The Law and Economics of Article 102 TFEU 9781509942985, 9781509942961

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For Cani, Borja, Aitana, Pablo and Claudia for their unconditional love and support. For Geoffrey O’Donoghue (1943–2020), RIP.

Foreword to the Third Edition It is with great pleasure and honour that I accepted to write the foreword to the third edition of “The Law and Economics of Article 102 TFEU”. From its first edition, this book stood out for its comprehensive, thorough and systematic manner in which it analyses both the legal and economic principles underpinning the application of Article 102 TFEU. The success of this book was such that it became a reference book in this area of EU competition law and a must-have companion for academics, enforcers and practitioners alike, as well as EU and national judges. There seem to be at least three reasons for the great success of this book. First, this book, co-authored by a lawyer and an economist, achieves something unprecedented—economists will finally be able to grasp the law, and lawyers actually understand economics! On a more serious note, indeed, the book strikes a perfect “equilibrium” in presenting, on the one hand, the legal rules in a comprehensible and articulate manner that non-lawyers will easily understand, and, on the other hand, the economic theory behind these rules in an accessible way (often using case studies). This without having recourse to complex formulas and econometric models that sometimes tend to put lawyers off. Apart from proving that the symbiosis of law and economics is actually possible and beneficial, this achievement is not to be underestimated, particularly given the intrinsically economic nature of Article 102 TFEU. Second, the book masterfully navigates through the relevant legislation, case law, decisional practice and legal and economic doctrine, clearly exposing and explaining the current state of the law and the shape it is likely to take in the future. The systematisation of this wealth of information is remarkable. For instance, the case law is not merely used in the traditional narrative (summarising the facts and what the court held) but is contextualised and often used to illustrate how a specific argument has been dealt with by the EU Courts. Similarly, given the relatively few judgments of the EU Courts in this field (compared to Article 101 TFEU), the authors refer extensively (and exhaustively) to the European Commission decisions, and selectively to the decisional practice of national competition authorities and courts. Equally impressive is the use of legal and economic literature. The authors should be praised for carefully choosing to analyse and refer to the latest and most authoritative legal and economic writings of both EU and US scholarship. Third, the legal analysis carried out in this book is not limited to a simple positivist portrayal of the current state of the law but offers clear normative propositions. Indeed, the authors do not shy away from taking clear positions and presenting, through an in-depth analysis, their critical remarks on the various judgments of the EU Courts and Commission decisions. While one does not necessarily need to agree, such criticism, stemming from two experienced and distinguished practitioners, offers an insight that goes beyond mere academic theory and reflects not only the practitioners’ perspective on the enforcement of Article 102 TFEU but also the actual concerns of the actors primarily concerned by these rules—the companies. It should therefore be welcome. It follows that

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the book offers a constructive and authoritative contribution to the debate on the numerous legal questions pertaining to the application of Article 102 TFEU that are still open and contentious. If the achievement of the first two editions of the book, in the words of John Temple Lang, was to “create a new paradigm which provides a basis for subsequent analysis, and be definitive on some issues, in the sense that some of the conclusions reached are so clearly convincing and correct that nobody questions them again”, the third edition carries this achievement further by methodically analysing the developments that occurred in the field of Article 102 TFEU since August 2013. The fact that the current edition of the book is considerably longer than the previous one is indicative. In that regard, I wish to signal out what I consider the highlights of this new edition. To begin with, the current edition of the book meticulously updates each individual chapter corresponding to a type of abuse (Chapters 6-17) as to include the latest relevant case law, EU and national decisions and legal/economic literature (see, indicatively, predatory pricing, margin squeeze, exclusive dealing, loyalty rebates, refusal to deal, tying and bundling, exclusionary non-price abuses, FRAND terms, excessive pricing and discrimination). Similarly, the introductory and more general chapters of the book (Chapters 1-5 and 18-19) have been reworked to reflect the latest developments [see, indicatively, the role of “fairness” as a possible new objective of Article 102 TFEU, particularly in the digital and digital platform markets; the territorial scope of Article 102 TFEU post-Intel; the latest developments in the interaction between regulation and Article 102 TFEU; the application of abuse of dominance to digital platform markets, both at EU and national level; the latest developments pertaining to the product market definition (in terms of demand-side substitution, potential competition, and two-sided markets); the concept of dominance in multi-sided markets; the new aspects of the general concept of abuse (e.g., the application of the equally-efficient competitor test, price discrimination, and the recent examples of analysis of anticompetitive effects) and, finally, the different types of remedies]. Moreover, this new edition features a new Chapter 17, which discusses the recent application of Article 102 TFEU in the area of multi-sided digital platform markets. This chapter includes an in-depth analysis of the Google cases recently pursued by the Commission— Shopping, Android and Search (AdSense)—and provides valuable insight into the main legal issues that these cases raise in the context of the current appeals before the EU Courts. Finally, the 2017 Intel judgment has undoubtedly affected the application of Article 102 TFEU in a way that extends beyond the area of rebates. On the one hand, it crystallised “consumer welfare” as the primary objective of Article 102 TFEU, and, on the other hand, it seems to have brought, once and for all, an end to the long-standing debate on whether the application of Article 102 TFEU should move towards a more “effects-based approach”. In fact, following this judgment, a demonstration of anticompetitive effects based on solid economic analysis is to be expected in every Article 102 TFEU decision and the latest Commission decisions seem to fully endorse this approach. It follows that this last edition of the book comes at a time when attention will focus on the way the EU Courts, and the General Court in particular, will review decisions based on complex economic considerations. In this regard, the General Court will be called to exercise its full

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powers of judicial review and possibly revisit the limits to the margin of appreciation that the Commission enjoys in respect of complex economic considerations. I am positive that the EU Courts have the ability, will, and resources to properly carry out such a demanding level of judicial review, which I am hopeful will be fully appraised in a future fourth edition of this book. Nils Wahl1

1 Judge, formerly Advocate General, at the Court of Justice of the European Union; Professor of European Law, Stockholm University.

Foreword to the First Edition Article 82 has always been a subject of considerable intellectual and practical difficulty. The first question (can it apply to a merger?) was answered only in 1973. The next question (does it require different kinds of analysis for exploitative and anticompetitive abuses?) was answered affirmatively later, but raised further questions. What is the test of “unfair” prices or contract terms under Article 82(a)? What tests distinguish legitimate competition from anticompetitive conduct under Article 82(b)? Is harm to consumers necessary for an abuse under Article 82(c)? Can conduct be unlawful as a reprisal abuse if it would not be illegal anyway? Is there an “unexpressed” category of abuses which do not fall under one of the four clauses of Article 82, but which result from the “special responsibility” of dominant companies, and if there is, what could it be? Can lawyers and economists agree on the answers to these questions, and until they do so, what advice (if any) can usefully be given to companies? It is perhaps surprising that these, undoubtedly difficult, questions have not been more thoroughly analysed. Every company which is, or may be, dominant has to have a pricing policy. A too-broad concept of anticompetitive abuses would discourage legitimate competition. Per se rules would be unjustifiable, but some economists seem to believe that no useful general tests or guidelines are possible either. In particular in recent years, lawyers and economists have criticised what the Commission and the Community Courts said in particular cases, but usually without offering constructive suggestions. National competition authorities in EC Member States have always had power to apply Article 82, but most of them did not try to develop principles on which they could do so. Questions that are so important and have caused so much difficulty for so long need to be dealt with by combining legal and economic knowledge and experience. This Robert O’Donoghue and Jorge Padilla have done. They have identified and analysed all of the fundamental questions concerning the interpretation and implications of Article 82. They have offered carefully considered answers, making it clear where their conclusions suggest that the Commission and the Community Courts have expressed themselves, in individual cases, in ways that obscure rather than clarifying the general principles which underlie the case law. They have formulated general principles which seem to me to be sound and reasonable, both as law and as economics. They have written a new kind of competition law book, deliberately avoided merely compiling case summaries, but providing an intellectual framework. Above all, they have dealt with one of the most important and difficult issues, the test of anticompetitive abuses, by returning to the language of Article 82. As long ago as 1975 the Court of Justice, in the Sugar Cartel judgment mostly concerned with what is now Article 81, decided that Article 82(b) prohibits conduct by a dominant company which limits the production, marketing or technical development of its competitors, that is anticompetitive abuses. That little-noticed finding (since confirmed in other judgments) was in fact more important than the description of an anticompetitive abuse given later in the Hoffmann-La

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Roche judgment. “Methods different from those which condition normal competition”, the phrase in the judgment, does not provide a useful test of anticompetitive conduct. “Limiting” possibilities of production, marketing or technical development which would, but for the supposedly unlawful conduct, be available to competitors provides a test, and may well provide the only possible or necessary definition, of anticompetitive conduct. By regarding Article 82(b) as the legal basis for all cases of foreclosure, exclusionary or anticompetitive abuses, the authors clarify the whole law on abuse of dominance. There are, in essence, three kinds of abuses: exploitative abuses (Article 82(a)), exclusionary abuses (Article 82(b)), and discrimination between companies not associated with the dominant enterprise (Article 82(c)). Discrimination in favour of the dominant company’s own operations comes under Article 82(b). Tying and bundling (Article 82(d)) can be either exclusionary or exploitative, or both. Reprisal abuses are exclusionary, since they discourage aggressive competition. The test for exclusionary conduct is that set out in the Treaty, which is both theoretically sound and suitable for use by dominant enterprises. The most important consequence, in practice, is to make possible a rational and operational approach to pricing by dominant companies. Price reductions which are conditional on the buyer buying exclusively from the dominant company are illegal, except in very special circumstances. Other price reductions, such as quantity rebates, benefit consumers and do not “limit” marketing possibilities otherwise open to competitors. This solves the greatest single problem facing dominant companies under the Commission’s practice up to now, and does so in a way which, because it is based on the words of the Treaty and the case law of the Court of Justice, will be difficult for any competition authority to reject. It provides much more legal certainty than any economic test which has been suggested, and avoids the ambiguity of the Commission’s “exclusivity inducing” test. Exclusivity, in the sense of buying only from one source, can also result from the dominant company offering the lowest price or the best value. By analysing the case law, the authors have brought out the underlying principles, and clarified both the principles and the issues unresolved by the case law, or indeed created by apparent inconsistencies in it. By establishing basic principles and identifying and discussing the questions which arise from them, the authors have provided an intellectual framework into which all the case law can be fitted and analysed, and from which conclusions can be drawn about important questions which the accidents of litigation have not so far raised. They have offered tests and conclusions more, it seems to me, than most other authors who have summarised the cases and made general comments, which were true but which have not always provided much practical guidance except in clear situations. This book will make it necessary in future for anyone writing seriously about Article 82 to take into account the fundamental legal principles to which the authors have called to our attention, to propose rules and make comments which reconcile both legal and economic analysis, and to suggest tests which can be used in practice and which give answers which would be generally accepted as correct. In short, they have greatly raised the intellectual level of the discussion of Article 82, and provided practical and acceptable answers to many of the questions which have concerned lawyers, economists and companies for many years.

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This book also creates another precedent, which others should follow. Books on substantive competition law are better if they are written jointly with economists and books on competition economics are better if they are written jointly with lawyers. One of the strengths of this book is that it combines so well the legal framework and the economic analysis. That combination is particularly important in Article 82 cases, but it is also essential in cases involving State measures restricting competition, which are subject to Article 86 EC. The Commission has published a Discussion Paper on the interpretation of Article 82. Whatever the final version of this may be, it is clear that it will not answer all the important questions about Article 82 which will inevitably arise. All of the issues discussed in this book are likely to come before the Community Courts (and increasingly also national courts). It may be some time before the Courts have given their answers to all these questions. But judgments, even in leading cases, cannot reasonably be expected to provide an intellectual framework for an entire area of law: judges are not legislators, and their role is to decide individual cases. The framework which the authors have provided will be of great value to everyone concerned with Article 82 in the future, and will enable courts and national authorities to decide Article 82 cases correctly with greater confidence than has been possible up to now. In an area of law such as this, no book can be expected to be both seminal and definitive in all respects at the same time. But a book can create a new paradigm which provides a basis for subsequent analysis, and be definitive on some issues, in the sense that some of the conclusions reached are so clearly convincing and correct that nobody questions them again. It seems to me that this book has achieved both. John Temple Lang1

1 Cleary Gottlieb Steen and Hamilton LLP, Brussels and London; Professor of Law, Trinity College Dublin; Visiting Senior Research Fellow, Oxford University.

Authors’ Preface to the Third Edition The third edition of this work has seen very substantial change from previous editions, with the addition of almost 250 pages of new text, notwithstanding our deleting substantial text from previous editions as well. Virtually all chapters have had significant amendment—in some cases fundamental reworking—and there is a new 61-page chapter on Abuses in Digital Platform Markets (Chapter Seventeen). Whether one views this as endeavour or prolixity on our part, these significant changes have been prompted by a series of developments. The first is that, whilst the overall quantity of Commission Decisions under Article 102 TFEU has probably diminished, the Commission has rendered a series of decisions in cases such as Google Android,1 Google Shopping,2 AdSense,3 Qualcomm (predation),4 and Qualcomm (exclusivity)5 that raise new and fundamental issues of principle. These decisions are referred to in most chapters, often in some detail. Second, there have been potentially profound changes at the EU Court level as well. Well-known cases such as Intel6 have the potential to reorient or even redefine the concept of abuse under Article 102 TFEU. But even somewhat less well-known judgments such as MEO7 could have significant practical impact on issues such as discrimination under Article 102 TFEU, an area that we have argued for almost fifteen years now was in need of reconsideration. Third, the competition concerns raised by multi-sided digital platforms under Article 102 TFEU have finally moved from the pages of law and economics journal articles into the realms of the decisional practice and case law. This area raises some of the most interesting, difficult, and controversial issues under Article 102 TFEU, affecting issues as diverse as market definition, dominance, predatory pricing, tying, leveraging, and exploitative terms. Fourth, areas where the law and economics was either embryonic or had fallen into desuetude have now exploded. For example, global litigation on FRAND disputes in the area of patents has emerged on a significant scale in China, Germany, the United Kingdom, and United States, not to mention arbitral tribunals seated worldwide. These cases have led, for example, to Chapter Thirteen (Abusive Conduct And Standards) virtually doubling in size. Similarly, excessive pricing—which was effectively a dead letter at the EU level and in most Member States for almost two decades—has been revitalised, as Chapter Fourteen (Excessive Prices) attests to.

1 Case

COMP 40099, Google Android, Commission Decision of 18 July 2018. Google Search (Shopping), Commission Decision of 27 June 2017. 3 Case AT.40411, Google Search (AdSense), Commission Decision of 20 March 2019. 4 Case AT.39711, Qualcomm (Predation), Commission Decision of 17 July 2019. 5 Case AT.40220, Qualcomm (Exclusivity Payments), Commission Decision of 24 January 2018. 6 Case C-413/14 P Intel v Commission, EU:C:2017:632. 7 Case C-525/16 MEO-Serviços De Comunicações E Multimédia EU:C:2018:270. 2 Case AT.39740,

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Finally, whilst the subject of monopolisation conduct was something very obscure when we first started this work in the early 2000s, it is now a subject that has, amazingly, entered into the political mainstream. Concerns as respects the roles of digital platforms, digital products/services, and more generally about market concentration levels, firm profits, social inequality, etc. have led to calls, of varying degrees of precision of focus, for greater enforcement of monopolisation laws. These calls have in large part arisen in the United States—where these issues are likely to be a major electoral focus in November 2020—but Europe has not been immune from them either. We are grateful to a number of people for their assistance. In alphabetical order, they are: Alexandru Circiumaru, Cani Fernandez, Ingrid Liedorp, Cynthia Ngwe, Daniel Piccinin, and Rebecca Wallace. Finally, we wish to record our immense gratitude, and honour, that Judge Wahl has agreed to write a Foreword to this edition. He is, without question, Europe’s leading competition law judge and has had a significant and positive effect on the evolution of EU competition law, and particularly Article 102 TFEU, as an Advocate General and, now, Judge of the Court of Justice of the European Union. Indeed, the copious references to his output in this edition show that it would not be a misnomer to call it the “Wahl edition.” As usual, any opinions expressed in this book are personal only and do not represent those of our respective firms/chambers or clients. The law is stated as of 15 May 2020. Robert O’Donoghue QC Jorge Padilla

Table of Cases I. European Commission Decisions 1998 Football World Cup, Case IV/36888, OJ 2000 L 5/55 ............... 10, 139, 253, 303, 1000–1001 ABG/Oil Companies operating in the Netherlands, Case IV/28.841, OJ 1977 L 117/1, Commission decision of 19 April 1977 ................................... 660, 696, 1012 ACI (Channel Tunnel), OJ 1994 L 224/28 .............................................. 209, 668, 1010, 1167, 1184 Alpha Flight Services/Aéroports de Paris, Case IV/35.613, OJ 1998 L 230/10, Commission decision of 11 June 1998 ......................................................................... 969, 1122 Aluminium imports from Eastern Europe, OJ 1985 L 92/1 ............................................................ 32 Amministrazione Autonoma dei Monopoli di Stato, Case IV/36.010, OJ 1998 L 252/47, Commission decision of 17 June 1998 ........................ 163, 201, 1036, 1098 ARA Foreclosure, Case AT.39759, Commission decision of 20 September 2016 ............ 640, 644–5 Astra, Case IV/32.745, OJ 1993 L 20/23, Commission decision of 23 December 1992 ...................................................................................................... 1132, 1209 AstraZeneca, OJ 2006 L 332/24........................................................... 94, 107, 202–3, 211–12, 266, 294, 296, 315, 317, 319, 754–5, 769–71, 775–7, 1113, 1115 AstraZeneca Case COMP/A.37.507/F3 ................................................................ 131, 149, 155, 874 Athens International Airport, Case COMP/D3/38469, Commission Decision of 2 May 2005 ................................................................................................................... 25, 926 Baltic Rail, Case AT.39813, Commission Decision of 2 October 2017............ 163–4, 201, 294, 327 Bandengroothandel Frieschebrug BV/NV Nederlandsche Banden-Industrie Michelin (Michelin I), Case IV/29.491, OJ 1981 L 353/33, Commission decision of 7 October 1981 ............................................................................... 151, 214, 598, 1017, 1117 BASF (formerly AGRIA and Others v BASF and Others) Case AT.39864, Commission Decision of 9 June 2015 ................................................................................ 763–5 Bass, Case COMP/36.081, OJ 1999 L 186/1, Commission decision of 16 June 1999................. 162 BBI/Boosey & Hawkes-Interim Measures Case IV/32.279, OJ 1987 L 286/36, Commission decision of 29 July 1987 ........................................................... 213–4, 264, 345–6, 688–9, 1136, 1140 BEH Electricity Case AT. 39767, Commission Decision of 10 December 2015 .......................... 162 BEH Electricity Case COMP/39.767, Commission Decision of 10 December 2015 ................. 1150 Bitumen Case COMP/38.456 Commission decision of 13 September 2006 ................................ 247 Boat Equipment, Xth Report on Competition Policy .................................................................. 1000 BP Kemi-DDSF, Case IV/29.021, OJ 1979 L 286/32, Commission decision of 5 September 1979 ..................................................................................................... 531, 1007 BPB Industries plc, Case IV/31.900, OJ 1989 L 10/50, Commission decision of 5 December 1988 .................................................................................. 161–2, 204, 212, 409, 415, 594, 599, 1017 Breeders’ Rights: Roses, OJ 1985 L 369/9...................................................................................... 21 British Gypsum, XXIIth Report on Competition Policy (1992), p. 422 ....................................... 581 British Gypsum, OJ 1992 C 321/9 ........................................................................................ 594, 596 British Interactive Broadcasting/Open, Case IV/36.539, OJ 1999 L 312/1, Commission decision of 15 September 1999 ................................... 159, 668, 1010, 1167, 1184 British Leyland, OJ 1984 L 207/11 ............................................................................................. 1003

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British Midland/Aer Lingus, Case IV/33.544, OJ 1992 L 96/34, Commission decision of 26 February 1992............................................................................................ 622–3, 661, 671 British Sugar plc, OJ 1999 L 76/1 ................................................................................................ 163 Broadcom Case AT.40608, Commission decision of 16 October 2019 .............. 1136, 1140–2, 1144 Brussels National Airport, Case 95/364/EC, OJ 1995 L 216/8, Commission decision of 28 June 1995 .................................................................................... 303, 1001, 1015 BT-MCI, OJ 1994 L 223/36 ............................................................................. 668, 1010, 1167, 1184 CDS – Information Market, Case COMP/39.745, Commission Decision of 20 July 2016 ..................................................................................................................... 1150 CECED Case IV.F.1/36.718 .......................................................................................................... 327 Certain joueur de tennis professionnel /Agence mondiale antidopage, ATP Tour Inc.et Fondation Conseil international de l’arbitrage en matière de sport, Case COMP/39471 ............................................................................................................... 28–9 Cewal, Cowac and Ukwal, OJ 1993 L 34/20 ............................................... 235, 267, 283, 293, 355, 357, 409, 1131, 1173 ČEZ and others, Case COMP/39.727, Commission decision of 10 April 2014 ......................... 1150 Chiquita, Case IV/26.699, OJ 1976 L 95/1, Commission decision of of 17 December 1975 ................................................................................. 10, 36, 163–4, 185, 264, 901, 980–1, 1003 Christiani & Nielsen, OJ 1969 L 165/12 ........................................................................................ 37 CISAC Case COMP/C2/38.698, Commission decision of 16 July 2008 .................................... 1176 Clearstream (Clearing and settlement), Case COMP/38.096, OJ 2009 C 165/05, Commission Decision of 2 June 2004 ....................................... 133–5, 151, 153, 188, 201, 203, 612, 633, 640, 669, 671, 677, 685, 876, 969, 998, 1016, 1116, 1176, 1178 CNSD, OJ 1993 L 203/27 ........................................................................................................... 1109 Coca-Cola, Case COMP/A.39.116/B2, Commission decision of 22 June 2005 .......................... 250 Coca-Cola, OJ 2005 L 253/21 ............................................................... 514, 518, 533–4, 599, 1017, 1132–3, 1148–9, 1159, 1165–6, 1170 Coca-Cola Export Corporation–Filiale Italiana, Commission Press Release IP/88/615 of 13 October 1988 ................................................................................................................. 599 Coca-Cola Italia Undertaking XIXth Report on Competition Policy (1989), para 50 .......................................................................................................... 594, 700, 712, 1170 Coca-Cola Italia Undertaking Commission Press Release IP/90/7 of 9 January 1990 ............... 712 Continental Can Company, Case IV/26.811, OJ 1972 L 7/25 Commission decision of 9 December 1971 ............................................................................................................... 212 Commission Decision of 22 December 1972 amending Decision No 30–53 of 2 May 1953 on practices prohibited by Article 60 (1) of the Treaty in the common market for coal and steel (72/440/ECSC), OJ 1972 L 297/39............................................................ 968 Decision 30–53 of the High Authority, OJ 1953 L 6/111.............................................................. 968 De Beers/Alrosa, Case COMP/E-2/38.381, OJ 2006 L 205/24, Commission decision of 22 February 2006............................................................................................................ 520–1 De Beers, OJ 2006 L 205/25 ....................................................................................................... 1149 De Post/La Poste, OJ 2002 L 61/32 .................................................................................... 134, 1113 Decca Navigator System, OJ 1989 L 43/27 ................................................................. 151, 341, 754, 756–7, 760–2 Deutsche Post AG Interception of cross-border mail, Case COMP/36.915, OJ 2001 L 331/40, Commission decision of 25 July 2001 .................... 163, 472, 632, 854, 901, 923, 992–3, 1116–7, 1178

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Deutsche Post AG, Case COMP/35.141, OJ 2001 L 125/27, Commission decision of 20 March 2001 ..................................... 163, 188, 323, 373–4, 388–90, 396–7, 399, 455, 481, 1129, 1185, 1198–1200, 1202 Deutsche Telekom AG, Cases COMP/37.451, 37.578, 37.579, OJ 2003 L 263/9, Commission decision of 21 May 2003 .......................................... 33–4, 63, 322, 427, 436, 444, 446, 448, 457, 462–5, 472–3, 490, 493–4, 1097, 1109, 1117, 1178, 1181 DFB Joint Selling of Media Rights (Bundesliga), Case COMP/37.214 OJ 2005 C 130/2 ......... 1155 DHL International, XXIst Report on Competition Policy (1991), para 88 .............668, 1010, 1167, 1184 Digital Equipment (1997) ........................................................................................................... 1171 Digital/Granada, Press Release IP/97/868 ................................................................................. 1015 Distribution of Package Tours During the 1990 World Cup, OJ 1992 L 326/31 ....................... 21, 37 Distrigaz, Case COMP/B-1/37.966, OJ 2008 C 9/8, Commission Decision of 11 October 2007 ..................................................................................... 522, 524, 1110, 1149 DSD, Case COMP/34.493, OJ 2001 L 166/1, Commission decision of 20 April 2001 ................................................................................. 13, 133, 164, 636, 1038–9, 1098, 1117, 1178, 1182 E-book MFNs and related matters (Amazon), Case AT.40153, Commission Decision of 4 March 2017 ............................................ 128, 131, 162, 192, 208–9, 274–5, 1009–1010, 1102, 1150 COMP/AT.39847/E-BOOKS (2012/C 283/07) ........................................................................... 1008 EBU-Eurovision, OJ 1993 L 179/23 ............................................................... 668, 1010, 1167, 1184 ECS/AKZO Interim Measures, OJ 1983 L 252/13 ........................................ 151, 162, 1135–6, 1181 ECS/AKZO, Case IV/30.698, OJ 1985 L 374/1, Commission decision of 14 December 1985 .................................................... 36, 86, 193, 221, 264, 267, 323, 355–6, 368, 375–6, 378, 387–8, 399, 405, 410–12, 415, 427, 432, 456, 797–8, 1128–9, 1132 Eirpage, OJ 1993 L 306/22 ....................................................................... 37, 668, 1010, 1167, 1184 ENI Case COMP/39.315, OJ 2010 C 352/10, Commission Decision of 29 September 2010 ..................................................................... 1117–8, 1150, 1167, 1201–2 E.ON Gas, OJ 2010 C 278/9 ....................................................................................................... 1150 E.ON Gas Case 39.317, Commitments Decision of 4 May 2010 ............................. 991, 1118, 1167 E.ON Gas, Commission Decision of 29 September 2010 .................................................... 632, 659 E.ON Gas, Case AT.39767, Commission Decision of 26 July 2016 ............................................. 162 Eurofix-Bauco v Hilti, Cases IV/30.787 and 31.488, OJ 1988 L 65/19, Commission decision of 22 December 1987 ................................. 125, 133, 139, 151, 162, 209, 213–4, 221, 343, 345, 355, 408–9, 415, 700, 711–2, 719, 722, 739–41, 1131, 1173, 1195 Euromax/IMAX, Case COMP/37.761, Commission Decision of 25 March 2004 ............ 908, 922–3 European Federation of Ink Manufacturers, Case COMP/C-3/39.391......................................... 172 European Night Services, Case IV/34.600, OJ 1994 L 259/20, Commission decision of 21 September 1994 ................................... 209, 668, 1010, 1167, 1184 Eurotunnel, OJ 1994 L 354/66 ...................................................................................................... 209 Eurovision, OJ 2000 L 151/18 .................................................................................................... 1109 Exclusive right to broadcast television advertising in Flanders, OJ 1997 L 244/18 ...................... 57 FAG-Flughafen Frankfurt Main AG, Case IV/34.801, OJ 1998 L 72/30, Commision decision of 14 January 1998 .............................................. 103, 260, 344, 478, 622, 659–61, 676, 1122

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FAG—Flughafen Frankfurt/Main AG, OJ 1998 L 173/32, Commission Decision 98/387/EC of 14 January 1998 ......................................................................................................... 165, 637 Filtrona/Tabacalera, XVIVth Report on Competition Policy (1989) para 61 .................. 672, 687–8 Franco-Japanese Ballbearings, IIIrd Report on Competition Policy (1974) ................................. 32 French-West African Shipowners’ Committees, Case IV/32.450, OJ 1992 L 134/1, Commission decision of 1 April 1992 .................................................................................. 1125 Gas Interconnector, XXVth Competition Policy Report (1996), para 82 ...... 668, 1010, 1167, 1184 Gaz de France, Case COMP/39.316, Commission Decision of 3 December 2009 ............. 632, 659, 1121, 1167 GDF Case COMP/39.316 Committments Decision of 3 December 2009 ........................... 436, 991 GDF foreclosure, OJ 2010 C 57/09 ............................................................................................ 1150 GEC-Siemens/Plessey, OJ 1990 C 239/2 ........................................................................................ 53 GEMA I, Case IV/26.760, OJ 1971 L 134/15, Commission decision of 2 June 1971............................................................................................. 85, 1023, 1034, 1098 GEMA II OJ 1972 L 166/2 .......................................................................................................... 1023 GEMA II, OJ 1982 L 94/12 ......................................................................................... 12, 1034, 1098 German Electricity Balancing Markets Case COMP/39.389, OJ 2009 C 36/8, Commission Decision of 26 November 2008 .................................................... 248, 1000, 1116, 1167, 1201–2 German Electricity Wholesale Market Case COMP/39.388, OJ 2009 C 36/8, Commission Decision of 26 November 2008 .................................................... 248, 1000, 1116, 1149, 1167, 1201–2 Google Android, Case COMP/AT.40.099, Commission Decision of 18 July 2018 (currently on appeal) .............................. 18–19, 40, 115–6, 125, 128–9, 151–2, 163, 170, 179–80, 182–4, 188, 192, 197, 204, 206, 208, 257–9, 274, 307, 333–4, 345, 351, 560, 568–71, 600–1, 700–1, 716–7, 725–9, 731, 735–7, 1072–6, 1102, 1177, 1195 Google Search (AdSense), Case AT.40411, Commission Decision of 20 March 2019 .................................................... 19–20, 40, 115–6, 180, 197, 257, 274, 331, 351, 502, 511–2, 514, 525, 529–32, 538, 541–2, 544, 1076–80, 1102–3, 1150, 1177 Google Search (Shopping), Case AT.39740 Commission Decision of 27 June 2017 (currently on appeal) ........................... 30, 40, 115–6, 125, 128–9, 151–2, 179, 188, 192, 197, 204–8, 211, 257, 259–60, 274, 310, 319, 351, 955, 1063, 1065–6, 1068–72, 1088–91, 1094–6, 1102–3, 1106, 1130, 1150, 1176–7, 1179–80, 1185, 1203–6 GUESS Case AT.40428 ..................................................................................................................... 9 GVG/FS, Case COMP/37.685, OJ 2004 L 11/17, Commission decision of 27 August 2003......................................................................................... 201, 312, 640, 1178 GVL, Case IV/29.839, OJ 1981 L 370/49, Commission decision of 29 October 1981 ............................................................................................... 151, 999–1000 HOV SVZ/MCN, Case IV/33.941, OJ 1994 L 104/34, Commission decision of 29 March 1994 ................................................................................. 164, 598, 969, 989, 1015 Hugin/Liptons 78/68/EEC, OJ 1978 L 22/23, Commission decision of 8 December 1977 ....................................................................................................... 622, 687 IBM, XIVth Competition Policy Report (1985), para 94 ............................................................ 1170 IBM Maintenance Services, Case COMP/C-3/39.692, OJ 2012 C 18/6 Commission Decision of 13 December 2011 ................................................ 171, 173, 298, 640, 661–2, 686, 716, 1150

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IBM Undertaking, OJ 1984 L 118/24 ....................................................................................... 711–2 IGR Stereo Television/Salora, XIth Competition Policy Report (1981), para 63............... 668, 1010, 1167, 1184 Ijsselcentrale, OJ 1991 L 28/32 .......................................................................................... 209, 1109 Ilmailulaitos/Luftfartsverket (Finnish Airports), Case IV/35.767, OJ 1999 L 69/24, Commission Decision of 10 February 1999 .................................................. 165, 260, 303, 980, 1001, 1122–3 Industrial Gases, XIXth Report on Competition Policy (1989), para 62 ........................... 532, 1007 Infolab/Ricoh, Competition Policy Newsletter No. 1, (February 1999)........................................ 172 Infonet, XXIInd Report on Competition Policy (1993), p 416 ....................... 668, 1010, 1167, 1184 Intel, Case COMP/37.990 Commission Decision of 13 May 2009 ............... 15–17, 102–4, 111–12, 122, 163, 192, 203–4, 211, 213–4, 217, 222, 263, 278, 291, 327–8, 351, 518–9, 546, 559, 562–3, 576, 579, 586–91, 598, 602, 1112–3, 1115, 1177–8 International Skating Union’s Eligibility Rules, Case AT.40208, Commission Decision of 8 December 2017 ............................................................................. 28 IRI/AC Nielsen, XXVIth Report on Competition Policy (1996) para 64 .................. 531, 1009, 1170 Irish Continental Group v CCI Morlaix: Interim Measures [1995] 5 CMLR 177 ..................... 1136 Irish Continental Group v CCI Morlaix-Port of Roscoff, XXVth Competition Policy Report para 43 (1995) .......................................................................................... 209, 623 Irish Sugar plc, Cases IV/34.621 and 35.059, OJ 1997 L 258/1, Commission decision of 14 May 1997 .................................................. 164, 249, 409, 412, 415, 536, 573, 599, 754–5, 795, 980, 990, 1118 Italian Flat Glass, OJ 1981 L 326/12 ................................................................................... 161, 162 Italian Flat Glass, Case IV/31.906, OJ 1988 L 33/34, Commission decision of 7 December 1988 ............................................................................................................... 161 John Deere, OJ 1985 L 35/38 ....................................................................................................... 691 Johnson and Johnson, OJ 1980 L 377/16 ..................................................................................... 691 Kabel-metal-Luchaire, OJ 1975 L 222/34 .......................................................................... 995, 1009 Kodak, OJ 1970 L 147/24 ............................................................................................................... 37 Konica, OJ 1988 L 78/34 .............................................................................................................. 691 La Poste/SWIFT, Case IV/36.120, OJ 1997 C 335/3, Commission decision of 6 November 1997 ............................................................................................................. 1170 Langnese-Iglo GmbH, OJ 1993 L 183/19 ................................................................................... 1140 “Licensing Of Intellectual Property Rights For Football Collectibles,” Case AT.39899, Commission Decision of 15 July 2014 ................................................................................... 214 London European/Sabena, Case IV/32.318, OJ 1988 L 317/47, Commission decision of 4 November 1988 ............................................................................................... 151, 622, 669 Long-term electricity contracts France, Case Comp/39.386, OJ 2010 C 133/5, Commission Decision of 17 March 2010 .................. 1114, 1116, 1119, 1150 Magill TV Guide/ITP, BBC and RTE, Case IV/31.851, OJ 1989 L 78/43, Commission decision of 21 December 1988 ................................... 87, 151, 162, 194, 343, 624, 628–31, 636–7, 645–6, 648, 664, 671, 856, 1128, 1185 Magyar Suzuki, Case AT.40072, Commission Decision of 14 October 2014 ............................... 164 Michelin II (PO–Michelin), OJ 2002 L 143/1................................................ 89, 163, 214, 548, 580, 582, 595–6, 1178–9 Microsoft, Commission XXIVth Competition Policy Report (1994) para 212 .......................... 1170

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Microsoft, Case COPM/C-3/37.792, OJ 2007 L 32/23, Commission Decision of 24 March 2004 ................ 15, 133–4, 151, 163, 170, 206–7, 213, 266, 272, 286–7, 298, 306–8, 311, 313, 480, 604, 624, 627–31, 637, 642–3, 646, 653, 670–1, 673–4, 697, 700, 713–4, 718, 720–1, 723–4, 726–7, 732–4, 802, 1127, 1131, 1133, 1151, 1173, 1180, 1185, 1187, 1191–2, 1207 Microsoft, COPM/C-3/37.792, OJ 2009 C 166/20, Commission Decision of 27 February 2008.......................................................................................................... 1192–4 Microsoft (Tying), Case COMP/39.530, OJ 2010 C 36/7 (“Microsoft Web browser”), Commission Decision of 16 December 2009 ........................................ 207, 570, 700, 716, 718, 721, 723, 729, 733, 802, 1075, 1150, 1151, 1195–6 Microsoft (Tying), Case AT/39530 Commission Decision of 6 March 2013 .................... 1130, 1174 “Motorola – Enforcement of GPRS Standard Essential Patents,” Case AT.39.985, Commission Decision of 29 April 2014 ................ 202, 805, 835–6, 858, 1176 Napier Brown/British Sugar, Case IV/30.178, OJ 1988 L 284/41, Commission decision of 18 July 1988 ......................................... 86–7, 162, 164, 193, 412, 415, 435, 444, 448–9, 485, 697, 797–8, 990, 1013, 1110, 1112 National Coal Board, National Smokeless Fuels Ltd and the National Carbonising Company Ltd, Commission Decision 76/185/ECSC, OJ 1976 L 35/6 .......................................................................................... 319, 435, 444, 446–8, 485–6, 1135–6 National Sulphuric Acid Association, OJ 1989 L 190/22 ............................................................. 216 NDC Health/IMS Health-Interim Measures, Case COMP D3/38.044, OJ 2002 L 59/18 .................................................................................. 87, 202, 206–7, 624, 634, 637, 658, 802, 854–6, 1136, 1140–1, 1144, 1174, 1185 NDC Health/IMS Health: Interim measures, OJ 2003 L 268/69 ................ 202, 624, 627, 854, 1144 Nederlandse Vereniging van Banken (Dutch Banks), OJ 1999 L 271/28 .................................... 1119 Nestlé/Perrier, OJ 1992 L 356/1 ........................................................................................... 149, 229 Novo Nordisk, XXVIth Report on Competition Policy p 37 (1996) ............................................. 172 Osram/Airam, XIth Report On Competition Policy (1981), para 97 ............................................ 763 P&I Clubs/Pooling Agreement, Cases IV/30.373 and IV/37.143, OJ 1999 L 125/12, Commission decision of 12 April 1999 .............................................................................. 133–4 Paroxetine, CMA Case CE-9531/11 Decision of 12 February 2016 ....................................... 50, 789 Pelican/Kyocera, XXVth Report on Competition Policy (1995) .......................................... 125, 172 Perindopril (Servier), Case AT.39612 Commission decision of 9 July 2014 ......... 50, 788, 793, 880 Phoenix/IBM, XXIInd Report on Competition Policy, p 426 ..................................................... 1136 Pioneer Hi-Fi Equipment, OJ 1980 L 60/21 ............................................................................... 1173 Polypropelene, OJ 1986 L 230/1 ..................................................................................................... 21 Port of Rødby, Case 94/119/EC, OJ 1994 L 55/52, Commission decision of 21 December 1993 ......................................................................... 209, 606, 623, 657–8, 659 Portuguese Airports, Case IV/35.703, OJ 1999 L 69/31, Commission decision of 10 February 1999........................................................................................ 260, 1001, 1122–3 Printers (EFIM complaint), Case AT.39391 Commission Decision of 20 May 2009 .................. 174 Prokent/Tomra, Case COMP/E-1/38.113, Commission Decision of 29 March 2006 .............................................................................. 103, 340, 351, 514–6, 522, 524–5, 546, 598, 759, 1116

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Qualcomm (Exclusivity Payments), Case AT.40220, Commission Decision of 24 January 2018 .................................................................... 115–6, 125–6, 153, 196–7, 202, 217, 331–2, 351, 560, 564–8, 579–80, 587–8, 598–600, 1177 Qualcomm (Predation), Case AT.39711, Commission Decision of 18 July 2019 .................................................. 20–21, 115–6, 125–6, 153, 196–7, 202–3, 217, 339, 351, 357, 366–7, 371–4, 376, 378–80, 391, 421–2, 427, 434, 560, 1177, 1181 RAI/Unitel, OJ 1978 L 157/39 .................................................................................................... 1109 Rambus, OJ 2010 C 30/17 ............................................................. 54, 138–9, 294, 296, 315, 317–8, 773, 805, 868–78, 1150, 1156 Refrigeration compressors, Case COMP/39.600, Commission decision of 7 November 2011 ............................................................................................................. 1176 REIMS II, OJ 1999 L 275/17 ...................................................................................................... 1109 REIMS II Case COMP/C1/38.170 ................................................................................................ 327 Reuters Instrument Codes, Case COMP/39.654, Commission Decision of 20 December 2012 ....................................................................................... 1150, 1161, 1162 Rio Tinto Alcan, Case COMP/39.230, Commission Decision of 20 December 2012 ............................................................................ 716, 718, 723–5, 730–1, 733–4, 1150, 1161 Romania: Arbitral award Micula v Romania Case SA.38517 of 11 December 2013, OJ 2015 L 232................................................................................ 73, 75 RWE Gas Foreclosure, Case COMP/B-1/39.402, 2009 OJ C 133/10, Commission Decision of 18 March 2009 ............................................................ 632, 659, 1117, 1149, 1167, 1201–2 Ryanair/DAA-Aer Lingus, Case AT.39.886, Commission Decision of 17 October 2010 ................... 165 SABA’s EEC distribution system, OJ 1983 L 376/41 .................................................................... 194 SACEM & SABAM, IVth Report On Competition Policy ........................................................... 1000 SAMSUNG – Enforcement Of UMTS Standard Essential Patents” Case AT.39939, Commission Decision of 29 April 2014 ................................................................. 202, 805, 858 Samsung – Enforcement of UMTS standard essential patents, Case COMP/39.939, Commission Decision of 29 April 2014 ............................................................................... 1150 Scandlines Sverige AB v Port of Helsingborg, Case COMP/A.36.568/D3, Commission Decision of 23 July 2004 .............................................. 295, 889, 899–900, 904–5, 907–8, 911–2, 914, 918, 923, 925–6, 943, 946, 953, 977 Sea Containers v Stena Sealink-Interim measures, Case IV/34.689, OJ 1994 L 15/8, Commission decision of 21 December 1993 ...... 165, 209, 260, 605, 623, 633, 637, 657, 659, 671, 1122, 1136 Sealink/B&I Holyhead: Interim Measures Case IV/34.174, [1992] 5 CMLR 255, Commission decision of 11 June 1992 ................................................................................. 1136 Sequential Use Of Coupons, Case COMP/A.38763/D2 ....................................... 970, 1005, 1041–2 Slovak Telekom, Case AT.39523, Commission Decision of 16 October 2014 ......... 63–66, 128, 436, 446, 453–5, 457–8, 466–7, 469–70, 496, 675, 677–81, 1090, 1098 Soda-Ash/ICI, OJ 1991 L 152/40 .................................................................................. 509, 558, 585 Soda-Ash–ICI, OJ 2003 L 10/33 ........................................................................................... 558, 585 Soda-Ash/Solvay, Case IV/33.133, OJ 1991 L 152/21, Commission decision of19 December 1990 ....................................................................... 94, 163, 212, 221, 558, 581, 585,765, 980, 997

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Soda-Ash/Solvay, OJ 2000 L 10/10 ............................................................ 531, 558, 585, 958, 1113 Spanish Airports, Case 2000/521/EC, OJ 2000 L 208/36, Commission decision of 26 July 2000 ....................................................................................................................... 260 Sperry New Holland, OJ 1985 L 376/21 ....................................................................................... 691 Standard & Poor’s Case COMP/39.592, Commission Decision of 15 November 2011 ............................................................................ 13, 15, 201–2, 716, 910, 918–9, 1037, 1116 Standard & Poor’s, OJ 2012 C 31/5............................................................................................ 1150 Stichting Certificatie Kraanverhuurbedrijf and the Federatie van Nederlandse Kraanverhuurbedrijven, OJ 1994 L 117/30.............................................................................. 33 Sundbusserne v Port of Helsingborg, Case COMP/A.36.570/D3, Commission Decision of 23 July 2004 ....................................................................... 295, 889, 899, 904, 911, 925, 943, 946, 953 Swedish Interconnectors, OJ 2010 C 142/8 ................................................................................ 1150 Telekomunikacja Polska, Case COMP/39.525, Commission Decision of 22 June 2011............................................................ 63, 210, 323, 632–3, 643, 645, 647, 657, 659–60, 664, 677–80, 1118, 1177 TESN, XXIInd Report on Competition Policy, p 426 ................................................................. 1136 Tetra Pak I (BTG licence), Case IV/31.043, OJ 1988 L 272/27, Commission decision of 26 July 1988 ................................................ 139, 162–4, 221, 793, 879 Tetra Pak II, Case IV/31.043, OJ 1992 L 72/1, Commission decision of 24 July 1991 ...................................................................... 12, 51, 162, 164, 192, 312–3, 357, 367, 375, 378, 387, 395, 415, 433, 700, 712, 719, 722, 725, 732, 739–41, 980, 1004, 1031, 1035–6, 1098, 1131, 1173, 1181, 1195 Tipp-Ex, OJ 1987 L 222/1 ............................................................................................................. 691 Tomra, OJ 2008 C 219 .................................................................................................................. 192 Trans-Atlantic Conference Agreement (TACA), Case IV/35.134, OJ 1999 L 95/1, [1999] 4 CMLR 1415, Commission decision of 16 September 1998 ............. 94, 133, 188, 242, 247, 1132, 1209 Tretorn, OJ 1994 L 378/45 .......................................................................................................... 1124 Upstream Gas Supplies In Central And Eastern Europe CASE AT.39816, Commission Decision of 24 May 2018 ............................................................................ 10, 699 Van den Bergh Foods Ltd, Cases IV/34.073, 34.395, 35.436, OJ 1998 L 246/1, Commission decision of 11 March 1998 ................................................... 133, 151, 501–2, 507, 509, 533–4, 1178 Velux, Case AT.40026, Commission Decision, of 14 June 2018 ................................................... 211 Velux, Case COMP/39.451 ............................................................................................ 575–6, 593–4 Virgin/British Airways, Case IV/34.780, OJ 2000 L 30/1, Commission decision of 14 July 1999 .................................................................. 133, 164, 193–6, 339, 384, 547, 574, 581, 598, 957–8, 997, 1015–6, 1179 Visa International, OJ 2002 L 318/17 ........................................................................................ 1116 Vitamins, Case IV/29.020, OJ 1976 L 223/27, Commission decision of 9 June 1976..................................................................................... 151, 185, 508, 555–6, 563 Volkswagen, OJ 2001 L 262/14 ................................................................................................... 1110 Wanadoo Interactive, Case COMP 38.233, Commission Decision of 16 July 2003 ............................................................................... 101, 103–4, 459, 487–8, 490 Wanadoo España v Telefónica, Case COMP/38.784, OJ 2008 C 83/5 ........ 156, 192–5, 204–5, 210, 419, 444–6, 455, 457, 459–61, 466, 477, 485, 487, 1118, 1180, 1181–2

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Wanadoo España v Telefonica, OJ 2008 C 83/5 ............................................ 40, 103, 133, 324, 373, 399, 403–4, 425, 435, 443, 448, 469–71, 674–6, 1097, 1113, 1178 Wanadoo Interactive, Case COMP/38.233, Commission Decision of 16 July 2003 .................................................................... 7, 40, 128, 151–2, 167–8, 188, 210, 272, 323, 357, 366, 369, 372, 375, 377, 385, 387–8, 400–3, 413–5, 417–8, 423, 427, 1181 Warner-Lambert/Gillette, Case IV/33.440, OJ 1993 L 116/21, Commission decision of10 November 1992 ..................................................... 52, 54, 151, 1198 Watch Repair, Case AT.39097 Commission Decision of 29 July 2014......... 46–7, 351, 645, 672–3, 739 Zanussi, OJ 1978 L 322/36 ......................................................................................................... 1114 ZOJA/CSC ICI, OJ 1972 L 299/51.............................................................................................. 1132

II. European Commission Merger Decisions ABB/Daimler Benz, Case IV/M.580, OJ 1997 L 11/1 .................................................................. 229 Abbot/Solvay Pharmaceuticals COMP/M.5661 ........................................................................... 138 Aérospatiale-Alenia/de Havilland, OJ 1991 L 334/42.................................................................. 194 Air Liquide/Messer Targets, Case COMP/M.3314 ....................................................................... 244 Airtours/First Choice, OJ 2000 C 324/5 ....................................................................................... 235 Alcatel/Telettra, OJ 1991 L 122/48 ............................................................................................... 193 Alcoa/Alumax (aluminium), Case IV/M.1161 .............................................................................. 163 AlliedSignal/Honeywell, Case COMP/M.1601 ........................................................................... 1187 Apple/Shazam Case M.8788, Commission Decision of 6 September 2018 ............................... 1054 AstraZeneca/Novartis, OJ 2004 L 110/1 ............................................................................... 138, 872 AstraZeneca/Novartis Case COMP/M.1806 ................................................................................. 135 Atlas/Phoenix/Global One, OJ 1996 L 239/23 ..................................... 668, 1010, 1167, 1184, 1187 BASF/Eurodiol/Pantochim, Case COMP/M.2314 ........................................................................ 156 Behringwerke/Armour Pharmaceutical, Case IV/M.495.............................................................. 219 BHP/Billiton (copper), Case COMP/M.2413 ............................................................................... 163 Blokker/Toys ‘R’ Us (II), OJ 1998 L 316/1 .................................................................................. 1025 Boeing/Hughes, Case COMP/M.1879 .......................................................................................... 156 Carnaud/Sofreb, XVIIth Report on Competition Policy (1987), para. 70 ...................................... 53 Carnival Corporation/P&O Princess, Case COMP/M.2706 ....................................................... 167 Carrefour/Promodes, Case COMP/M.1684 OJ 2000 C 164/5 ........................................... 251, 1025 Cendant/Galileo, Case COMP/M.2510 ........................................................................................ 251 Coca-Cola/Amalgamated Beverages GB, OJ 1997 L 218/15 ....................................................... 211 Coca-Cola Company/Carlsberg A/S, OJ 1998 L 145/41 .............................................................. 211 Coca-Cola Company/Nestlé/JV, Case COMP/M.2276, OJ 2001 C 308/13 ................................. 221 Credit Suisse Group/Donaldson, Lufkin & Jenrette, OJ 2000 C 348/13 ...................................... 189 Crown Cork & Seal/CarnaudMetalbox, OJ 1996 L 75/38 .......................................................... 1025 CVC/Lenzing, Case COMP/M.2187 ............................................................................................. 150 Danish Crown/Vestjyske Slagterier, Case IV/M.1313, OJ 2000 L 20/1 ........................... 157, 162–3 De Beers/LVMH Case COMP/M.2333 ......................................................................................... 135 Deutsche Börse/NYSE Euronext, Case COMP/M.6166 ................................................................ 122 DuPont/ICI, Case IV/M.214 OJ 1993 L 7/13 ............................................................... 139, 189, 194 Electrolux/AEG, OJ 1994 C 187/07 .............................................................................................. 193 Electrolux/AEG 158 Case IV/M.458 OJ 1994 C 187/07 .............................................................. 158 Enso/Stora, OJ 1999 L 254/9 ................................................................................................ 216, 219

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Exxon/Mobil (crude oil), Case IV/M.1383, OJ 2004 L 103/1 ...................................................... 163 Facebook/WhatsApp Case M.7217, Commission Decision of 3 October 2014................ 1054, 1097 Fiat Geotech/Ford New Holland, OJ 1991 C 118/14 .................................................................... 193 GE/Amersham, Case COMP/M.3304, OJ 2004 C 74/5 ................................................................ 744 GEC-Siemens/Plessey, OJ 1990 C 239/2 ........................................................................................ 53 Gencor/Lonrho, OJ 1997 L 11/30................................................................................................. 234 Gencor/Lonrho Case IV/M.619 ............................................................................................ 150, 163 General Electric/Honeywell, Case COMP/M.2220 ...................................................................... 171 Glaxo Wellcome/SmithKline Beecham, OJ 2000 C 170/6 ..................................................... 138, 872 Google/Doubleclick, Case M.4731 Commission Decision of 11 March 2008 ........................... 1054 Google/Motorola Mobility, Case COMP M.6381, Commission decision of 13 February 2012................................................................................ 843–4, 849, 851–2, 856 Gosme/Martell-DMP, OJ 1991 L 185/23 ....................................................................................... 37 Granari/Ültje/Intersnack/May Holding Case No IV/M.32 ........................................................... 133 Guinness/Grand Metropolitan, OJ 1998 L 288/24 ....................................................................... 211 Hutchison 3G Italy / Wind / JV COMP/M.7758............................................................................ 154 Hutchison/RCPM/ECT, OJ 2003 L 223/1 ..................................................................................... 212 Imetal/English China Clays, Case COMP/M.1381 ...................................................................... 157 Industri Kapital (Nordkem)/DYNO, Case COMP/M.1813............................................................ 156 Kesko/Tuko, Case IV/M.784, Commission Decision of 20 November 1996, OJ 1997 L 110/53 ........................................................................................................... 193, 251 Kesko/Tuko, M.784, decision of 19 February 1997, OJ 1997 L 174/47 ..................................... 1015 Kimberly-Clark/Scott, OJ 1996 L 183/1 ....................................................................................... 211 Kraft Foods/Cadbury, Case COMP/M.5644 ................................................................................. 122 LVMH/PRADA/FENDI Case No IV/M.1780 ................................................................................ 135 MCIWorldCom/Sprint, OJ 2003 L 300/1 ...................................................................................... 194 Mannesmann/Vallourec/Ilva, Case IV/M.315 OJ 1993 C 228/17......................................... 150, 229 Microsoft/LinkedIn Case M.8124, Commission Decision of 6 December 2016 ........ 1054, 1097, 1100 Mitsui/CVRD/Caemi, OJ L 2004 92/50 ........................................................................ 156, 189, 242 Mylan/Meda COMP/M.7975 ........................................................................................................ 138 NC/Canal+/CDPQ/BankAmerica, Case IV/M.1327 .................................................................... 251 Nestlé/Ralston Purina, Case COMP/M.2337 ............................................................................... 167 Norske Skog/Parenco/Walsum, Case COMP/M.2499 ........................................................... 158, 243 Office Depot/Guilber Case COMP/M.3108 .................................................................................. 122 Olympic / Aegean Airlines Case COMP/M.5830 .......................................................................... 153 Online Travel Portal, OJ 2001 C 323/6 ....................................................................................... 1010 Oracle/Sun Microsystems, OJ 2010 C 91/7................................................................................... 852 Pfizer/Warner Lambert, OJ 2000 C 210/9............................................................................. 138, 872 Philip Morris/Nabisco, Case COMP/M.2072 ............................................................................... 216 Pilkington Techint/SIV, Case IV/M.358 OJ 1994 L 158/24 .......................................................... 226 Pirelli/BICC Case COMP/M.1882 ............................................................................................... 135 Price Waterhouse/Coopers & Lybrand, OJ 1999 L 50/27............................................................. 189 Procordia/Erbamont, OJ 1993 C 128/07 ...................................................................................... 193 Procter and Gamble/Gillette, Case COMP/M.3732, Commission Decision of 15 July 2005 ..............535 Rewe/Meinl, OJ 1999 L 274/1......................................................................................... 219, 1025–6 Rhône Poulenc/SNIA II, Case IV/M.355 OJ 1993 C 272/04 ........................................................ 226 Saint-Gobain/Wacker-Chemie/NOM, Case IV/M.774 .................................................................. 156 Sanofi/Sterling Drug, Case IV/M.72 ............................................................................................. 193 SCA/Metsä Tissue, OJ 2002 L 57/1 ............................................................................................... 198 Scottish and Newcastle, OJ 1999 L 186/28 .................................................................................. 162

Table of Cases

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Shell/Montecatini, OJ 1994 L 332/48 ........................................................................................... 194 Siemens/Dräger, Case COMP/M.2861 ....................................................................................... 1187 Snecma, Case IV/M.368 ............................................................................................................... 229 Sogecable/Canalsatélite Digital Vía Digital, Case COMP/M.2845 ............................................. 159 Sony/BMG, Case COMP/M.3333 ............................................................................... 239–41, 243–4 T-Mobile NL / Tele2 COMP/M.8792 ............................................................................................. 154 Tetra Laval/Sidel, OJ 2004 L 43/13 .............................................................................................. 127 Tetra Pak/Alfa-Laval, OJ 1991 L 290/35 ...................................................................................... 192 Unilever/Bestfoods, Case No IV/M.1990 ..................................................................................... 143 Unisource, OJ 1997 L 318/1 ........................................................................... 668, 1010, 1167, 1184 UPM-Kymmene/Haindl, Case IV/M.2498 OJ 2002 L 233/38 ...................................... 158, 216, 242 Volvo/Scania, Case IV/M.1672 ..................................................................................................... 158 Watch Repair, Case COMP/E-l/39097, Commission Decision of 10 July 2008 ........................ 46–7 Water Management Products, Case COMP/39611, Commission decision of 27 June 2012 ...... 1175 WorldCom/MCI, Case IV/M.1069, OJ 1999 L 116/1.................................................................... 189 Worldline/Equens/Paysquare, Case M.7873 Commission Decision of 20 April 2016 ................... 53

III. General Court Judgments Alphabetical Order Aéroports de Paris v Commission, Case T-128/98, [2000] ECR II-3929 .............. 165, 303, 682, 974 Agria Polska sp. z o.o. and others v Commission, Case T-480/15 EU:T:2017:339....................... 764 Airtours plc v Commission, Case T-342/99, [2002] ECR II-2585 ............... 106, 123, 167, 224, 228, 232–3, 235–9, 241–2, 245 Alrosa Company Ltd v Commission, Case T-170/06, [2007] ECR II-2601................................. 1159 Amministrazione Autonoma dei Monopoli di Stato (AAMS) v Commission, Case T-139/98, [2001] ECR II-3413 ............................................... 163, 192, 201, 1036–7, 1098 Arkema France, Altuglas International SA, Altumax Europe SAS v Commission Case T-217/06 EU:T:2011:251 ................................................................................................. 39 Arrow v Commission Case T-467/13, EU:T:2016:450 .................................................................. 788 Asia Motor France SA and others v Commission, Case T-387/94, [1996] ECR II-961 .............. 32–3 AstraZeneca v Commission, Case T-321/05, [2010] ECR II-2805................. 40, 51, 94–5, 107, 131, 149, 155, 202–3, 211–12, 266, 294, 296, 315–7, 319–20, 342, 754–5, 764, 769, 771–2, 774, 777, 874, 877–8, 884, 1113 Atlantic Container Line AB and Others v Commission, Case T-395/94, [2002] ECR II-875 ..... 1214 Atlantic Container Line AB and Others v Commission (TACA), Joined Cases T-191/98 and T-212/98 to T-214/98, [2003] ECR II-3275............................... 46, 49, 94, 188, 236, 246–7, 265, 267, 352–3, 1132, 1179 Automec Srl v Commission, Case T-64/89, [1990] ECR II-367 .................................................. 1143 Automec Srl v Commission (Automec II), Case T-24/90, [1992] ECR II-2223 ................. 1163, 1168 Bayer AG v Commission, Case T-41/96, [2000] ECR II-3383 ................................................ 45, 609 BPB Industries plc and British Gypsum Ltd v Commission, Case T-65/89, [1993] ECR II-389 ...................................................... 303, 310, 323, 509, 524, 566, 1110, 1118 British Airways Plc v Commission, Case T-219/99, [2003] ECR II-5917 ............................................................................. 89, 119, 133, 164, 193–5, 252, 322, 324–5, 330, 384, 545, 547, 574–5, 581–2, 597, 957–8, 971, 997–8, 1013

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British Broadcasting Corporation and BBC Enterprises Ltd (BBC) v Commission, Case T-70/89, [1991] ECR II-535 .................................................................... 87, 162, 194, 624, 629, 1111, 1128 Bureau Européen des Unions des Consommateurs and National Consumer Council v Commission, Case T-37/92, [1994] ECR II-285 ............................................. 32, 1160 CISAC v Commission Case T-442/08 EU:T:2013:188 ................................................................ 1103 Cisco Systems, Inc. and Messagenet SpA v Commission, Case T-79/12, EU:T:2013:635 ............................................................................................. 197, 570, 729, 1075 Clearstream Banking AG and Clearstream International SA v Commission, Case T-301/04, [2009] ECR II-3155 .................................................. 134–6, 151–2, 633–4, 645, 647–8, 685, 876, 969–70, 981, 989–90, 998, 1016, 1176 Coe Clerici Logistics SpA v Commission, Case T-52/00, [2003] ECR II-2123 .................... 604, 641 Compagnie Générale Maritime and others v Commission, Case T-86/95, [2002] ECR II-1011 .............................................................................................................. 1114 Compagnie Maritime Belge Transports SA and others v Commission, Joined Cases T-24/93, T-25/93, T-26/93, and T-28/93, [1996] ECR II-1201 .......... 235, 267, 293, 355, 357, 366, 409, 412 Confédération Européenne des Associations d’horlogers-réparateurs (CEAHR) v Commission, Case T-427/08, [2010] ECR I-5865 .................................................... 172–4, 739 Confédération européenne des associations d’horlogers-réparateurs (CEAHR) v Commission, Case T-712/14, EU:T:2017:748 ................................ 46–7, 645, 647, 672–3, 739 Consiglio Nazionale degli Spedizionieri Doganali v Commission, Case T-513/93, [2000] ECR II-1807 ........................................................................................................ 21, 31–3 Dansk Pelsdyravlerforing v Commission, Case T-61/89, [1992] ECR II-1931 ................. 1110, 1179 Der Grüne Punkt – Duales System Deutschland GmbH v Commission, Case T-151/01, [2007] ECR II-1607 .............................................................................. 13, 1038–40, 1098, 1182 Deutsche Bahn AG v Commission, Case T-229/94, [1997] ECR II-1689............ 260, 303, 969, 1001 Deutsche Telekom AG v Commission, Case T-271/03, [2008] ECR II-447 .......... 33–4, 63, 100, 290, 299, 324, 436, 444–6, 448–9, 452, 463–6, 494–7, 1097, 1180 EMC Development v Commission Case T-432/05, EU:T:2010:189.............................................. 765 European Federation of Ink and Ink Cartridge Manufacturers (EFIM) v Commission, Case T-296/09, EU:T:2011:693, [2011] ECR II-693 ...................................................... 174, 237 European Night Services Ltd and others v Commission, Joined Cases T-374/94, T-375/94, T-384/94 and T-388/94, [1998] ECR II-3141 ............................. 603–4, 639, 641, 668 Fédération internationale de football association (FIFA) v Commission, Case T-68/08 [2011] ECR II-349 .............................................................................................. 58 Federación Nacional de Empresas de Instrumentación Científica, Médica, Técnica y Dental (FENIN) v Commission, Case T-319/99, [2003] ECR II-357 ................. 22, 26 France Télécom SA v Commission, Case T-340/03, [2007] ECR II-107, ECLI:EU:T:2007:22 .......................................................... 7, 101, 128, 152, 168, 188, 197, 210, 326, 339, 357, 366, 369, 375–6, 378, 380, 385, 400, 402–3, 414–5, 418, 1112 Gencor Ltd v Commission, Case T-102/96, [1999] ECR II-753 ............................ 16, 138, 150, 194, 234, 773, 872, 1196 General Electric Company v Commission, Case T-210/01, [2005] ECR II-5575 ........... 55, 171, 309 Generics (UK) v Commission, Case T-469/13 EU:T:2016:454 .................................................... 788 Google and Alphabet v Commission Case T-612/17, OJ 2017 C 369/37 .................................... 1070 Google and Alphabet v Commission Case T-604/18, OJ 2018 C 445/21 ............................ 570, 1074

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Google and Alphabet v Commission Case T-334/19, OJ 2019 C 255/46, 2019/C 255/60 .............................................................................................................. 530, 1079 Gosselin Group NV and Stichting Administratiekantoor Portielje v Commission, Joined Cases T-208/08 and T-209/08, [2011] ECR II-3639 ...................................................... 22 Groupe Canal + v Commission, Case T-873/16 EU:T:2018:904................................................ 1161 Groupement d’achat Édouard Leclerc v Commission, Case T-88/92 [1996] ECR II-1961 ............ 49 Guérin Automobiles v Commission, Case T-186/94, [1995] ECR II-1753.................................. 1160 Hilti AG v Commission, Case T-30/89, [1991] ECR II-1439 ............... 133, 164, 192, 214, 303, 344, 409, 412, 538, 712, 723, 734 Imperial Chemical Industries v Commission, Case T-36/91, [1995] ECR II-1847....................... 193 Imperial Chemical Industries v Commission, Case T-66/01, [2010] ECR II-2631.............. 502, 516, 558, 585 IMS Health Inc v Commission, Case T-184/01 R, [2001] ECR II-3193 ...................... 626, 627, 654, 1138–9, 1141, 1144 Independent Music Publishers and Labels Association (Impala) v Commission, Case T-464/04, [2006] ECR II-2289 ............................................................................... 239, 241 Independent Television Publications Ltd (ITP) v Commission, Case T-76/89, [1991] ECR II-575 .................................................................................. 87, 162, 194, 624, 1128 Industrie des Poudres Sphériques SA v Commission, Case T-5/97, [2000] ECR II-3755 ................................................................................... 436, 444–5, 449, 451, 498, 754–5, 765 Intel v Commission, Case T-286/09, EU:T:2014:547 ............................... 15, 17, 113, 163, 263, 291, 328–9, 547, 559–60, 563, 597, 1112, 1123 Inuit Tapiriit Kanatami and others v European Parliament and Council of the European Union, Case T-18/10, [2011] ECR II-5599 ................................................ 1159 Irish Sugar plc v Commission, Case T-228/97, [1999] ECR II-2969, ECLI:EU:T:1999:246 ............................................................ 31–3, 216, 248–50, 253, 260, 303, 326–8, 335, 343, 409, 412, 536, 573, 598–9, 754–5, 795, 968, 980–1, 990, 1015, 1017, 1113, 1118–9, 1178 Isabella Scippacercola and Ioannis Terezakis v Commission, Case T-306/05, [2008] ECR II-4 ................................................................................................................ 25, 926 ITT Promedia NV v Commission, Case T-111/96, [1998] ECR II-2937 ...................... 266, 341, 754, 759–64, 850, 853 Kaysersberg v Commission, Case T-290/94, [1997] ECR II-2137................................................ 189 Kesko Oy v Commission, Case T-22/97, [1999] ECR II-3775 .............................................. 193, 251 Kish Glass & Co Ltd v Commission, Case T-65/96, [2000] ECR II-1885 ............................ 119, 158 La Cinq SA v Commission, Case T-44/90, [1992] ECR II-1 ....................................... 1137, 1139–40 L’Air liquide, société anonyme pour l’étude et l’exploitation des procédés Georges Claude v Commission, Case T-185/06, EU:T:2011:275 ........................................................... 39 Langnese-Iglo GmbH v Commission, Case T-7/93, [1995] ECR II-1533 ..................................... 151 Lundbeck v Commission, Case T-472/13 EU:T:2016:449..................................................... 788, 794 Manufacture française des pneumatiques Michelin v Commission (Michelin II), Case T-203/01, [2003] ECR II-4071 ........................................ 89, 209, 264, 278, 322, 326, 334, 412, 545, 548, 554, 558, 573–4, 581, 592, 594–7, 797–8, 874 Meca-Medina (David) and Majcen (Igor) v Commission, Case T-313/02, [2004] ECR II-3291 ......... 28 Merck v Commission Case T-470/13 EU:T:2016:452 ................................................................... 788 Micro Leader Business v Commission, Case T-198/98, [1999] ECR II-3989 ........ 628, 691, 1004, 1115

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Microsoft v Commission, Case T-201/04, [2007] ECR II-3601 ........... 15, 99, 117, 133–4, 151, 163, 170, 206–7, 213, 272, 279, 285, 298, 306–7, 320, 348, 353, 604, 624, 629–31, 633–4, 638, 640–2, 646–8, 650–4, 662, 664, 669, 673, 679, 697, 700, 713–4, 716, 720–3, 725, 729, 731, 733, 737–8, 740, 802, 856, 1133–4, 1173, 1193 Microsoft Corp v Commission, Case T-167/08, EU:T:2012:323 ........................................ 661, 1192 Morningstar v Commission, Case T-76/14 EU:T:2016:481 ........................................................ 1162 National Association of Licensed Opencast Operators (NALOO) v Commission, Case T-89/98, ECLI:EU:T:2001:41 ........................................................................................ 932 Nintendo v Commission, Case T-13/03 [2009] ECR II-0975 ...................................................... 1178 O2 (Germany) GmbH & Co. OHG v Commission, Case T-328/03 [2006] ECR II-1231 ............. 321 Orange Polska S.A. v Commission Case T-486/11 EU:T:2015:1002 ............................ 63, 677, 1178 Parker ITR and Parker-Hannifin v Commission Case T-146/09 EU:T:2013:258............................ 39 Peugeot v Commission, Case T-23/90, [1991] ECR II-653 ........................................... 1135, 1137–8 Piau (Laurent) v Commission, Case T-193/02, [2005] ECR II-209 ..................... 21, 28, 233, 236–7, 242, 251, 1160 Protégé International Ltd v Commission, Case T-119/09, EU:T:2012:421 .................... 759–60, 853 Radio Telefís Éireann (RTE) v Commission, Case T-69/89, [1991] ECR II-485............ 87, 162, 164, 194, 624, 636, 1128 Schneider Electric SA v Commission, Case T-77/02, [2002] ECR II-4201........................... 123, 745 Schneider Electric SA v Commission, Case T-310/01, [2002] ECR II-4071................. 123, 309, 745 SELEX Sistemi Integrati SpA v Commission, Case T-155/04, [2006] ECR II-4797 ..................... 682 Servier SAS, Servier Laboratories Ltd, and Les Laboratoires Servier SAS v Commission, Case T-691/14, EU:T:2018:922 ............................. 116–7, 119–20, 123, 129–30, 788, 794, 880 Slovak Telekom a.s. v Commission, Case T-851/14, EU:T:2018:929 ..... 63–4, 128, 436, 453–4, 458, 468, 496, 675, 677–80, 1090, 1098 Società Italiana Vetro SpA, Fabbrica Pisana SpA and PPG Vernante Pennitalia SpA v Commission (re Italian Flat Glass), Joined Cases T-68/89, T-77/89 and T-78/89, [1992] ECR II-1403 .................................................................................... 161, 216, 233–5, 249 Société de Treillis et Panneaux Soudés v Commission, Case T-151/89, [1995] ECR II-1191 ........ 32 Solvay SA v Commission, Case T-32/91, [1995] ECR II-1825........................................ 94, 558, 585 Solvay SA v Commission, Case T-57/01, [2009] ECR II-4621.................. 531–2, 558, 585, 594, 958 Sumitomo Chemical Co Ltd and Sumika Fine Chemicals Co Ltd v Commission, Joined Cases T-22/02 and T-23/02, [2005] ECR II-4065 .......................................................... 43 Sun and Ranbaxy v Commission Case T-460/13 EU:T:2016:453 ................................................. 788 Telefonica v Commission Case T-216/13 EU:T:2016:369..................................................... 561, 906 Telefónica and Telefónica de España v Commission, Case T-336/07, EU:T:2012:172 .............................................................................. 34–5, 40, 156, 324, 414, 436, 443–9, 461, 464, 466–7, 474, 477–8, 491, 494, 496, 1097, 1113, 1118, 1180 Tetra Laval BV v Commission, Case T-5/02, [2002] ECR II-4381........................ 106, 123, 309, 745 Tetra Laval BV v Commission, Case T-80/02, [2002] ECR II-4519.............................. 106, 309, 745 Tetra Pak International SA v Commission, Case T-83/91, [1994] ECR II-755 ..................................................... 12, 51, 192, 303, 311, 323, 343, 357, 366, 375, 388, 395, 413, 446, 509, 538, 712, 724, 734, 958, 988, 1035–6, 1098, 1187 Tetra Pak v Commission Case T-51/89 [1990] ECR II-41............................................................... 49 Tetra Pak Rausing SA v Commission (Tetra Pak I), Case T-51/89, [1990] ECR II-309 .................................................................................................. 45–6, 50, 695

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Tiercé Ladbroke SA v Commission, Case T-504/93, [1997] ECR II-923 ...... 626, 628, 637, 639, 682 Timab Industries and Cie financière et de participations Roullier (CFPR) v Commission, Case T-456/10, EU:T:2015:296 .................................................................................................. 2 Tomra Systems ASA and others v Commission, Case T-155/06, [2011] ECR II-4361 ........................................................................... 106, 502, 516, 518, 522–3, 546, 559, 578–9, 586, 1116 Topps Europe Ltd v Commission Case T-699/14, EU:T:2017:2 ........................................ 152–3, 184 Transportes Evaristo Molina v Commission Case T-45/08 [2008] ECR-II 499.......................... 1161 Tréfileurope Sales SARL v Commission, Case T-141/89, [1995] ECR II-791 ............................. 1110 UPS Europe SA v Commission, Case T-175/99, [2002] ECR II-1915 .............................. 317, 394–5 Van den Bergh Foods Ltd v Commission, Case T-65/98, [2003] ECR II-4653, ECLI:EU:T:2003:281 .................................................................... 323, 501, 507, 509, 522, 524, 533–4, 570, 689, 1089, 1178 Vereniging van Samenwerkende Prijsregelende Organisaties in de Bouwnijverheid and others v Commission, Case T-29/92, [1995] ECR II-289 .................................... 1110, 1179 Vlaamse Televisie Maatschapij NV v Commission, Case T-266/97, [1999] ECR II-2329 .............. 57 Volkswagen AG v Commission, Case T-208/01, [2003] ECR II-5141 ......................................... 1110 Volkswagen v Commission, Case T-62/98, [2000] ECR II-2707, ECLI:EU:T:2000:180 ............................................................................................. 119, 137, 176 WWF UK (World Wide Fund for Nature) v Commission, Case T-105/95, [1997] ECR II-313................ 97 Xellia and Alpharma v Commission Case T-471/13 EU:T:2016:460 ............................................ 788

IV. General Court Judgments Numerical Order Case T-30/89, Hilti AG v Commission, [1991] ECR II-1439 ............... 133, 164, 192, 214, 303, 344, 409, 412, 538, 712, 723, 734 Case T-51/89 Tetra Pak v Commission [1990] ECR II-41............................................................... 49 Case T-51/89, Tetra Pak Rausing SA v Commission (Tetra Pak I), [1990] ECR II-309 .................................................................................................. 45–6, 50, 695 Case T-61/89, Dansk Pelsdyravlerforing v Commission, [1992] ECR II-1931 ................. 1110, 1179 Case T-64/89, Automec Srl v Commission, [1990] ECR II-367 .................................................. 1143 Case T-65/89, BPB Industries plc and British Gypsum Ltd v Commission, [1993] ECR II-389 ................................................................................. 303, 310, 323, 509, 524, 566, 1110, 1118 Joined Cases T-68/89, T-77/89 and T-78/89, Società Italiana Vetro SpA, Fabbrica Pisana SpA and PPG Vernante Pennitalia SpA v Commission (re Italian Flat Glass), [1992] ECR II-1403............................................... 161, 216, 233–5, 249 Case T-69/89, Radio Telefís Éireann (RTE) v Commission, [1991] ECR II-485............ 87, 162, 164, 194, 624, 636, 1128 Case T-70/89, British Broadcasting Corporation and BBC Enterprises Ltd (BBC) v Commission, [1991] ECR II-535 .................................................................. 87, 162, 194, 624, 629, 1111, 1128 Case T-76/89, Independent Television Publications Ltd (ITP) v Commission, [1991] ECR II-575 .................................................................................. 87, 162, 194, 624, 1128 Case T-141/89, Tréfileurope Sales SARL v Commission, [1995] ECR II-791 ............................. 1110 Case T-151/89, Société de Treillis et Panneaux Soudés v Commission, [1995] ECR II-1191 ................. 32 Case T-23/90, Peugeot v Commission, [1991] ECR II-653 ........................................... 1135, 1137–8 Case T-24/90, Automec Srl v Commission (Automec II), [1992] ECR II-2223 ................. 1163, 1168 Case T-44/90, La Cinq SA v Commission, [1992] ECR II-1 ....................................... 1137, 1139–40

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Case T-32/91, Solvay SA v Commission, [1995] ECR II-1825........................................ 94, 558, 585 Case T-36/91, Imperial Chemical Industries v Commission, [1995] ECR II-1847....................... 193 Case T-83/91, Tetra Pak International SA v Commission, [1994] ECR II-755 ............................................................. 12, 51, 192, 303, 311, 323, 343, 357, 366, 375, 388, 395, 413, 446, 509, 538, 712, 724, 734, 958, 988, 1035–6, 1098, 1187 Case T-29/92, Vereniging van Samenwerkende Prijsregelende Organisaties in de Bouwnijverheid and others v Commission, [1995] ECR II-289 ........................ 1110, 1179 Case T-37/92, Bureau Européen des Unions des Consommateurs and National Consumer Council v Commission, [1994] ECR II-285.................................................................... 32, 1160 Case T-88/92 Groupement d’achat Édouard Leclerc v Commission, [1996] ECR II-1961 ............ 49 Case T-7/93, Langnese-Iglo GmbH v Commission, [1995] ECR II-1533 ..................................... 151 Joined Cases T-24/93, T-25/93, T-26/93, and T-28/93, Compagnie Maritime Belge Transports SA and others v Commission, [1996] ECR II-1201 ..................... 235, 267, 293, 355, 357, 366, 409, 412 Case T-504/93, Tiercé Ladbroke SA v Commission, [1997] ECR II-923 ...... 626, 628, 637, 639, 682 Case T-513/93, Consiglio Nazionale degli Spedizionieri Doganali v Commission, [2000] ECR II-1807 ........................................................................................................ 21, 31–3 Case T-186/94, Guérin Automobiles v Commission, [1995] ECR II-1753.................................. 1160 Case T-229/94, Deutsche Bahn AG v Commission, [1997] ECR II-1689............ 260, 303, 969, 1001 Case T-290/94, Kaysersberg v Commission, [1997] ECR II-2137................................................ 189 Joined Cases T-374/94, T-375/94, T-384/94 and T-388/94, European Night Services Ltd and others v Commission, [1998] ECR II-3141 ......................................... 603–4, 639, 641, 668 Case T-387/94, Asia Motor France SA and others v Commission, [1996] ECR II-961 .............. 32–3 Case T-395/94, Atlantic Container Line AB and Others v Commission, [2002] ECR II-875 ..... 1214 Case T-86/95, Compagnie Générale Maritime and others v Commission, [2002] ECR II-1011 .............................................................................................................. 1114 Case T-105/95, WWF UK (World Wide Fund for Nature) v Commission, [1997] ECR II-313 ....... 97 Case T-41/96, Bayer AG v Commission, [2000] ECR II-3383 ................................................ 45, 609 Case T-65/96, Kish Glass & Co Ltd v Commission, [2000] ECR II-1885 ............................ 119, 158 Case T-102/96, Gencor Ltd v Commission, [1999] ECR II-753 ............................ 16, 138, 150, 194, 234, 773, 872, 1196 Case T-111/96, ITT Promedia NV v Commission, [1998] ECR II-2937 ...................... 266, 341, 754, 759–64, 850, 853 Case T-5/97, Industrie des Poudres Sphériques SA v Commission, [2000] ECR II-3755 ................................................................................... 436, 444–5, 449, 451, 498, 754–5, 765 Case T-22/97, Kesko Oy v Commission, [1999] ECR II-3775 .............................................. 193, 251 Case T-228/97, Irish Sugar plc v Commission, [1999] ECR II-2969, ECLI:EU:T:1999:246 ............................................................ 31–3, 216, 248–50, 253, 260, 303, 326–8, 335, 343, 409, 412, 536, 573, 598–9, 754–5, 795, 968, 980–1, 990, 1015, 1017, 1113, 1118–9, 1178 Case T-266/97, Vlaamse Televisie Maatschapij NV v Commission, [1999] ECR II-2329 .............. 57 Case T-62/98, Volkswagen v Commission, [2000] ECR II-2707, ECLI:EU:T:2000:180 ............. 119, 137, 176 Case T-65/98, Van den Bergh Foods Ltd v Commission, [2003] ECR II-4653, ECLI:EU:T:2003:281 .................................. 323, 501, 507, 509, 522, 524, 533–4, 570, 689, 1089, 1178 Case T-89/98, National Association of Licensed Opencast Operators (NALOO) v Commission, ECLI:EU:T:2001:41....................................................................................... 932

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Case T-128/98, Aéroports de Paris v Commission, [2000] ECR II-3929 .............. 165, 303, 682, 974 Case T-139/98, Amministrazione Autonoma dei Monopoli di Stato (AAMS) v Commission, [2001] ECR II-3413 ............................................... 163, 192, 201, 1036–7, 1098 Joined Cases T-191/98 and T-212/98 to T-214/98, Atlantic Container Line AB and Others v Commission (TACA), [2003] ECR II-3275........... 46, 49, 94, 188, 236, 246–7, 265, 267, 352–3, 1132, 1179 Case T-198/98, Micro Leader Business v Commission, [1999] ECR II-3989 .................................................................................... 628, 691, 1004, 1115 Case T-175/99, UPS Europe SA v Commission, [2002] ECR II-1915 .............................. 317, 394–5 Case T-219/99, British Airways Plc v Commission, [2003] ECR II-5917.............. 89, 119, 133, 164, 193–5, 252, 322, 324–5, 330, 384, 545, 547, 574–5, 581–2, 597, 957–8, 971, 997–8, 1013 Case T-319/99, Federación Nacional de Empresas de Instrumentación Científica, Médica, Técnica y Dental (FENIN) v Commission, [2003] ECR II-357 ............................ 22, 26 Case T-342/99, Airtours plc v Commission, [2002] ECR II-2585 ............... 106, 123, 167, 224, 228, 232–3, 235–9, 241–2, 245 Case T-52/00, Coe Clerici Logistics SpA v Commission, [2003] ECR II-2123 .................... 604, 641 Case T-57/01, Solvay SA v Commission, [2009] ECR II-4621.................. 531–2, 558, 585, 594, 958 Case T-151/01, Der Grüne Punkt – Duales System Deutschland GmbH v Commission, [2007] ECR II-1607 .............................................................................. 13, 1038–40, 1098, 1182 Case T-66/01, Imperial Chemical Industries v Commission, [2010] ECR II-2631.............. 502, 516, 558, 585 Case T-184/01 R, IMS Health Inc v Commission, [2001] ECR II-3193 ...................... 626, 627, 654, 1138–9, 1141, 1144 Case T-203/01, Manufacture française des pneumatiques Michelin v Commission (Michelin II), [2003] ECR II-4071 .......................................... 89, 209, 264, 278, 322, 326, 334, 412, 545, 548, 554, 558, 573–4, 581, 592, 594–7, 797–8, 874 Case T-208/01, Volkswagen AG v Commission, [2003] ECR II-5141 ......................................... 1110 Case T-210/01, General Electric Company v Commission, [2005] ECR II-5575 ........... 55, 171, 309 Case T-310/01, Schneider Electric SA v Commission, [2002] ECR II-4071................. 123, 309, 745 Case T-5/02, Tetra Laval BV v Commission, [2002] ECR II-4381........................ 106, 123, 309, 745 Joined Cases T-22/02 and T-23/02, Sumitomo Chemical Co Ltd and Sumika Fine Chemicals Co Ltd v Commission, [2005] ECR II-4065 ........................................................... 43 Case T-77/02, Schneider Electric SA v Commission, [2002] ECR II-4201........................... 123, 745 Case T-80/02, Tetra Laval BV v Commission, [2002] ECR II-4519.............................. 106, 309, 745 Case T-193/02, Piau (Laurent) v Commission, [2005] ECR II-209 ..................... 21, 28, 233, 236–7, 242, 251, 1160 Case T-313/02, Meca-Medina (David) and Majcen (Igor) v Commission, [2004] ECR II-3291 .................................................................................................................. 28 Case T-13/03 Nintendo v Commission, [2009] ECR II-0975 ...................................................... 1178 Case T-271/03, Deutsche Telekom AG v Commission, [2008] ECR II-447 .......... 33–4, 63, 100, 290, 299, 324, 436, 444–6, 448–9, 452, 463–6, 494–7, 1097, 1180 Case T-328/03 O2 (Germany) GmbH & Co. OHG v Commission, [2006] ECR II-1231 ............. 321 Case T-340/03, France Télécom SA v Commission, [2007] ECR II-107, ECLI:EU:T:2007:22 .......................................................... 7, 101, 128, 152, 168, 188, 197, 210, 326, 339, 357, 366, 369, 375–6, 378, 380, 385, 400, 402–3, 414–5, 418, 1112 Case T-155/04, SELEX Sistemi Integrati SpA v Commission, [2006] ECR II-4797 ..................... 682

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Case T-201/04, Microsoft v Commission, [2007] ECR II-3601 ........... 15, 99, 117, 133–4, 151, 163, 170, 206–7, 213, 272, 279, 285, 298, 306–7, 320, 348, 353, 604, 624, 629–31, 633–4, 638, 640–2, 646–8, 650–4, 662, 664, 669, 673, 679, 697, 700, 713–4, 716, 720–3, 725, 729, 731, 733, 737–8, 740, 802, 856, 1133–4, 1173, 1193 Case T-301/04, Clearstream Banking AG and Clearstream International SA v Commission, [2009] ECR II-3155 .............................. 134–6, 151–2, 633–4, 645, 647–8, 685, 876, 969–70, 981, 989–90, 998, 1016, 1176 Case T-464/04, Independent Music Publishers and Labels Association (Impala) v Commission, [2006] ECR II-2289 ............................................................................... 239, 241 Case T-306/05, Isabella Scippacercola and Ioannis Terezakis v Commission, [2008] ECR II-4 ................................................................................................................ 25, 926 Case T-321/05, AstraZeneca v Commission, [2010] ECR II-2805......... 40, 51, 94–5, 107, 131, 149, 155, 202–3, 211–12, 266, 294, 296, 315–7, 319–20, 342, 754–5, 764, 769, 771–2, 774, 777, 874, 877–8, 884, 1113 Case T-432/05, EMC Development v Commission EU:T:2010:189.............................................. 765 Case T-155/06, Tomra Systems ASA and others v Commission, [2011] ECR II-4361 ......... 106, 502, 516, 518, 522–3, 546, 559, 578–9, 586, 1116 Case T-170/06, Alrosa Company Ltd v Commission, [2007] ECR II-2601................................. 1159 Case T-185/06, L’Air liquide, société anonyme pour l’étude et l’exploitation des procédés Georges Claude v Commission, EU:T:2011:275 ...................................................................... 39 Case T-217/06, Arkema France, Altuglas International SA, Altumax Europe SAS v Commission EU:T:2011:251.................................................................................................. 39 Case T-336/07, Telefónica and Telefónica de España v Commission, EU:T:2012:172 ...................................................................................... 34–5, 40, 156, 324, 414, 436, 443–9, 461, 464, 466–7, 474, 477–8, 491, 494, 496, 1097, 1113, 1118, 1180 Case T-45/08, Transportes Evaristo Molina v Commission, [2008] ECR-II 499........................ 1161 Case T-68/08, Fédération internationale de football association (FIFA) v Commission, [2011] ECR II-349 .................................................................................................................... 58 Case T-167/08, Microsoft Corp v Commission, EU:T:2012:323 ........................................ 661, 1192 Joined Cases T-208/08 and T-209/08, Gosselin Group NV and Stichting Administratiekantoor Portielje v Commission, [2011] ECR II-3639........................................................................... 22 Case T-427/08, Confédération Européenne des Associations d’horlogers-réparateurs (CEAHR) v Commission, [2010] ECR I-5865 ............................................................ 172–4, 739 Case T-442/08, CISAC v Commission, EU:T:2013:188 .............................................................. 1103 Case T-119/09, Protégé International Ltd v Commission, EU:T:2012:421 .................... 759–60, 853 Case T-146/09, Parker ITR and Parker-Hannifin v Commission, EU:T:2013:258.......................... 39 Case T-286/09, Intel v Commission, EU:T:2014:547 ................... 15, 17, 113, 163, 263, 291, 328–9, 547, 559–60, 563, 597, 1112, 1123 Case T-296/09, European Federation of Ink and Ink Cartridge Manufacturers (EFIM) v Commission, EU:T:2011:693, [2011] ECR II-693 ......................................... 174, 237 Case T-18/10, Inuit Tapiriit Kanatami and others v European Parliament and Council of the European Union, [2011] ECR II-5599 ....................................................................... 1159 Case T-456/10, Timab Industries and Cie financière et de participations Roullier (CFPR) v Commission, EU:T:2015:296 ..................................................................................... 2 Case T-486/11, Orange Polska S.A. v Commission, EU:T:2015:1002 .......................... 63, 677, 1178

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Case T-79/12, Cisco Systems, Inc. and Messagenet SpA v Commission, EU:T:2013:635 ............................................................................................. 197, 570, 729, 1075 Case T-216/13, Telefonica v Commission, EU:T:2016:369................................................... 561, 906 Case T-460/13, Sun and Ranbaxy v Commission, EU:T:2016:453 ............................................... 788 Case T-467/13, Arrow v Commission, EU:T:2016:450 ................................................................. 788 Case T-469/13, Generics (UK) v Commission, EU:T:2016:454 ................................................... 788 Case T-470/13, Merck v Commission, EU:T:2016:452 ................................................................. 788 Case T-471/13, Xellia and Alpharma v Commission, EU:T:2016:460 .......................................... 788 Case T-472/13, Lundbeck v Commission, EU:T:2016:449.................................................... 788, 794 Case T-76/14, Morningstar v Commission, EU:T:2016:481 ....................................................... 1162 Case T-691/14, Servier SAS, Servier Laboratories Ltd, and Les Laboratoires Servier SAS v Commission, EU:T:2018:922................................................ 116–7, 119–20, 123, 129–30, 788, 794, 880 Case T-699/14, Topps Europe Ltd v Commission, EU:T:2017:2 ....................................... 152–3, 184 Case T-712/14, Confédération européenne des associations d’horlogers-réparateurs (CEAHR) v Commission, EU:T:2017:748 ........................................ 46–7, 645, 647, 672–3, 739 Case T-851/14, Slovak Telekom a.s. v Commission, EU:T:2018:929 ......................... 63–4, 128, 436, 453–4, 458, 468, 496, 675, 677–80, 1090, 1098 Case T-480/15, Agria Polska sp. z o.o. and others v Commission, EU:T:2017:339...................... 764 Case T-873/16, Groupe Canal + v Commission, EU:T:2018:904............................................... 1161 Case T-612/17, Google and Alphabet v Commission, OJ 2017 C 369/37 ................................... 1070 Case T-604/18, Google and Alphabet v Commission, OJ 2018 C 445/21 ........................... 570, 1074 Case T-334/19, Google and Alphabet v Commission OJ 2019 C 255/46, 2019/C 255/60 ........ 530, 1079

V. Court of Justice Judgments Alphabetical Order Aalborg Portland A/S and others v Commission, Joined Cases C-204/00 P, C-205/00 P, C-211/00 P, C-213/00 P, C-217/00 P and C-219/00 P, [2004] ECR I-123 .......... 348 AB Volvo v Erik Veng (UK) Ltd, Case 238/87, [1988] ECR 6211 .......................... 87, 297, 310, 605, 608, 612, 624, 628–30, 662, 873, 893, 1182–3 ABB and others v Commission, Joined Cases C-189/02 P, C-202/02 P, C-205/02 P-C-208/02 P and C-213/02 P, [2005] ECR I-5425.................................................. 97 Accession by the Community to the European Convention for the Protection of Human Rights and Fundamental Freedoms, Opinion 2/94, [1996] ECR I-1759 ................. 42 Aéroports de Paris v Commission, Case C-82/01 P, [2002] ECR I-9297 ........... 24–5, 165, 303, 980 AG2R Prévoyance v Beaudout Père et Fils SARL, Case C-437/09, [2011] ECR I-973 .................. 27 Agria Polska sp. z o.o. and others v Commission, Case C-373/17 P EU:C:2018:756 .............. 764–5 Agricola commerciale olio Srl and others v Commission, Case 232/81 R, [1981] ECR-2193......... 1137 Ahlström Osakeyhtiö and Others v Commission, Joined Cases 89/85, 104/85, 114/85, 116/85, 117/85 and 125/85 to 129/85, (Woodpulp I) [1988] ECR 447 ............ 16, 19, 117, 1114 Ahmed Saeed Flugreisen and Silver Line Reisebüro GmbH v Zentrale zur Bekämpfung unlauteren Wettbewerbs eV, Case 66/86, [1989] ECR 803 ......... 45, 50, 918–20, 1208 AKZO Chemie BV v Commission, Case C-62/86, [1991] ECR I-3359............ 12, 86, 119, 193, 264, 267, 276, 289, 293, 312, 326, 339, 355–6, 366–7, 369–70, 372–3, 375, 378, 384–5, 415, 418–9, 449, 456, 490, 1128–9

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Akzo Nobel NV and Others v Commission, Case C-97/08 P, [2009] ECR I-8237 ...................... 38–9 Albany International BV v Stichting Bedrijfspensioenfonds Textielindustrie, Case C-67/96, [1999] ECR I-5751 ..................................................................................... 22, 27 Allgemeine Elektrizitäts-Gesellschaft AEG-Telefunken AG v Commission, Case 107/82, [1983] ECR 3151 .................................................................. 37, 1099, 1111, 1120 Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH, and Oberbundesanwalt beim Bundesverwaltungsgericht, Case C-280/00, [2003] ECR I-7747 ................................................................................. 57, 394 Angonese (Roman) v Cassa di Risparmio di Bolzano SpA, Case C-281/98, [2000] ECR I-4139 ................................................................................................................. 338 Antonio Muñoz y Cia SA and Superior Fruiticola SA v Frumar Ltd and Redbridge Produce Marketing Ltd, Case C-253/00, [2002] ECR I-7289 .............................................. 1163 AOK Bundesverband and others v Ichthyol-Gesellschaft Cordes and others, Joined Cases C-264/01, C-306/01, C-354/01 and C-355/01, [2004] ECR I-2493 ................... 25 Arduino (Manuele), Case C-35/99, [2002] ECR I-1529 ....................................................... 56, 1123 ASBL Vereniging van Vlaamse Reisbureaus v ASBL Sociale Dienst van de Plaatselijke en Gewestelijke Overheidsdiensten, Case 311/85, [1987] ECR 3801 ................................ 30, 56 AstraZeneca, Case C-223/01, [2003] ECR I-11809.............................................................. 320, 777 AstraZeneca v Commission, Case C-457/10 P, EU:C:2012:770 ................ 40, 51, 95, 107, 131, 149, 155, 202–3, 211, 266, 294, 296, 315, 317–20, 754–5, 769, 772–5, 777–9, 781–2, 874–5, 877, 1113 Austria Asphalt GmbH & Co OG v Bundeskartellanwalt, Case C-248/16, EU:C:2017:643................ 53 Autortiesību un komunicēšanās konsultāciju aģentūra / Latvijas Autoru apvienība Case C-177/16, EU:C:2017:286 (“Latvian Copyright”), Opinion .............. 900, 906–10, 916–8, 928–30, 932, 940–1, 954, 1109 Autortiesību un komunicēšanās konsultāciju aģentūra / Latvijas Autoru apvienība Case C-177/16, EU:C:2017:689 (“Latvian Copyright”) ................................... 910, 915, 924–5, 930, 932 Bagnasco (Carlo) and Others v Banca Popolare di Novara soc. coop. arl., Joined Cases C-215/96 and C-216/96, [1999] ECR 135 ............................................ 1109, 1111 Banchero (Domingo), Case C-387/93, [1995] ECR I-4663 ............................................................ 22 Basset v Société des auteurs, compositeurs et éditeurs de musique (SACEM), Case 402/85, [1987] ECR 1747 ............................................................................................ 1023 Belgische Radio en Televisie v SV SABAM and NV Fonior, Case 127/73, [1974] ECR 313 ............................................................................... 12, 164, 260, 1023, 1033–4, 1098, 1109, 1208, 1212 Benzine en Petroleum Handelsmaatschappij BV and others v Commission, Case 77/77, [1978] ECR 1513 ........................................................ 261, 343, 980, 1012–3, 1121 Bertelsmann AG and anor. v Independent Music Publishers and Labels Association, Case C-413/06 P, [2008] ECR I-4951 ................................................................. 237, 239, 241–2 Bodson (Corinne) v SA Pompes funèbres des régions libérées, Case 30/87, [1988] ECR 2479 .............................................................................................................. 37, 923 Bodson (Corinne) v SA Pompes funèbres des régions libérées, Case 30/87, [1988] ECR 2507 .................................................................................................... 903, 922, 926 Boehringer Mannheim GmbH v Commission, Case 45/69, [1970] ECR 769 ............................. 1174 BPB Industries plc and British Gypsum Ltd v Commission, Case C-310/93 P, [1995] ECR I-865 ................................................................................................................... 509 Bristol Myers Squibb v Paranova A/S and others, Joined Cases C-427/93, C-429/93 and C-436/93, [1996] ECR I-3457 ..................................................................... 693–4

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British Airways plc v Commission, Case C-95/04 P, (BA/Virgin) [2006] ECR I-2331, ECLI:EU:C:2007:166 ......................................... 99, 106–7, 334, 549, 554, 573, 939, 958–9, 971–2, 976, 978–81, 998, 1013–4 British American Tobacco Company Ltd and RJ Reynolds Industries Inc v Commission, Joined Cases 142/84 and 156/84, [1987] ECR 4487 ....................................... 52 British Leyland plc v Commission, Case 226/84, [1986] ECR 3263 ............. 10, 303, 889, 899–901, 907, 910, 917, 926–7, 929, 940, 952, 980, 1003–4 Bundesanstalt für den Güterfernverkehr v Gebrüder Reiff GmbH & Co KG, Case C-185/91, [1993] ECR I-5801 ............................................................................. 30–31, 56 Bundesrepublik Deutschland (Germany) v Delta Schiffahrts und Speditionsgesellschaft mbH, Case C-153/93, [1994] ECR I-2517 ............................... 30–31, 56 Bundesverband der Arzneimittel-Importeure eV and Commission v Bayer AG, Joined Cases C-2/01 P and C-3/01 P, [2004] ECR I-23.................................... 45, 609, 690, 867 Bundeswettbewerbsbehörde v Donau Chemie AG and others, Case C-536/11, EU:C:2013:366 ..................................................................................................................... 1235 Bureau national interprofessionnel du cognac v Guy Clair, Case 123/83, [1985] ECR 391 .............................................................................................................. 32, 1114 Camera Care Ltd v Commission, Case 792/79 R, [1980] ECR 119 ........... 1135–6, 1138–9, 1143–4 Carlo Bagnasco, Case 246/86, [1989] ECR 2117 ...................................................................... 1119 Carra (Giovanni) and others, Case C-258/98, [2000] ECR I-4217........................................ 58, 298 Centrafarm BV et Adriaan de Peijper v Winthrop BV, Case 16/74, [1974] ECR 1183 ................. 694 Centre belge d’études de marché – Télémarketing (CBEM) v SA Compagnie luxembourgeoise de télédiffusion (CLT) and Information publicité Benelux (IPB), Case 311/84, [1985] ECR 3261 ........................... 297, 343, 612, 621–2, 669–71 Centro Servizi Spediporto Srl v Spedizioni Marittima del Golfo Srl, Case C-96/94, [1995] ECR I-2883 ..................................................................................................... 31, 56, 234 Christelle Deliège v Ligue francophone de judo et Disciplines Associées ASBL and others, Joined Cases C-51/96 and C-191/97, [2000] ECR I-2549 ....................................................... 29 Christian Poucet v Assurances Générales de France and Caisse Mutuelle Régionale du Languedoc-Roussillon, Joined Cases C-159/91 and C-160/91, [1993] ECR I-637 ................. 25 Cisal di Battistello Venanzio & C. Sas v Istituto nazionale per l’assicurazione contro gli infortuni sul lavoro (INAIL), Case C-218/00, [2002] ECR I-691.................................... 25–6 Coditel SA, Compagnie générale pour la diffusion de la télévision, and others v Ciné-Vog Films SA and others, Case 262/81, [1982] ECR 3381............................................................ 607 Cogeco Communications Case C-637/17, EU:C:2019:263 ........................................................ 1236 Comet BV v Produktschap voor Siergewassen, Case 45/76, [1976] ECR 2043 ......................... 1213 Comité des industries cinématographiques des Communautés européennes (CICCE) v Commission, Case 298/83, [1985] ECR 1105 ............................................. 918, 1023, 1027–8 Commission v Alrosa Company Ltd, Case C-441/07 P, [2010] ECR I-5949...... 1146, 1154, 1156–8, 1158–61, 1167, 1203 Commission v Anic Partecipazioni SpA, Case C-49/92 P, [1999] ECR I-4125............................. 222 Commission v Atlantic Container Line AB and others, Case C-149/95 P-R, [1995] ECR I-2165 ............................................................................................................... 1135 Commission v Belgium, Case C-249/88, [1991] ECR I-1275............................................. 690, 1002 Commission v Council (European Agreement on Road Transport), Case 22/70, [1971] ECR 263 ........................................................................................................................ 42 Case C-553/12 P, Commission v Dimosia Epicheirisi Ilektrismou AE (DEI) (Greek Lignite Case), EU:C:2014:2083 ..................................................................... 58–9, 1095

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Commission v Germany, Case 107/84, [1985] ECR 2655 .............................................................. 22 Commission v Gosselin Group NV and Stichting Administratiekantoor Portielje Case C-440/11 P, EU:C:2013:514 ............................................................................................ 22 Commission v Greece, Case 68/88, [1989] ECR 2965 ............................................................... 1164 Commission v Italy (Customs agents), Case C-35/96, [1998] ECR I-3851 .................................... 32 Commission v Ladbroke Racing Ltd, Joined Cases C-359/95 P and C-379/97 P, [1997] ECR I-6265 ............................................................................................................... 31–3 Commission v Luxembourg (Inland Waterway) Case C-266/03 [2005] ECR I-341 ....................... 68 Commission v Siemens Österreich and Others et Siemens Transmission & Distribution and Others v Commission, Cases C-231/11 P to C-233/11 P EU:C:2014:256 ........................ 39 Commission v Sweden (PFOS) Case C-246/07 [2010] ECR I-203 ................................................ 68 Commission v Tetra Laval BV, Case C-12/03 P, [2005] ECR I-987.............. 106, 123, 309–10, 491, 745 Commission v United Kingdom (Sea Fisheries) Case 804/79 [1981] ECR 93 ............................... 68 Compagnie Maritime Belge Transports SA and others v Commission, Joined Cases C-395/96 P and C-396/96 P, [2000] ECR I-1365......... 46, 79, 192, 235–6, 248–9, 253–4, 262, 267, 277, 293, 303, 339, 355, 357, 366, 368, 384, 387, 404–5, 409–10, 415, 1114 Connect Austria Gesellschaft für Telekommunikation GmbH v Telekom-Control- Kommission, and Mobilkom Austria AG, Case C-462/99, [2003] ECR I-5197, ECLI:EU:C:2003:297 ..................................................................................................... 57, 1095 Consorzio Industrie Fiammiferi (CIF) v Autorità Garante della Concorrenza e del Mercato, Case C-198/01, [2003] ECR I-8055 ....................................................... 31–2, 56 Consorzio italiano della componentistica di ricambio per autoveicoli and Maxicar v Régie nationale des usines Renault, Case 53/87, [1988] ECR 6039 ...... 297, 302–3, 608, 612, 624–5, 636, 739, 1182–3 Coöperatieve Stremsel-en Kleurselfabriek v Commission, Case 61/80, [1981] ECR 851 .............................................................................................................. 21, 1113 Coöperatieve Vereniging Suiker Unie UA and others v Commission, Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114–73, [1975] ECR 1663 ......... 33, 85, 260, 278, 297–8, 314, 508, 556, 980, 996, 1120–1 Corbeau (Paul), Case C-320/91, [1993] ECR I-2533..................................................... 30, 201, 395 Corsica Ferries France SA v Gruppo Antichi Ormeggiatori del porto di Genova Coop arl, and others, Case C-266/96, [1998] ECR I-3949 ...................................................................... 57 Corsica Ferries Italia Srl v Corpo dei Piloti del Porto di Genova, Case C-18/93, [1994] ECR I-1783 ..................................................... 260, 338, 977, 1000, 1122 Courage Ltd v Bernard Crehan and Bernard Crehan v Courage Ltd and Others, Case C-453/99, [2001] ECR I-6297 ........................................................................... 56, 1214–5 Courage v Crehan Case C-453/99, [2001] ECR I-6314 ............................................................. 1215 Delimitis (Stergios) v Henninger Bräu AG, Case C-234/89, [1991] ECR I-935......................... 1163 Denkavit Nederland BV v Hoofdproduktschap voor Akkerbouwprodukten, Case 15/83, [1984] ECR 2171 .................................................................................................................. 1133 Der Grüne Punkt – Duales System Deutschland GmbH v Commission, Case C-385/07 P, [2009] ECR I-6155 ....................................... 13, 907, 1038, 1040, 1098, 1182 Deutsche Grammophon Gesellschaft mbH v Metro-SB-Großmärkte GmbH & Co KG, Case 78/70, [1971] ECR 487 ........................................................................ 85, 202, 343, 922–3 Deutsche Telekom AG v Commission, Case C-280/08 P, [2010] ECR I-9555, ECLI:EU:C:210:603 .............................................................. 33–6, 63, 324, 436, 444, 448, 452, 463, 465, 473, 486–7, 494, 500, 638, 646, 654, 670, 675, 678, 1090, 1097–8, 1180

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Diego Calí & Figli Srl v Servizi ecologici porto di Genova SpA (SEPG), Case C-343/95, [1997] ECR I-1547 ................................................................................................................... 24 DIP SpA v Comune di Bassano del Grappa, LIDL Italia Srl v Comune di Chioggia and Lingral Srl v Comune di Chiogga, Joined Cases C-140/94, C-141/94 and C-142/94, [1995] ECR I-3257 ............................................................................... 31–2, 234 Duff and others v Minister for Agriculture and Food and Attorney General, Case C-63/93, [1996] ECR I-569 ............................................................................. 97, 299, 489 Duphar BV and others v The Netherlands, Case 238/82, [1984] ECR 523 .................................... 25 EARL de Kerlast v Union régionale de coopératives agricoles (Unicopa) and Coopérative du Trieux, Case C-15/95, [1997] ECR I-1961 ............................................. 999 Eco Swiss China Time Ltd v Benetton International NV, Case C-126/97, [1999] ECR I-3055 ............................................................................................................... 72–3 EFIM v Commission Case C-56/12 P EU:C:2013:575 ................................................................. 174 Elf Aquitaine SA v Commission, Case C-521/09 P, EU:C:2011:620 ............................................... 39 Elliniki Radiophonia Tiléorassi AE and Panellinia Omospondia Syllogon Prossopikou v Dimotiki Etairia Pliroforissis and others, Case C-260/89, [1991] ECR I-2925............ 57, 310 Emanuela Sbarigia v Azienda USL RM/A, Comune di Roma, Case C-393/08, [2010] ECR I-6337, ECLI:EU:C:2010:388 .......................................................................... 1123 EMI Records Ltd v CBS United Kingdom Ltd, Case 51/75, [1976] ECR 811 ............................ 1124 Eni SpA v Commission C-508/11 P EU:C:2013:289 ...................................................................... 39 Établissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v Commission, Joined Cases 56 and 58/64, [1966] ECR 299 ....................................................................... 1110 Europemballage and Continental Can v Commission, Case 6/72, [1973] ECR 215 ................................................................... 23, 45, 52, 54–5, 85, 119, 133, 138, 176, 187, 198, 313–4, 316–7, 335, 501, 695, 730, 773, 872, 879, 1197–8 Europese Gemeenschap v Otis NV and others, Case C-199/11, [2012] ECR I-684 ..................... 109 Federación Española de Empresas de Tecnología Sanitaria (FENIN) v Commission, Case C-205/03 P, [2006] ECR I-6295 ....................................................................................... 26 Fédération Française des Sociétés d’Assurance, Société Paternelle-Vie, Union des Assurances de Paris-Vie and Caisse d’Assurance et de Prévoyance Mutuelle des Agriculteurs v Ministère de l’Agriculture et de la Pêche, Case C-244/94, [1995] ECR I-4013 ................................................................................................................... 25 Finanze dello Stato v Simmenthal SpA, Case 106/77, [1978] ECR 629 ..................................... 1213 Firma Ambulanz Glöckner v Landkreis Südwestpfalz, Case C-475/99, [2001] ECR I-8089 ......................................................................................................... 24, 1109 Football Association Premier League and Others Joined cases C- 403/08 and C-429/08 EU:C:2011:631 .................................................................................................... 9 Ford of Europe Incorporated and Ford-Werke Aktiengesellschaft v Commission, Joined Cases 228 and 229/82, [1984] ECR 1129 ....................................................... 1135, 1138 France and Société commerciale des potasses et de l’azote (SCPA) and Entreprise minière et chimique (EMC) v Commission, Joined Cases C-68/94 and C-30/95, [1998] ECR I-1375 ........................................................................................................... 42, 234 France Télécom SA v Commission, Case C-202/07 P, [2009] ECR I-2369...... 7, 101, 128, 152, 168, 188, 210, 357, 366, 369, 377, 385–6, 400, 402–3, 415, 418, 469 France v Commission (Telecommunication terminals), Case C-202/88, [1991] ECR I-1223 ......................................................................................................... 201, 999 Franz Grad v Finanzamt Traunstein, Case 9/70, [1970] ECR 825 ............................................. 1163 Fromançais SA v Fonds d’orientation et de régularisation des marchés agricoles (FORMA), Case 66/82, [1983] ECR 395 ................................................................................................ 1133

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Frubo – Nederlandse Vereniging voor de fruit- en groentenimporthandel, Nederlandse Bond van grossiers in zuidvruchten en ander geimporteerd fruit “Frubo” v Commission, Case 71/74, [1975] ECR 563 .......................................................................................... 21, 1110 Gasorba SL and Others v Repsol Comercial de Productos Petrolíferos SA, Case C-547/16 EU:C:2017:891 .............................................................................. 1162, 1165–7 Gazdasági Versenyhivatal v Budapest Bank Nyrt. and Others, Case C-228/18 EU:C:2020:265 ............................................................................ 176, 321, 1105 Gemeente Almelo and others v NV Energiebedrijf Ijsselmij, Case C-393/92, [1994] ECR I-1477 ............................................................................... 234, 248 General Química and Others v Commission Case C-90/09 P EU:C:2011:21 ................................ 39 General Motors BV v Commission, Case C-551/03 P, [2006] ECR I-3173 .................................. 516 General Motors Continental NV v Commission, Case 26/75, [1975] ECR 1367 ........ 433, 472, 889, 899–901, 907, 910, 917, 922, 927, 939, 1179 Generics (UK) Ltd and others v CMA (Paroxetine), Case C-307/18, EU:C:2020:52...... 136–9, 185, 321, 348, 789–94, 873 Gerard Mulligan and others v Minister of Agriculture and Food, Ireland and Attorney General, Case C-313/99, [2002] ECR I-5719 ........................................... 299, 489 Germany v Council, Case C-426/93, [1995] ECR I-3723 ...................................................... 1133–4 Gesellschaft zur Verwertung von Leistungsschutzrechten mbH (GVL) v Commission, Case 7/82, [1983] ECR 483 .................................................................... 1000, 1023, 1129, 1173 GlaxoSmithKline Services Unlimited v Commission, Joined Cases C-501/06 P, C-513/06 P, C-515/06 P and C-519/06 P, [2009] ECR I-9291.............................. 6, 99, 335, 695 Greenwich Film Production v Société des auteurs, compositeurs et éditeurs de musique (SACEM), Case 22/79, [1979] ECR 3275 ......................................................... 1116 Grimaldi v Fonds des maladies professionnelles, Case C-322/88, [1989] ECR 4407 .......... 98, 1233 Groupement des cartes bancaires v Commission, Case C-67/13 P, EU:C:2014:2204.... 176–7, 1105 GT-Link A/S v De Danske Statsbaner (DSB), Case C-242/95, [1997] ECR I-4449...................... 990 Hässle, Case C-127/00, [2003] ECR I-14781....................................................................... 770, 773 Heintz van Landewyck SARL and others v Commission, Joined Cases 209 to 215 and 218/78, [1980] ECR 3125 ........................................................................................ 33, 1110 Hilti AG v Commission, Case C-53/92 P, [1994] ECR I-667 ............................... 133, 192, 214, 303, 351, 712–3, 723, 732 HJ Banks & Co Ltd v British Coal Corporation, Case C-128/92, [1994] ECR I-1209 .............. 1214 Hoechst AG v Commission, Joined Cases 46/87 and 227/88, [1989] ECR 2859 ............................ 56 Hoffmann-La Roche & Co AG v Commission, Case 85/76, [1979] ECR 461.......... 45–6, 51, 86, 88, 90, 114, 119, 185, 190–5, 209, 211–12, 220–21, 264, 266, 278, 315–6, 323, 326, 329, 338, 384, 501, 508–9, 514–6, 531, 554–64, 566, 573, 594, 597, 876, 958, 988, 996, 1007, 1009, 1015 Höfner (Klaus) and Elser (Fritz) v Macrotron GmbH, Case C-41/90, [1991] ECR I-1979 ................................................................................... 21, 58, 201, 298, 1109 Huawei Technologies Co. Ltd v ZTE Corp., ZTE Deutschland GmbH, Case C-170/13, EU:C:2015:477, OJ 2013 C 215/5 ................................ 44, 805–6, 836, 859–64 Hubert Wachauf v Bundesamt für Ernährung und Forstwirtschaft, Case 5/88, [1989] ECR 2609 ...................................................................................................................... 42 Hugin Kassaregister AB and Hugin Cash Registers Ltd v Commission Case C-22/78 [1979] ECR 1869, ECL:EU:C:1979:138 ................................. 49, 1115, 1119–20 Hüls AG v Commission, Case C-199/92 P, [1999] ECR I-4287 ............................................ 43, 1103

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Imperial Chemical Industries Ltd v Commission (Dyestuffs), Case 48/69, 1972:EU:C:619, [1972] ECR 619 .............................................................................. 16, 37, 222 IMS Health GmbH & Co OHG v NDC Health GmbH & Co KG, Case C-418/01, [2004] ECR I-5039 .................................................................... 62, 65, 107, 624, 627, 629, 631, 638–9, 641, 643, 645–6, 648–51, 656, 669–70, 674, 681, 802, 1088 InnoLux v Commission, Case C-231/14 P EU:C:2015:292 ............................................................ 19 Intel Corp. v Commission, Case C-413/14 P, EU:C:2016:788.................................... 17, 18, 19, 560 Intel Corp. v Commission, Case C-413/14 P, EU:C:2017:632, Grand Chamber ................. 6, 15, 17, 79, 90, 113–5, 118, 163, 263, 265, 278, 289, 291–2, 326–8, 336–7, 340, 342–3, 352, 380, 464, 502, 511–3, 547, 555–6, 560–1, 564, 570, 576–8, 730, 829–30, 906, 940, 1078, 1106 Internationale Handelsgesellschaft mbH v Einfuhr und Vorratsstelle für Getreide und Futtermittel, Case 11/70, [1970] ECR 1125 ...................................................................... 42 Inuit Tapiriit Kanatami and others v Parliament and Council, Case C-583/11 P, EU:C:2013:625 ..................................................................................................................... 1159 Irish Sugar plc v Commission, Case C-497/99 P, [2001] ECR I-5333 ........ 249, 409, 412, 536, 573, 599, 754–5, 795, 990, 1118 Istituto Chemioterapico Italiano SpA and Commercial Solvents Corporation v Commission, Joined Cases 6/73 and 7/73, [1974] ECR 223 .................. 85, 209–10, 310, 621, 637, 669–71, 679, 683, 1112–3, 1116, 1127–8, 1132, 1173 Italy v Commission (British Telecommunications), Case 41/83, [1985] ECR 873 ......... 57, 201, 297 Italy v Commission, Case 13/63, [1963] ECR 165 ....................................................................... 975 J. Nold, Kohlen und Baustoffgroßhandlung v Commission, Case 4/73, [1974] ECR 491 .............. 42 Javico International and Javico AG v Yves Saint Laurent Parfums SA, Case C-306/96, [1998] ECR-I-1983 ................................................................................................... 690, 1124–5 Job Centre coop arl, Case C-55/96, [1997] ECR I-7119 ........................................................ 58, 298 Johnson & Firth Brown v Commission, Case 3/75 R, [1975] ECR 7 ......................................... 1138 Johnston v Chief Constable of the Royal Ulster Constabulary, Case 222/84, [1986] ECR 1651 ............................................................................................................ 759, 853 Kanal 5 Ltd and TV 4 AB v Föreningen Svenska Tonsättares Internationella Musikbyrå (STIM) upa., Case C-52/07, [2008] ECR I-9275.............. 972–3, 977, 1042–3, 1098 Karlsson (Kjell) and others, Case C-292/97, [2000] ECR I-2737 ................................................ 999 Keurkoop BV v Nancy Kean Gifts BV, Case 144/81, [1982] ECR 2853 ....................................... 607 Kish Glass & Co Ltd v Commission, Case C-241/00 P, [2001] ECR I-7759 ........................ 119, 158 KME Germany v Commission, Case C-272/09 P [2011] ECR I-810 ............................................. 42 KME Germany AG, KME France SAS and KME Italy SpA v Commission, Case C-389/10 P, EU:C:2011:816 ........................................................................................ 43–4 Knauf Gips KG v Commission, Case C-407/08 P, [2010] ECR I-6375........................................... 44 Konkurrensverket v TeliaSonera Sverige AB, Case C-52/09, [2011] ECR I-527, ECLI:EU:C:2011:83 .......................................................... 2, 103, 107, 255, 263, 290, 293, 324, 335, 435, 444–7, 449, 451–2, 458, 464, 465–6, 468, 473–4, 477–9, 487, 499–500, 523, 525, 634, 664, 672, 675, 677–9, 685–6, 1090 KPN Telecom BV v Onafhanklijke Post en Telecommunicatie Autoriteit (OPTA), Case C-109/03, [2004] ECR I-1273 ............................................................... 478, 611, 664, 675

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Kühn v Landwirtschaftskammer Weser-Ems, Case C-177/90, [1992] ECR I-35 ............................ 97 La Poste and French Republic v Union française de l’express (Ufex), DHL International, Federal express international (France) and CRIE, Joined Cases C-83/01 P, C-93/01 P and C-94/01 P, Chronopost SA, [2003] ECR I-6993............................................. 394 L.C. Nungesser KG and Kurt Eisele v Commission, Case 258/78, [1982] ECR 2015 ................... 21 L’Oreal v De Nieuwe AMCK, Case 31/80, [1980] ECR 3775 ....................................... 119, 122, 151 Lucazeau v SACEM, Joined Cases 110/88, 241/88, 242/88, [1989] ECR 2811 ................................................................................... 889, 899–900, 903, 908, 918, 922–4, 1001, 1023 Manfredi, Joined Cases C-295-298/04, [2006] ECR I-6619 .................................................. 1218–9 Marleasing SA v La Comercial Internacional de Alimentacion SA, Case C-106/89, [1990] ECR I-4135 ............................................................................................................... 1213 Masterfoods Ltd v HB Ice Cream Ltd, Case C-344/98, [2000] ECR I-11369 ...........66, 980, 1163, 1213 Meng (Wolf W), Case C-2/91, [1993] ECR I-5751.......................................................................... 30 MEO-Serviços De Comunicações E Multimédia Case C-525/16 EU:C:2017:1020, Opinion ................................................................. 305, 828–9, 959, 968, 973, 978, 981–2, 986, 988, 995–6 MEO-Serviços De Comunicações E Multimédia Case C-525/16 EU:C:2018:270 ...................................................................... 114–5, 289, 292, 338, 354, 828–9, 957, 968, 974, 976, 978, 981–6 Merci convenzionali porto di Genova SpA v Siderurgica Gabriella SpA, Case C-179/90, [1991] ECR 5889 ................................................ 13, 58, 260, 907, 977, 1122–3 Merck & Co Inc, and others v Primecrown Ltd, and others, Joined Cases C-267/95 and C-268/95, [1996] ECR I-6285 ......................................................................................... 693 Metro SB-Großmärkte GmbH & Co KG v Commission, Case 26/76, [1977] ECR 1875 ........... 1160 Metro SB-Großmärkte GmbH & Co KG v Commission (Metro II), Case 75/84, [1986] ECR 3021 .................................................................................................................. 1160 Miller International Schallplatten GmbH v Commission, Case 19/77, [1978] ECR 131 .............................................................................................. 690, 1113–4, 1179 Ministère public luxembourgeois v Madeleine Muller, Veuve J.P. Hein and others, Case 10/71, [1971] ECR 723 .................................................................................................... 57 Ministère Public v Jean-Louis Tournier, Case 395/87, [1989] ECR 2521........... 343, 889, 899–900, 903, 908, 923, 939, 1001, 1023 Ministère Public v Jean-Louis Tournier, François Lucazeau and Others v Société des Auteurs Compositeurs et Editeurs de Musique (SACEM), Joined Cases 395/87, 110, 241-242/88, [1989] ECR 2521, EU:C:1989:215, Opinion ..................... 914–5, 924, 931–2 Molkerei Wagenfeld Karl Niemann GmbH & Co. KG v Bezirksregierung Hannover, Case C-14/01, [2003] ECR I-2279 ......................................................................................... 999 Montecatini v Commission Case C-235/52 P [1999] ECR I-4539 ............................................. 1103 Mostaza Claro Case C-168/05 [2006] ECR I-675 .......................................................................... 72 Motosykletistiki Omospondia Ellados NPID (MOTOE) v Elliniko Dimosio, Case C-49/07, [2008] ECR I-4863 ................................................................................. 28–9, 59 Musik-Vertrieb membran GmbH et K-tel International v GEMA – Gesellschaft für musikalische Aufführungs- und mechanische Vervielfältigungsrechte, Joined Cases 55/80 and 57/80, [1981] ECR 147 .......................................................... 636, 1023 National Carbonising Company Ltd v Commission, Case 109/75 R, [1975] ECR 1193 .................................................................................................... 319, 435, 445 National Panasonic (UK) Ltd v Commission, Case 136/79, [1980] ECR 2033.............................. 43 NDC Health GmbH & Co KG and NDC Health Corporation v Commission and IMS Health Inc, Case C-481/01 P(R), [2002] ECR I-3401 ................................ 626–7,1144

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Nederlandse Federatieve Vereniging voor de Groothandel of Elektrotechnisch Gebied and Technische Unie (FEG) v Commission, Case C-105/04 P, [2006] ECR I-8725................. 43 Nederlandse Sigarenwinkeliers Organisatie v Commission, Case 260/82, [1985] ECR 3801 ....... 32 Nordsee Deutsche Hochseefischerei GmbH v Reederei Mond Hochseefischerei Nordstern AG & Co KG and Reederei Friedrich Busse Hochseefischerei Nordstern AG & Co KG, Case 102/81, [1982] ECR 1095........................................................ 73 NV Algemene Transport en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration, Case 26/62, [1963] ECR 95 ........................... 76 NV Nederlandsche Banden Industrie Michelin v Commission (Michelin I), Case 322/81, [1983] ECR 3461 ..................................... 3, 8, 65, 79, 86, 88, 133, 164, 185, 193, 213, 215, 247, 262, 265–6, 451, 554, 572–3, 581, 604, 740, 873, 1110, 1112–3, 1117 Opinion 2/13, Case Opinion pursuant to Article 218(11) TFEU, EU:C:2014:2454, Full Court.......................................................................................................................... 43, 111 Orange Polska S.A. v Commission, Case C-123/16 ECLI:EU:C:2018:87 .............................. 63, 677 Ordem dos Técnicos Oficiais de Contas Case C-1/12, EU:C:2013:127 ......................................... 23 Oscar Bronner GmbH & Co KG v Mediaprint Zeitungs- und Zeitschriftenverlag GmbH & Co KG, Mediaprint Zeitungsvertriebsgesellschaft mbH & Co KG and Mediaprint Anzeigengesellschaft mbH & Co KG, Case C-7/97, [1998] ECR I-7791 .......................................................... 65, 66, 87, 107, 289–90, 337, 477–80, 484, 498, 603–4, 609–11, 621, 623–4, 635, 637, 639–41, 644–5, 647, 656–7, 669–70, 674, 677–81, 685–6, 985, 1088–92 Oswald Schmidt, trading as Demo-Studio Schmidt, v Commission, Case 210/81, [1983] ECR 3045 .................................................................................................................... 609 Parke, Davis and Co v Probel, Reese, Beintema-Interpharm and Centrafarm, Case 24/67, [1968] ECR 55 ...................................................................................... 85, 343, 613 Pfleiderer AG v Bundeskartellamt, Case C-360/09, [2011] ECR I -5161 ................................... 1235 Portugal v Commission, Case C-163/99, [2001] ECR I-2613 ............................. 260, 303, 343, 548, 554, 598, 1001, 1015–6 Post Danmark A/S v Konkurrencerådet, Case C-209/10, EU:C:2012:172, Grand Chamber.............................................................. 79, 99, 107, 113–4, 263, 265, 286, 291, 305, 324, 335–6, 341–3, 348, 370, 373, 391, 410, 419, 449, 452, 647, 675, 729–30, 829–30, 985 Post Danmark A/S v Konkurrencerådet (Post Danmark II) Case C-23/14 ECLI:EU:C:2015:651 .................................................... 114, 290–1, 293, 324–5, 329, 336, 513, 547, 560, 576–7, 597, 829, 1112 Poulsen and Diva Corp Case C-286/90 [1992] ECR I-6019 .......................................................... 16 The Queen v Secretary of State for Transport, ex parte: Factortame Ltd and others (Factortame I), Case C-213/89, [1990] ECR I-2433 .................................................. 1163, 1213 Radio Telefís Éireann and Independent Television Publications Ltd (RTE & ITP) v Commission (Magill), Joined Cases C-241/91 P and C-242/91 P, [1995] ECR I-743 ................................................................ 87, 162, 194, 202, 298, 604, 611–2, 624–6, 636, 649–51, 654–5, 661, 669, 671, 674, 1112, 1116, 1128, 1134 Raso (Silvano) and others, Criminal Proceedings Against Case C-163/96, [1998] ECR I-533, ECLI:EU:C:1998:54 ................................................................ 1094–5, 1122 Régie des télégraphes et des telephones (RTT) v GB-Inno-BM SA, Case C-18/88, [1991] ECR I-5941, ECLI:EU:C:1991:474 ................ 30, 57, 59, 201, 637, 1094 Remia and others v Commission, Case 42/84, [1985] ECR 2425 ................................................ 105

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Rewe-Zentralfinanz eG et Rewe-Zentral AG v Landwirtschaftskammer für das Saarland, Case 33/76, [1976] ECR 1989 ........................................................................................ 72, 1213 Roland Rutili v Ministre de l’intérieur, Case 36/75, [1975] ECR 1219 ......................................... 42 SA Buitoni v Fonds d’orientation et de régularisation des marchés agricoles, Case 122/78, [1979] ECR 677 .............................................................................................. 1133 SA GB-Inno-BM v Association des détaillants en tabac (ATAB), Case 13/77, [1977] ECR 2115 ...................................................................................................................... 32 Sacchi (Guiseppe), Case 155/73, [1974] ECR 409 ..................................................... 57, 1000, 1023 SAT Fluggesellschaft mbH v Eurocontrol, Case C-364/92, [1994] ECR I-43 ................................ 23 Scarlet Extended SA v Société belge des auteurs, compositeurs et éditeurs SCRL (SABAM), Case C-70/10 [2011] ECR I-771 .................................................................................... 850, 853 Scippacercola (Isabella) and Terezakis(Ioannis) v Commission (Athens International Airport Case), Case C-159/08 P, [2009] ECR I-46....................................... 25, 905–6, 908, 926 SELEX Sistemi Integrati SpA v Commission of the European Communities and Organisation européenne pour la sécurité de la navigation aérienne (Eurocontrol), Case C-113/07 P, [2009] ECR I-2207 ................................................ 23 Sirena Srl v Eda Srl and others, Case 40/70, [1971] ECR 69, ECLI:EU:C:1971:18 ............ 85, 202, 343, 901, 923 Slovak Republic v Achmea BV, Case C-284/16 EU:C:2018:158 .................................................... 73 SOA Nazionale Costruttori, Case C-327/12 EU:C:2013:827 ......................................................... 22 Société alsacienne et lorraine de télécommunications et d’électronique (Alsatel) v SA Novasam, Case 247/86, [1988] ECR 5987 ................................................... 158, 223, 1036 Société Civile Agricole du Centre d’Insémination de la Crespelle v Coopérative d’Elevage et d’Insémination Artificielle du Département de la Mayenne, Case C-323/93, [1994] ECR I-5077 ..................................................................... 58–9, 234, 260 Société Technique Minière (L.T.M.) v Maschinenbau Ulm GmbH (M.B.U.), Case 56/65, [1966] ECR 235 ................................................................................................ 1110 Solvay SA v Commission, Case C-109/10 P, EU:C:2011:256 (Opinion) .............................. 112, 291 Solvay SA v Commission, Case C-109/10 P, [2011] ECR I-10329, EU:C:2011:686 .................................................................................................. 94 538, 585, 958 Sot. Lélos kai Sia EE and Others v GlaxoSmithKline AEVE Farmakeftikon Proïonton, formerly Glaxowellcome AEVE, Joined Cases C-468/06 to C-478/06, [2008] ECR I-7139 .................................................................... 11–12, 278–9, 323–4, 326, 346, 670, 683, 693–6, 1002, 1005 Spain v Council, Case 203/86, [1988] ECR 4563......................................................................... 999 Stichting Sigarettenindustrie and others v Commission, Joined Cases 240, 241, 242, 261, 262, 268 and 269/82, [1985] ECR 3831 ................................................................. 33, 1112 Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) and Others v GlaxoSmithKline plc and GlaxoSmithKline AEVE, Case C-53/03, [2005] ECR I-4609 ............................................................................. 344, 354, 670, 690–1, 693 Telefónica and Telefónica de España v Commission Case C-295/12 P, EU:C:2014:2062 ...................................................................... 40, 133, 156, 435, 443–4, 447–8, 477, 479, 1097, 1118, 1180 Tetra Pak International SA v Commission, (Tetra Pak II) Case C-333/94 P, [1996] ECR I-5951 ........................................................ 151, 164, 192, 208, 253, 311, 316, 357, 366, 372, 375, 384–5, 395, 412, 446, 509, 712–3, 723–5, 734, 1035–8, 1098 Tipp-Ex GmbH & Co KG v Commission, Case C-279/87, [1990] ECR I-261 ................... 690, 1179 Tomkins plc v Commission, Case C-286/11 P, EU:C:2013:29 ........................................................ 38 Tomra Systems ASA and others v Commission, Case C-549/10 P, EU:C:2012:55, Opinion ........ 340, 576

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Tomra Systems ASA and others v Commission, Case C-549/10 P, EU:C:2012:221 ..... 107, 112, 114, 255, 290–1, 324, 336, 340, 516–7, 522–3, 546, 559, 570, 829 Transportes Evaristo Molina v Commission, Case C-36/09 P [2010] ECR-I 670 ...................... 1161 Unilever Bestfoods (Ireland) v Commission, Case C-552/03 P, [2006] ECR I-9091 ............ 501, 507 United Brands Company and United Brands Continentaal BV v Commission, Case 27/76, [1978] ECR 207, EU:C:1978:22 ........................................... 10, 36, 46, 86, 119, 122, 124, 151, 158, 162 185, 187, 190, 203–4, 209, 211, 214, 221, 264, 294, 302, 316, 343, 345, 415, 472, 670, 673, 683, 687–9, 694, 811, 888–9, 899–910, 913–4, 916–8, 921–3, 925–9, 933–5, 948, 968–9, 1002–3, 1014, 1112, 1117 URBSFA v Bosman, Case C-415/93, [1995] ECR I-4921 ............................................................... 29 Van Eycke (Pascal) v ASPA NV, Case 267/86, [1988] ECR 4769 ............................................. 30, 56 Vantaan kaupunki v Skanska Industrial Solutions Oy, and Others, Case C-724/17, EU:C:2019:204 ..................................................................................................................... 1212 Verband der Sachversicherer e.V. v Commission, Case 45/85, [1987] ECR 405 ........................ 1109 Vereniging ter Bevordering van het Vlaamse Boekwezen, VBVB, and Vereniging ter Bevordering van de Belangen des Boekhandels, VBBB, v Commission, Joined Cases 43/82 and 63/82, [1984] ECR 19 ........................................................................ 32 Vereniging van Cementhandelaren v Commission Case 8/72 [1972] ECR 977.......................... 1123 Viho Europe BV v Commission, Case C-73/95 P, [1996] ECR I-5457........................................ 36–7 Volkswagen AG v Commission, Case C-74/04 P, [2006] ECR I-6585 ............................................. 45 Walter Rau Lebensmittelwerke and Others v Commission, Joined Cases 279/84, 280/84, 285/84 and 286/84, [1987] ECR 1069 .................................................................................. 1134 Warner Brothers Inc and Metronome Video ApS v Erik Viuff Christiansen, Case 158/86, [1988] ECR 2605 .............................................................................................. 636 Wilhelm (Wealt) and others v Bundeskartellamt, Case 14/68, [1969] ECR 1....................... 66, 1163 Wouters (JCJ), Savelbergh (JW) and Price Waterhouse Belastingadviseurs BV v Algemene Raad v an de Nederlandse Orde van Advocaten, intervener: Raad van de Balies van de Europese Gemeenschap, Case C-309/99, [2002] ECR I-1577 ......................................................................................... 21–23, 1109, 1111 Züchner (Gerhard) v Bayerische Vereinsbank, Case 172/80, [1981] ECR 2021 ........................ 1109

VI. Court of Justice Judgments Numerical Order Case 26/62, NV Algemene Transport en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration, [1963] ECR 95 ............................................... 76 Case 13/63, Italy v Commission, [1963] ECR 165 ....................................................................... 975 Case 56/65, Société Technique Minière (L.T.M.) v Maschinenbau Ulm GmbH (M.B.U.), [1966] ECR 235 .................................................................................................................... 1110 Case 24/67, Parke, Davis and Co v Probel, Reese, Beintema-Interpharm and Centrafarm, [1968] ECR 55 .............................................................................. 85, 343, 613 Case 14/68, Wilhelm (Wealt) and others v Bundeskartellamt, [1969] ECR 1....................... 66, 1163 Case 45/69, Boehringer Mannheim GmbH v Commission, [1970] ECR 769 ............................. 1174 Case 48/69, Imperial Chemical Industries Ltd v Commission (Dyestuffs), 1972:EU:C:619, [1972] ECR 619 .............................................................................. 16, 37, 222 Case 9/70, Franz Grad v Finanzamt Traunstein, [1970] ECR 825 ............................................. 1163

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Case 11/70, Internationale Handelsgesellschaft mbH v Einfuhr und Vorratsstelle für Getreide und Futtermittel, [1970] ECR 1125 ........................................................................... 42 Case 22/70, Commission v Council (European Agreement on Road Transport), [1971] ECR 263 ........................................................................................................................ 42 Case 40/70, Sirena Srl v Eda Srl and others, [1971] ECR 69, ECLI:EU:C:1971:18 ............ 85, 202, 343, 901, 923 Case 78/70, Deutsche Grammophon Gesellschaft mbH v Metro-SB-Großmärkte GmbH & Co KG, [1971] ECR 487 ............................................................... 85, 202, 343, 922–3 Case 10/71, Ministère public luxembourgeois v Madeleine Muller, Veuve J.P. Hein and others, [1971] ECR 723............................................................................ 57 Case 6/72, Europemballage and Continental Can v Commission, [1973] ECR 215 ........................................................... 23, 45, 52, 54–5, 85, 119, 133, 138, 176, 187, 198, 313–4, 316–7, 335, 501, 695, 730, 773, 872, 879, 1197–8 Case 8/72, Vereniging van Cementhandelaren v Commission [1972] ECR 977......................... 1123 Case 4/73, J. Nold, Kohlen und Baustoffgroßhandlung v Commission, [1974] ECR 491 .............. 42 Joined Cases 6/73 and 7/73, Istituto Chemioterapico Italiano SpA and Commercial Solvents Corporation v Commission, [1974] ECR 223 ......... 85, 209–10, 310, 621, 637, 669–71, 679, 683, 1112–3, 1116, 1127–8, 1132, 1173 Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114–73, Coöperatieve Vereniging Suiker Unie UA and others v Commission, [1975] ECR 1663 .............. 33, 85, 260, 278, 297–8, 314, 508, 556, 980, 996, 1120–1 Case 127/73, Belgische Radio en Televisie v SV SABAM and NV Fonior, [1974] ECR 313 ............................................................................... 12, 164, 260, 1023, 1033–4, 1098, 1109, 1208, 1212 Case 155/73, Sacchi (Guiseppe), [1974] ECR 409 ..................................................... 57, 1000, 1023 Case 16/74, Centrafarm BV et Adriaan de Peijper v Winthrop BV, [1974] ECR 1183 ................. 694 Case 71/74, Frubo – Nederlandse Vereniging voor de fruit- en groentenimporthandel, Nederlandse Bond van grossiers in zuidvruchten en ander geimporteerd fruit “Frubo” v Commission, [1975] ECR 563 ..................................................................................... 21, 1110 Case 3/75 R, Johnson & Firth Brown v Commission, [1975] ECR 7 ......................................... 1138 Case 26/75, General Motors Continental NV v Commission, [1975] ECR 1367 ........ 433, 472, 889, 899–901, 907, 910, 917, 922, 927, 939, 1179 Case 27/76, United Brands Company and United Brands Continentaal BV v Commission, [1978] ECR 207, EU:C:1978:22 ................... 10, 36, 46, 86, 119, 122, 124, 151, 158, 162 185, 187, 190, 203–4, 209, 211, 214, 221, 264, 294, 302, 316, 343, 345, 415, 472, 670, 673, 683, 687–9, 694, 811, 888–9, 899–910, 913–4, 916–8, 921–3, 925–9, 933–5, 948, 968–9, 1002–3, 1014, 1112, 1117 Case 36/75, Roland Rutili v Ministre de l’intérieur, [1975] ECR 1219 ......................................... 42 Case 51/75, EMI Records Ltd v CBS United Kingdom Ltd, [1976] ECR 811 ............................ 1124 Case 109/75 R, National Carbonising Company Ltd v Commission, [1975] ECR 1193 ............ 319, 435, 445 Case 26/76, Metro SB-Großmärkte GmbH & Co KG v Commission, [1977] ECR 1875 ........... 1160 Case 33/76, Rewe-Zentralfinanz eG et Rewe-Zentral AG v Landwirtschaftskammer für das Saarland, [1976] ECR 1989 ............................................................................... 72, 1213 Case 45/76, Comet BV v Produktschap voor Siergewassen, [1976] ECR 2043 ......................... 1213

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Case 85/76, Hoffmann-La Roche & Co AG v Commission, [1979] ECR 461.......... 45–6, 51, 86, 88, 90, 114, 119, 185, 190–5, 209, 211–12, 220–21, 264, 266, 278, 315–6, 323, 326, 329, 338, 384, 501, 508–9, 514–6, 531, 554–64, 566, 573, 594, 597, 876, 958, 988, 996, 1007, 1009, 1015 Case 13/77, SA GB-Inno-BM v Association des détaillants en tabac (ATAB), [1977] ECR 2115 ...................................................................................................................... 32 Case 19/77, Miller International Schallplatten GmbH v Commission, [1978] ECR 131 .............................................................................................. 690, 1113–4, 1179 Case 77/77, Benzine en Petroleum Handelsmaatschappij BV and others v Commission, [1978] ECR 1513 ............................................................................ 261, 343, 980, 1012–3, 1121 Case 106/77, Finanze dello Stato v Simmenthal SpA, [1978] ECR 629 ..................................... 1213 Case C-22/78, Hugin Kassaregister AB and Hugin Cash Registers Ltd v Commission [1979] ECR 1869, ECL:EU:C:1979:138 ........................................................ 49, 1115, 1119–20 Case 122/78, SA Buitoni v Fonds d’orientation et de régularisation des marchés agricoles, [1979] ECR 677 .................................................................................................................... 1133 Joined Cases 209 to 215 and 218/78, Heintz van Landewyck SARL and others v Commission, [1980] ECR 3125 ............................................................................................................ 33, 1110 Case 258/78, L.C. Nungesser KG and Kurt Eisele v Commission, [1982] ECR 2015 ................... 21 Case 22/79, Greenwich Film Production v Société des auteurs, compositeurs et éditeurs de musique (SACEM), [1979] ECR 3275 ............................................................................. 1116 Case 136/79, National Panasonic (UK) Ltd v Commission, [1980] ECR 2033.............................. 43 Case 792/79 R, Camera Care Ltd v Commission, [1980] ECR 119 ................. 1135–6, 1138–9, 1143–4 Case 804/79, Commission v United Kingdom (Sea Fisheries), [1981] ECR 93 ............................. 68 Case 31/80, L’Oreal v De Nieuwe AMCK, [1980] ECR 3775 ....................................... 119, 122, 151 Joined Cases 55/80 and 57/80, Musik-Vertrieb membran GmbH et K-tel International v GEMA – Gesellschaft für musikalische Aufführungs- und mechanische Vervielfältigungsrechte, [1981] ECR 147 ..................................................................... 636, 1023 Case 61/80, Coöperatieve Stremsel-en Kleurselfabriek v Commission, [1981] ECR 851 .... 21, 1113 Case 172/80, Züchner (Gerhard) v Bayerische Vereinsbank, [1981] ECR 2021 ........................ 1109 Case 102/81, Nordsee Deutsche Hochseefischerei GmbH v Reederei Mond Hochseefischerei Nordstern AG & Co KG and Reederei Friedrich Busse Hochseefischerei Nordstern AG & Co KG, [1982] ECR 1095......................................................................................................... 73 Case 144/81, Keurkoop BV v Nancy Kean Gifts BV, [1982] ECR 2853 ....................................... 607 Case 210/81, Oswald Schmidt, trading as Demo-Studio Schmidt, v Commission, [1983] ECR 3045 .................................................................................................................... 609 Case 232/81 R, Agricola commerciale olio Srl and others v Commission, [1981] ECR-2193 ...........1137 Case 262/81, Coditel SA, Compagnie générale pour la diffusion de la télévision, and others v Ciné-Vog Films SA and others, [1982] ECR 3381 ............................................. 607 Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission (Michelin I), [1983] ECR 3461 ........................................................... 3, 8, 65, 79, 86, 88, 133, 164, 185, 193, 213, 215, 247, 262, 265–6, 451, 554, 572–3, 581, 604, 740, 873, 1110, 1112–3, 1117 Case 7/82, Gesellschaft zur Verwertung von Leistungsschutzrechten mbH (GVL) v Commission, [1983] ECR 483 ............................................................. 1000, 1023, 1129, 1173 Joined Cases 43/82 and 63/82, Vereniging ter Bevordering van het Vlaamse Boekwezen, VBVB, and Vereniging ter Bevordering van de Belangen des Boekhandels, VBBB, v Commission, [1984] ECR 19...................................................................................... 32 Case 66/82, Fromançais SA v Fonds d’orientation et de régularisation des marchés agricoles (FORMA), [1983] ECR 395 ................................................................... 1133

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Case 107/82, Allgemeine Elektrizitäts-Gesellschaft AEG-Telefunken AG v Commission, [1983] ECR 3151 ........................................................................................ 37, 1099, 1111, 1120 Joined Cases 228 and 229/82, Ford of Europe Incorporated and Ford-Werke Aktiengesellschaft v Commission, [1984] ECR 1129 ................................................. 1135, 1138 Case 238/82, Duphar BV and others v The Netherlands, [1984] ECR 523 .................................... 25 Joined Cases 240, 241, 242, 261, 262, 268 and 269/82, Stichting Sigarettenindustrie and others v Commission, [1985] ECR 3831 ................................................................. 33, 1112 Case 260/82, Nederlandse Sigarenwinkeliers Organisatie v Commission, [1985] ECR 3801 ....... 32 Case 15/83, Denkavit Nederland BV v Hoofdproduktschap voor Akkerbouwprodukten, [1984] ECR 2171 .................................................................................................................. 1133 Case 41/83, Italy v Commission (British Telecommunications), [1985] ECR 873 ......... 57, 201, 297 Case 123/83, Bureau national interprofessionnel du cognac v Guy Clair, [1985] ECR 391 .............................................................................................................. 32, 1114 Case 298/83, Comité des industries cinématographiques des Communautés européennes (CICCE) v Commission, [1985] ECR 1105 .................................................... 918, 1023, 1027–8 Case 42/84, Remia and others v Commission, [1985] ECR 2425 ................................................ 105 Joined Cases 56 and 58/64, Établissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v Commission, [1966] ECR 299 ........................................................................................... 1110 Case 75/84, Metro SB-Großmärkte GmbH & Co KG v Commission (Metro II), [1986] ECR 3021 .................................................................................................................. 1160 Case 107/84, Commission v Germany, [1985] ECR 2655 .............................................................. 22 Joined Cases 142/84 and 156/84, British American Tobacco Company Ltd and RJ Reynolds Industries Inc v Commission, [1987] ECR 4487 .......................................... 52 Case 222/84, Johnston v Chief Constable of the Royal Ulster Constabulary, [1986] ECR 1651 ............................................................................................................ 759, 853 Case 226/84, British Leyland plc v Commission, [1986] ECR 3263 ............. 10, 303, 889, 899–901, 907, 910, 917, 926–7, 929, 940, 952, 980, 1003–4 Joined Cases 279/84, 280/84, 285/84 and 286/84, Walter Rau Lebensmittelwerke and Others v Commission, [1987] ECR 1069 ...................................................................... 1134 Case 311/84, Centre belge d’études de marché – Télémarketing (CBEM) v SA Compagnie luxembourgeoise de télédiffusion (CLT) and Information publicité Benelux (IPB), [1985] ECR 3261 .................................. 297, 343, 612, 621–2, 669–71 Case 45/85, Verband der Sachversicherer e.V. v Commission, [1987] ECR 405 ........................ 1109 Joined Cases 89/85, 104/85, 114/85, 116/85, 117/85 and 125/85 to 129/85, Ahlström Osakeyhtiö and Others v Commission, (Woodpulp I) [1988] ECR 447 ............ 16, 19, 117, 1114 Case 311/85, ASBL Vereniging van Vlaamse Reisbureaus v ASBL Sociale Dienst van de Plaatselijke en Gewestelijke Overheidsdiensten, [1987] ECR 3801 ...................... 30, 56 Case 402/85, Basset v Société des auteurs, compositeurs et éditeurs de musique (SACEM), [1987] ECR 1747 .................................................................................................................. 1023 Case C-62/86, AKZO Chemie BV v Commission, [1991] ECR I-3359........ 12, 86, 119, 193, 264, 267, 276, 289, 293, 312, 326, 339, 355–6, 366–7, 369–70, 372–3, 375, 378, 384–5, 415, 418–9, 449, 456, 490, 1128–9 Case 66/86, Ahmed Saeed Flugreisen and Silver Line Reisebüro GmbH v Zentrale zur Bekämpfung unlauteren Wettbewerbs eV, [1989] ECR 803......... 45, 50, 918–20, 1208 Case 158/86, Warner Brothers Inc and Metronome Video ApS v Erik Viuff Christiansen, [1988] ECR 2605 .................................................................................................................... 636 Case 203/86, Spain v Council, [1988] ECR 4563......................................................................... 999

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Case 246/86, Carlo Bagnasco, [1989] ECR 2117 ...................................................................... 1119 Case 247/86, Société alsacienne et lorraine de télécommunications et d’électronique (Alsatel) v SA Novasam, [1988] ECR 5987 .......................................................... 158, 223, 1036 Case 30/87, Bodson (Corinne) v SA Pompes funèbres des régions libérées, [1988] ECR 2479 .............................................................................................................. 37, 923 Case 30/87, Bodson (Corinne) v SA Pompes funèbres des régions libérées, [1988] ECR 2507 .................................................................................................... 903, 922, 926 Case C-279/87, Tipp-Ex GmbH & Co KG v Commission, [1990] ECR I-261 ................... 690, 1179 Joined Cases 46/87 and 227/88, Hoechst AG v Commission, [1989] ECR 2859 ............................ 56 Case 53/87, Consorzio italiano della componentistica di ricambio per autoveicoli and Maxicar v Régie nationale des usines Renault, [1988] ECR 6039 ............ 297, 302–3, 608, 612, 624–5, 636, 739, 1182–3 Case 238/87, AB Volvo v Erik Veng (UK) Ltd, [1988] ECR 6211 .................. 87, 297, 310, 605, 608, 612, 624, 628–30, 662, 873, 893, 1182–3 Case 267/86, Van Eycke (Pascal) v ASPA NV, [1988] ECR 4769 ............................................. 30, 56 Case 395/87, Ministère Public v Jean-Louis Tournier, [1989] ECR 2521........... 343, 889, 899–900, 903, 908, 923, 939, 1001, 1023 Joined Cases 395/87, 110, 241–242/88, Ministère Public v Jean-Louis Tournier, François Lucazeau and Others v Société des Auteurs Compositeurs et Editeurs de Musique (SACEM), [1989] ECR 2521, EU:C:1989:215, Opinion ............ 914–5, 924, 931–2 Case 5/88, Hubert Wachauf v Bundesamt für Ernährung und Forstwirtschaft, [1989] ECR 2609 ...................................................................................................................... 42 Case C-18/88, Régie des télégraphes et des telephones (RTT) v GB-Inno-BM SA, [1991] ECR I-5941, ECLI:EU:C:1991:474 ........................................ 30, 57, 59, 201, 637, 1094 Case 68/88, Commission v Greece, [1989] ECR 2965 ............................................................... 1164 Joined Cases 110/88, 241/88, 242/88, Lucazeau v SACEM, [1989] ECR 2811 .........889, 899–900, 903, 908, 918, 922–4, 1001, 1023 Case C-202/88, France v Commission (Telecommunication terminals), [1991] ECR I-1223 ......................................................................................................... 201, 999 Case C-322/88, Grimaldi v Fonds des maladies professionnelles, [1989] ECR 4407 .......... 98, 1233 Case C-234/89, Delimitis (Stergios) v Henninger Bräu AG, [1991] ECR I-935......................... 1163 Case C-249/88, Commission v Belgium, [1991] ECR I-1275............................................. 690, 1002 Case C-106/89, Marleasing SA v La Comercial Internacional de Alimentacion SA, [1990] ECR I-4135 ............................................................................................................... 1213 Case C-213/89, The Queen v Secretary of State for Transport, ex parte: Factortame Ltd and others (Factortame I), [1990] ECR I-2433 .......................................................... 1163, 1213 Case C-260/89, Elliniki Radiophonia Tiléorassi AE and Panellinia Omospondia Syllogon Prossopikou v Dimotiki Etairia Pliroforissis and others, [1991] ECR I-2925 ................. 57, 310 Case C-286/90, Poulsen and Diva Corp, [1992] ECR I-6019 ........................................................ 16 Case C-41/90, Höfner (Klaus) and Elser (Fritz) v Macrotron GmbH, [1991] ECR I-1979 .... 21, 58, 201, 298, 1109 Case C-179/90, Merci convenzionali porto di Genova SpA v Siderurgica Gabriella SpA, [1991] ECR 5889 .......................... 13, 58, 260, 907, 977, 1122–3 Joined Cases C-159/91 and C-160/91, Christian Poucet v Assurances Générales de France and Caisse Mutuelle Régionale du Languedoc-Roussillon, [1993] ECR I-637 ....................... 25 Case C-177/90, Kühn v Landwirtschaftskammer Weser-Ems, [1992] ECR I-35 ............................ 97 Case C-2/91, Meng (Wolf W), [1993] ECR I-5751.......................................................................... 30 Case C-185/91, Bundesanstalt für den Güterfernverkehr v Gebrüder Reiff GmbH & Co KG, [1993] ECR I-5801 .......................................................................... 30–31, 56

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Joined Cases C-241/91 P and C-242/91 P, Radio Telefís Éireann and Independent Television Publications Ltd (RTE & ITP) v Commission (Magill), [1995] ECR I-743 ................................................................ 87, 162, 194, 202, 298, 604, 611–2, 624–6, 636, 649–51, 654–5, 661, 669, 671, 674, 1112, 1116, 1128, 1134 Case C-320/91, Corbeau (Paul), [1993] ECR I-2533..................................................... 30, 201, 395 Case C-49/92 P, Commission v Anic Partecipazioni SpA, [1999] ECR I-4125............................. 222 Case C-53/92 P, Hilti AG v Commission, [1994] ECR I-667 ............................... 133, 192, 214, 303, 351, 712–3, 723, 732 Case C-128/92, HJ Banks & Co Ltd v British Coal Corporation, [1994] ECR I-1209 .............. 1214 Case C-199/92 P, Hüls AG v Commission, [1999] ECR I-4287 ............................................ 43, 1103 Case C-235/92 P, Montecatini v Commission, [1999] ECR I-4539 ............................................ 1103 Case C-364/92, SAT Fluggesellschaft mbH v Eurocontrol, [1994] ECR I-43 ................................ 23 Case C-393/92, Gemeente Almelo and others v NV Energiebedrijf Ijsselmij, [1994] ECR I-1477 ......................................................................................................... 234, 248 Case C-18/93, Corsica Ferries Italia Srl v Corpo dei Piloti del Porto di Genova, [1994] ECR I-1783 ............................................................................. 260, 338, 977, 1000, 1122 Case C-63/93, Duff and others v Minister for Agriculture and Food and Attorney General, [1996] ECR I-569 ................................................................. 97, 299, 489 Case C-153/93, Bundesrepublik Deutschland (Germany) v Delta Schiffahrts und Speditionsgesellschaft mbH, [1994] ECR I-2517 .................................................. 30–31, 56 Case C-310/93 P, BPB Industries plc and British Gypsum Ltd v Commission, [1995] ECR I-865 ................................................................................................................... 509 Case C-323/93, Société Civile Agricole du Centre d’Insémination de la Crespelle v Coopérative d’Elevage et d’Insémination Artificielle du Département de la Mayenne, [1994] ECR I-5077...................................................................... 58–9, 234, 260 Case C-387/93, Banchero (Domingo), [1995] ECR I-4663 ............................................................ 22 Case C-415/93, URBSFA v Bosman, [1995] ECR I-4921 ............................................................... 29 Case C-426/93, Germany v Council, [1995] ECR I-3723 ...................................................... 1133–4 Joined Cases C-427/93, C-429/93 and C-436/93, Bristol Myers Squibb v Paranova A/S and others, [1996] ECR I-3457 .......................................................................................... 693–4 Opinion 2/94, Accession by the Community to the European Convention for the Protection of Human Rights and Fundamental Freedoms, [1996] ECR I-1759 ...................... 42 Joined Cases C-68/94 and C-30/95, France and Société commerciale des potasses et de l’azote (SCPA) and Entreprise minière et chimique (EMC) v Commission, [1998] ECR I-1375 ........................................................................................................... 42, 234 Case C-96/94, Centro Servizi Spediporto Srl v Spedizioni Marittima del Golfo Srl, [1995] ECR I-2883 ..................................................................................................... 31, 56, 234 Joined Cases C-140/94, C-141/94 and C-142/94, DIP SpA v Comune di Bassano del Grappa, LIDL Italia Srl v Comune di Chioggia and Lingral Srl v Comune di Chiogga, [1995] ECR I-3257 .................................................................. 31–2, 234 Case C-15/95, EARL de Kerlast v Union régionale de coopératives agricoles (Unicopa) and Coopérative du Trieux, [1997] ECR I-1961..................................................................... 999 Case C-244/94, Fédération Française des Sociétés d’Assurance, Société Paternelle-Vie, Union des Assurances de Paris-Vie and Caisse d’Assurance et de Prévoyance Mutuelle des Agriculteurs v Ministère de l’Agriculture et de la Pêche, [1995] ECR I-4013 ......... 25 Case C-333/94 P, Tetra Pak International SA v Commission, (Tetra Pak II) [1996] ECR I-5951 ................................................................ 151, 164, 192, 208, 253, 311, 316, 357, 366, 372, 375, 384–5, 395, 412, 446, 509, 712–3, 723–5, 734, 1035–8, 1098

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Case C-73/95 P, Viho Europe BV v Commission, [1996] ECR I-5457........................................ 36–7 Case C-149/95 P-R, Commission v Atlantic Container Line AB and others, [1995] ECR I-2165 ............................................................................................................... 1135 Case C-242/95, GT-Link A/S v De Danske Statsbaner (DSB), [1997] ECR I-4449...................... 990 Joined Cases C-267/95 and C-268/95, Merck & Co Inc, and others v Primecrown Ltd, and others, [1996] ECR I-6285............................................................................................... 693 Case C-343/95, Diego Calí & Figli Srl v Servizi ecologici porto di Genova SpA (SEPG), [1997] ECR I-1547 ................................................................................................................... 24 Joined Cases C-359/95 P and C-379/97 P, Commission v Ladbroke Racing Ltd, [1997] ECR I-6265 ............................................................................................................... 31–3 Case C-35/96, Commission v Italy (Customs agents), [1998] ECR I-3851 .................................... 32 Joined Cases C-51/96 and C-191/97, Christelle Deliège v Ligue francophone de judo et Disciplines Associées ASBL and others, [2000] ECR I-2549 .................................. 29 Case C-55/96, Job Centre coop arl, [1997] ECR I-7119 ........................................................ 58, 298 Case C-67/96, Albany International BV v Stichting Bedrijfspensioenfonds Textielindustrie, [1999] ECR I-5751 ............................................................................................................. 22, 27 Case C-163/96, Raso (Silvano) and others, Criminal Proceedings Against [1998] ECR I-533, ECLI:EU:C:1998:54 ................................................................ 1094–5, 1122 Joined Cases C-215/96 and C-216/96, Bagnasco (Carlo) and Others v Banca Popolare di Novara soc. coop. arl., [1999] ECR 135 ................................................................ 1109, 1111 Case C-266/96, Corsica Ferries France SA v Gruppo Antichi Ormeggiatori del porto di Genova Coop arl, and others, [1998] ECR I-3949 ............................................... 57 Case C-306/96, Javico International and Javico AG v Yves Saint Laurent Parfums SA, [1998] ECR-I-1983 ................................................................................................... 690, 1124–5 Joined Cases C-395/96 P and C-396/96 P, Compagnie Maritime Belge Transports SA and others v Commission, [2000] ECR I-1365.................................. 46, 79, 192, 235–6, 248–9, 253–4, 262, 267, 277, 293, 303, 339, 355, 357, 366, 368, 384, 387, 404–5, 409–10, 415, 1114 Case C-7/97, Oscar Bronner GmbH & Co KG v Mediaprint Zeitungs- und Zeitschriftenverlag GmbH & Co KG, Mediaprint Zeitungsvertriebsgesellschaft mbH & Co KG and Mediaprint Anzeigengesellschaft mbH & Co KG, [1998] ECR I-7791.......... 65, 66, 87, 107, 289–90, 337, 477–80, 484, 498, 603–4, 609–11, 621, 623–4, 635, 637, 639–41, 644–5, 647, 656–7, 669–70, 674, 677–81, 685–6, 985, 1088–92 Case C-126/97, Eco Swiss China Time Ltd v Benetton International NV, [1999] ECR I-3055 ..........72–3 Case C-292/97, Karlsson (Kjell) and others, [2000] ECR I-2737 ................................................ 999 Case C-258/98, Carra (Giovanni) and others, [2000] ECR I-4217........................................ 58, 298 Case C-281/98, Angonese (Roman) v Cassa di Risparmio di Bolzano SpA, [2000] ECR I-4139 ........338 Case C-35/99, Arduino (Manuele), [2002] ECR I-1529 ....................................................... 56, 1123 Case C-344/98, Masterfoods Ltd v HB Ice Cream Ltd, [2000] ECR I-11369 .... 66, 980, 1163, 1213 Case C-163/99, Portugal v Commission, [2001] ECR I-2613 ............................. 260, 303, 343, 548, 554, 598, 1001, 1015–6 Case C-309/99, Wouters (JCJ), Savelbergh (JW) and Price Waterhouse Belastingadviseurs BV v Algemene Raad v an de Nederlandse Orde van Advocaten, intervener: Raad van de Balies van de Europese Gemeenschap, [2002] ECR I-1577 ...... 21–23, 1109, 1111 Case C-313/99, Gerard Mulligan and others v Minister of Agriculture and Food, Ireland and Attorney General, [2002] ECR I-5719 ........................................................ 299, 489

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Case C-453/99, Courage Ltd v Bernard Crehan and Bernard Crehan v Courage Ltd and Others, [2001] ECR I-6297 ................................................................................. 56, 1214–5 Case C-462/99, Connect Austria Gesellschaft für Telekommunikation GmbH v Telekom-Control- Kommission, and Mobilkom Austria AG, [2003] ECR I-5197, ECLI:EU:C:2003:297 .................................................................... 57, 1095 Case C-475/99, Firma Ambulanz Glöckner v Landkreis Südwestpfalz, [2001] ECR I-8089 ......................................................................................................... 24, 1109 Case C-497/99 P, Irish Sugar plc v Commission, [2001] ECR I-5333 ........ 249, 409, 412, 536, 573, 599, 754–5, 795, 990, 1118 Case C-127/00, Hässle, [2003] ECR I-14781....................................................................... 770, 773 Joined Cases C-204/00 P, C-205/00 P, C-211/00 P, C-213/00 P, C-217/00 P and C-219/00 P, Aalborg Portland A/S and others v Commission, [2004] ECR I-123 ........... 348 Case C-218/00, Cisal di Battistello Venanzio & C. Sas v Istituto nazionale per l’assicurazione contro gli infortuni sul lavoro (INAIL), [2002] ECR I-691 ......................... 25–6 Case C-241/00 P, Kish Glass & Co Ltd v Commission, [2001] ECR I-7759 ........................ 119, 158 Case C-253/00, Antonio Muñoz y Cia SA and Superior Fruiticola SA v Frumar Ltd and Redbridge Produce Marketing Ltd, [2002] ECR I-7289 ............................................... 1163 Case C-280/00, Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH, and Oberbundesanwalt beim Bundesverwaltungsgericht, [2003] ECR I-7747............................................................... 57, 394 Joined Cases C-2/01 P and C-3/01 P, Bundesverband der Arzneimittel-Importeure eV and Commission v Bayer AG, [2004] ECR I-23 ............................................... 45, 609, 690, 867 Molkerei Wagenfeld Karl Niemann GmbH & Co. KG v Bezirksregierung Hannover, Case C-14/01, [2003] ECR I-2279 ......................................................................................... 999 Case C-481/01 P(R), NDC Health GmbH & Co KG and NDC Health Corporation v Commission and IMS Health Inc, [2002] ECR I-3401 .......................................... 626–7, 1144 Case C-82/01 P, Aéroports de Paris v Commission, [2002] ECR I-9297 ........... 24–5, 165, 303, 980 Joined Cases C-83/01 P, C-93/01 P and C-94/01 P Chronopost SA, La Poste and French Republic v Union française de l’express (Ufex), DHL International, Federal express international (France) and CRIE, [2003] ECR I-6993................................. 394 Case C-223/01, AstraZeneca, [2003] ECR I-11809.............................................................. 320, 777 Case C-198/01, Consorzio Industrie Fiammiferi (CIF) v Autorità Garante della Concorrenza e del Mercato, [2003] ECR I-8055 .................................................. 31–2, 56 Joined Cases C-264/01, C-306/01, C-354/01 and C-355/01, AOK Bundesverband and others v Ichthyol-Gesellschaft Cordes and others, [2004] ECR I-2493 ............................ 25 Case C-418/01, IMS Health GmbH & Co OHG v NDC Health GmbH & Co KG, [2004] ECR I-5039 .................................................................... 62, 65, 107, 624, 627, 629, 631, 638–9, 641, 643, 645–6, 648–51, 656, 669–70, 674, 681, 802, 1088 Joined Cases C-189/02 P, C-202/02 P, C-205/02 P-C-208/02 P and C-213/02 P, ABB and others v Commission, [2005] ECR I-5425 ................................................................ 97 Case C-12/03 P, Commission v Tetra Laval BV, [2005] ECR I-987....................... 106, 123, 309–10, 491, 745 Case C-53/03, Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) and Others v GlaxoSmithKline plc and GlaxoSmithKline AEVE, [2005] ECR I-4609 ............................................................................. 344, 354, 670, 690–1, 693 Case C-109/03, KPN Telecom BV v Onafhanklijke Post en Telecommunicatie Autoriteit (OPTA), [2004] ECR I-1273 ........................................................................... 478, 611, 664, 675 Case C-205/03 P, Federación Española de Empresas de Tecnología Sanitaria (FENIN) v Commission, [2006] ECR I-6295........................................................................................... 26 Case C-266/03, Commission v Luxembourg (Inland Waterway), [2005] ECR I-341 ..................... 68

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Case C-551/03 P, General Motors BV v Commission, [2006] ECR I-3173 .................................. 516 Case C-552/03 P, Unilever Bestfoods (Ireland) v Commission, [2006] ECR I-9091 ............ 501, 507 Case C-74/04 P, Volkswagen AG v Commission, [2006] ECR I-6585 ............................................. 45 Case C-95/04 P, British Airways plc v Commission, (BA/Virgin) [2006] ECR I-2331, ECLI:EU:C:2007:166 .......................................................... 99, 106–7, 334, 549, 554, 573, 939, 958–9, 971–2, 976, 978–81, 998, 1013–4 Case C-105/04 P, Nederlandse Federatieve Vereniging voor de Groothandel of Elektrotechnisch Gebied and Technische Unie (FEG) v Commission, [2006] ECR I-8725................................. 43 Joined Cases C-295-298/04, Manfredi, [2006] ECR I-6619 .................................................. 1218–9 Case C-168/05, Mostaza Claro, [2006] ECR I-675 ........................................................................ 72 Case C-413/06 P, Bertelsmann AG and anor. v Independent Music Publishers and Labels Association, [2008] ECR I-4951 ...................................................... 237, 239, 241–2 Joined Cases C-468/06 to C-478/06, Sot. Lélos kai Sia EE and Others v GlaxoSmithKline AEVE Farmakeftikon Proïonton, formerly Glaxowellcome AEVE, [2008] ECR I-7139 ............................... 11–12, 278–9, 323–4, 326, 346, 670, 683, 693–6, 1002, 1005 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] ECR I-9291 ........... 6, 99, 335, 695 Case C-49/07, Motosykletistiki Omospondia Ellados NPID (MOTOE) v Elliniko Dimosio, [2008] ECR I-4863 ......................................................................... 28–9, 59 Case C-52/07, Kanal 5 Ltd and TV 4 AB v Föreningen Svenska Tonsättares Internationella Musikbyrå (STIM) upa., [2008] ECR I-9275 ............ 972–3, 977, 1042–3, 1098 Case C-113/07 P, SELEX Sistemi Integrati SpA v Commission of the European Communities and Organisation européenne pour la sécurité de la navigation aérienne (Eurocontrol), [2009] ECR I-2207 ............................................................................ 23 Case C-202/07 P, France Télécom SA v Commission, [2009] ECR I-2369.............. 7, 101, 128, 152, 168, 188, 210, 357, 366, 369, 377, 385–6, 400, 402–3, 415, 418, 469 Case C-246/07, Commission v Sweden (PFOS), [2010] ECR I-203 .............................................. 68 Case C-385/07 P, [Der Grüne Punkt – Duales System Deutschland GmbH v Commission, 2009] ECR I-6155 ................................ 13, 907, 1038, 1040, 1098, 1182 Case C-441/07 P, Commission v Alrosa Company Ltd, [2010] ECR I-5949...... 1146, 1154, 1156–8, 1158–61, 1167, 1203 Case C-97/08 P, Akzo Nobel NV and Others v Commission, [2009] ECR I-8237 ...................... 38–9 Case C-159/08 P, Scippacercola (Isabella) and Terezakis(Ioannis) v Commission (Athens International Airport Case), [2009] ECR I-46 ................................ 25, 905–6, 908, 926 Case C-280/08 P, Deutsche Telekom AG v Commission, [2010] ECR I-9555, ECLI:EU:C:210:603 ............................. 33–6, 63, 324, 436, 444, 448, 452, 463, 465, 473, 486–7, 494, 500, 638, 646, 654, 670, 675, 678, 1090, 1097–8, 1180 Case C-393/08, Emanuela Sbarigia v Azienda USL RM/A, Comune di Roma, [2010] ECR I-6337, ECLI:EU:C:2010:388 .......................................................................... 1123 Joined cases C- 403/08 and C-429/08 Football Association Premier League and Others EU:C:2011:631 ........................................................................................................................... 9 Case C-407/08 P, Knauf Gips KG v Commission, [2010] ECR I-6375........................................... 44 Case C-36/09 P Transportes Evaristo Molina v Commission, [2010] ECR-I 670 ...................... 1161 Case C-52/09, Konkurrensverket v TeliaSonera Sverige AB, [2011] ECR I-527, ECLI:EU:C:2011:83 ................... 2, 103, 107, 255, 263, 290, 293, 324, 335, 435, 444–7, 449, 451–2, 458, 464, 465–6, 468, 473–4, 477–9, 487, 499–500, 523, 525, 634, 664, 672, 675, 677–9, 685–6, 1090

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Case C-90/09 P, General Química and Others v Commission, EU:C:2011:21............................... 39 Case C-272/09 P, KME Germany v Commission, [2011] ECR I-810 ............................................. 42 Case C-360/09, Pfleiderer AG v Bundeskartellamt, [2011] ECR I -5161 ................................... 1235 Case C-437/09, AG2R Prévoyance v Beaudout Père et Fils SARL, [2011] ECR I-973 .................. 27 Case C-521/09 P, Elf Aquitaine SA v Commission, EU:C:2011:620 ............................................... 39 Case C-70/10, Scarlet Extended SA v Société belge des auteurs, compositeurs et éditeurs SCRL (SABAM), [2011] ECR I-771................................................................................ 850, 853 Case C-109/10 P, Solvay SA v Commission, EU:C:2011:256 (Opinion) .............................. 112, 291 Case C-109/10 P, Solvay SA v Commission, [2011] ECR I-10329, EU:C:2011:686 .................................................................................................. 94 538, 585, 958 Case C-209/10, Post Danmark A/S v Konkurrencerådet, EU:C:2012:172, Grand Chamber.............................................................. 79, 99, 107, 113–4, 263, 265, 286, 291, 305, 324, 335–6, 341–3, 348, 370, 373, 391, 410, 419, 449, 452, 647, 675, 729–30, 829–30, 985 Case C-389/10 P, KME Germany AG, KME France SAS and KME Italy SpA v Commission, EU:C:2011:816 ............................................................................................ 43–4 Case C-457/10 P, AstraZeneca v Commission, EU:C:2012:770 ........ 40, 51, 95, 107, 131, 149, 155, 202–3, 211, 266, 294, 296, 315, 317–20, 754–5, 769, 772–5, 777–9, 781–2, 874–5, 877, 1113 Case C-549/10 P, Tomra Systems ASA and others v Commission, EU:C:2012:55, Opinion .................................................................................................. 340, 576 Case C-549/10 P, Tomra Systems ASA and others v Commission, EU:C:2012:221 .................................................................. 107, 112, 114, 255, 290–1, 324, 336, 340, 516–7, 522–3, 546, 559, 570, 829 Case C-199/11, Europese Gemeenschap v Otis NV and others, [2012] ECR I-684 ..................... 109 Cases C-231/11 P to C-233/11 P, Commission v Siemens Österreich and Others et Siemens Transmission & Distribution and Others v Commission, EU:C:2014:256 ............. 39 Case C-286/11 P, Tomkins plc v Commission, EU:C:2013:29 ........................................................ 38 Case C-440/11 P, Commission v Gosselin Group NV and Stichting Administratiekantoor Portielje EU:C:2013:514 .......................................................................................................... 22 C-508/11 P, Eni SpA v Commission, EU:C:2013:289 ..................................................................... 39 Case C-536/11, Bundeswettbewerbsbehörde v Donau Chemie AG and others, EU:C:2013:366 ..................................................................................................................... 1235 Case C-583/11 P, Inuit Tapiriit Kanatami and others v Parliament and Council, EU:C:2013:625 ..................................................................................................................... 1159 Case C-1/12, Ordem dos Técnicos Oficiais de Contas, EU:C:2013:127 ........................................ 23 Case C-56/12 P EFIM v Commission EU:C:2013:575 ................................................................. 174 Case C-295/12 P, Telefónica and Telefónica de España v Commission EU:C:2014:2062 ...................................................................... 40, 133, 156, 435, 443–4, 447–8, 477, 479, 1097, 1118, 1180 Case C-327/12, SOA Nazionale Costruttori, EU:C:2013:827 ........................................................ 22 Case C-553/12 P, Commission v Dimosia Epicheirisi Ilektrismou AE (DEI) (Greek Lignite Case), EU:C:2014:2083 ..................................................................... 58–9, 1095 Case Opinion 2/13, pursuant to Article 218(11) TFEU, EU:C:2014:2454, Full Court .......... 43, 111 Case C-67/13 P, Groupement des cartes bancaires v Commission, EU:C:2014:2204.... 176–7, 1105 Case C-170/13, Huawei Technologies Co. Ltd v ZTE Corp., ZTE Deutschland GmbH, EU:C:2015:477, OJ 2013 C 215/5 .......................................................... 44, 805–6, 836, 859–64 Case C-23/14 Post Danmark A/S v Konkurrencerådet (Post Danmark II) ECLI:EU:C:2015:651 .................................................... 114, 290–1, 293, 324–5, 329, 336, 513, 547, 560, 576–7, 597, 829, 1112

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Case C-231/14 P, InnoLux v Commission, EU:C:2015:292 ............................................................ 19 Case C-413/14 P, Intel Corp. v Commission, EU:C:2016:788.................................... 17, 18, 19, 560 Case C-413/14 P, Intel Corp. v Commission, EU:C:2017:632, Grand Chamber ........... 6, 15, 17, 79, 90, 113–5, 118, 163, 263, 265, 278, 289, 291–2, 326–8, 336–7, 340, 342–3, 352, 380, 464, 502, 511–3, 547, 555–6, 560–1, 564, 570, 576–8, 730, 829–30, 906, 940, 1078, 1106 Case C-123/16, Orange Polska S.A. v Commission, ECLI:EU:C:2018:87 ............................. 63, 677 Case C-177/16, Autortiesību un komunicēšanās konsultāciju aģentūra / Latvijas Autoru apvienība EU:C:2017:286 (“Latvian Copyright”), Opinion ......... 900, 906–10, 916–8, 928–30, 932, 940–1, 954, 1109 Case C-177/16, Autortiesību un komunicēšanās konsultāciju aģentūra / Latvijas Autoru apvienība EU:C:2017:689 (“Latvian Copyright”).............................. 910, 915, 924–5, 930, 932 Case C-248/16, Austria Asphalt GmbH & Co OG v Bundeskartellanwalt, EU:C:2017:643.......... 53 Case C-284/16, Slovak Republic v Achmea BV, EU:C:2018:158 ................................................... 73 Case C-525/16, MEO-Serviços De Comunicações E Multimédia EU:C:2017:1020, Opinion.... 305, 828–9, 959, 968, 973, 978, 981–2, 986, 988, 995–6 Case C-525/16, MEO-Serviços De Comunicações E Multimédia EU:C:2018:270 ...................................................................... 114–5, 289, 292, 338, 354, 828–9, 957, 968, 974, 976, 978, 981–6 Case C-547/16, Gasorba SL and Others v Repsol Comercial de Productos Petrolíferos SA, EU:C:2017:891 ....................................................................................................... 1162, 1165–7 Case C-373/17 P, Agria Polska sp. z o.o. and others v Commission, EU:C:2018:756 .............. 764–5 Case C-637/17, Cogeco Communications, EU:C:2019:263 ....................................................... 1236 Case C-724/17, Vantaan kaupunki v Skanska Industrial Solutions Oy, and Others, EU:C:2019:204 ..................................................................................................................... 1212 Case C-228/18, Gazdasági Versenyhivatal v Budapest Bank Nyrt. and Others, EU:C:2020:265 ..................................................................................................... 176, 321, 1105 Case C-307/18, Generics (UK) Ltd and others v CMA (Paroxetine), EU:C:2020:52...... 136–9, 185, 321, 348, 789–94, 873

VII. National Cases within EU Jurisdictions Belgium “Acuerdo de sobreseimiento” Case no. 2146/00, Decision of the Service for the Defence of Competition of 15 July 2005 .............................................................................. 1166 Belgacom/Tele2, Competition Council Decision 2012-P/K-29 of 29 November 2012 ........ 450, 486 Bofar SA, Case 2009-V/M-04 Decision of 2 April 2009, Competition Council........................... 695 Distri-One SA/Coca-Cola Enterprises Belgium SPRL, Competition Council decision No 2005-I/O-52 of 30 November 2005, Belgian Official Gazette 22 December 2005, 55.371 ................................................................................................................................... 1166 Denmark Berlingske Gratisaviser, Decision of the Konkurrencestyrelsens ................................................. 416 Finland Oulun/Puhelin, Decision of the Finnish Competition and Consumer Authority of 24 May 2007 ................................................................................................................... 993–4

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Port of Helsinki, Decision of the Finnish Market Court of 11 October 2002 (117/690/2000) ..... 946 Valio, Decision of the Finnish Competition and Consumer Authority of 20 December 2012 ...... 368 France AOL France SNC and AOL Europe SA, Conseil de la Concurrence, Decision n° 04-D-17 of 11 May 2004 ....................................................................................................................... 386 Bottin Cartographes v Google Inc, Paris Court of Appeal, 25 November 2015 .................. 275, 356, 1083, 1086, 1102 Canal Plus, Decision 05-D-13 of 13 March 2005, Autorité de la Concurrence ........................... 744 Ciba-Geigy, Cour d’appel de Versailles, 24 October 1996 ........................................................... 983 Compagnie Générale des Eaux and Lyonnaise des eaux, Conseil de la Concurrence, Decision n° 02-D-44 of 11 July 2002 ....................................................................................... 55 Decision No. 18-D-07 of 31 May 2018 on practices implemented in the sector of maritime passenger crossing services between the mainland and the Island of Yeu, Competition Authority ............................................................................................................ 356 Decision No. 18-D-10 of 27 June 2018 concerning practices implemented in the IT maintenance sector, Competition Authority ............................................................ 797 Direct Energie (interim measures), Conseil de la Concurrence, Decision n° 07-MC-04 of 28 June 2007................................................................................................................. 34, 494 Etna France, Cour de Cassation, 10 May 2006 ...................................................................... 34, 494 France Télécom, Conseil de la Concurrence, Decision No 05-D-59 of 7 November 2005 .......... 991 France Télécom/Orange Caraïbes Decision n. 09-D-36 of 9 December 2009, Relating to practices implemented by Orange Caraïbes and France Télécom, Competition Authority .......................................................................................................... 1121 France Télécom/Orange Caraïbes Decision n. 148 of 23 September 2010 (2010/00163), Paris Court of Appeal ........................................................................................................... 1121 France Télécom/Orange Caraïbes, Cour de Cassation, Decision no 140 of 31 January 2012 (10-25.775) ....................................................................................................................... 1121–2 France Télécom, Cour d’appel de Paris, Decision of 29 June 1999 ............................................. 990 France Télécom/SFR Cegetel/Bouygues Télécom, Conseil de la Concurrence, Decision no 04-D48 of 14 October 2004....................................... 33–4, 322, 465, 478, 494, 499, 664 GlaxoSmithKline France, Conseil de la Concurrence, Decision no 07-D-09 of 14 March 2007 ................................................................................................................... 386 GlaxoSmithKline, Cour d’appel de Paris, Decision 2007/07008 of 8 April 2008 ................ 368, 386 Janssen-Cilag Decision 17-D-25 of 20 December 2017 concerning practices implemented in the fentanyl transdermal patches sector ........................................................ 797 Opinion No. 04/A-17, Conseil de la Concurrence, 14 October 2004 .............................................. 61 Orange France/SFR, Conseil de la Concurrence, Decision No 12-D-24 of 13 December 2012 ......................................................................................................... 993–4 Sanicorse, 20 September 2018, Competition Authority ............................................................... 891 Sanofi-Aventis, Conseil de la Concurrence, Decision n° 13-D-11 of 14 May 2013 concerning practices in the medicinal products sector, upheld by the Paris Court of Appeal on 18 December 2014 and by the French Supreme Court on 18 October 2016, No. 15.10-384 ....................................................................................... 797 Schering Plough Decision No. 13-D-21 of 18 December 2013 regarding practices implemented in the French market for high-dosage buprenorphine sold in private practices, upheld by the Paris Court of Appeal on 26 March 2015 and by the French Supreme Court on 11 January 2017, No. 15-17.134................................. 797 SFR and France Télécom, Cour de Cassation, Case No 08-14.435 and 08-14.464 .............. 478, 664 SFR et France Telecom, Cour d’appel Paris, Decision of 2 April 2008 .................................. 34, 494 SNCF, Conseil de la Concurrence, Decision No 12-D-25 of 18 December 2012 ........................ 993

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Société LuK Lamellen und Kupplungsbau Beteiligungs GmBh v SA Valeo, Paris Tribunal de Grande Instance, Judgment of 27 January 2005 (Third Chamber) ................................ 882–3 Société Office d’Annonces (O.D.A.) c/ Becheret, Cour de Cassation, Chambre Commerciale, 6 April 1999 ............................................................................................................................ 983 Union of Magazine Press Publishers, Press Alliance, and Agence France-Presse, Decision No. 20-MC-01 of 9 April 2020 concerning requests for interim measures, Competition Authority .......................................................................................................... 1145 Germany Arzneimittelpreise, Frankfurt Court of Appeal, Judgment of 21 December 2010, 11 U 37/09 ........................................................................................................................ 1225–6 BAB-Tankstelle Bottrup Süd, OLG Düsseldorf, Judgment of 26 June 1979, WuW/E OLG 2135 ................................................................................................................. 931 Bahnhofsbuchhandel, Bundesgerichtshof, Judgment of 17 March 1998, WuW/E DE-R 134 ....... 70 Case I-2 U 92/10, Judgment of the Düsseldorf Court of Appeal of 20 January ................... 640, 657 Case VI-Kart 1/19 (V), (Facebook Germany) Decision of the Higher Regional Court of Düsseldorf (Oberlandesgericht Düsseldorf) in interim proceedings, 26 August 2019 ............................................................................................. 1024, 1085–7, 1098 Depotkosmetik, Bundesgerichtshof, Judgment of 12 May 1998, WUW/E DE-R 206 (RIW 1998, 962) ....................................................................................................................... 70 EON/Gelsenberg AG and EON Bergmann GmbH, Sondergutachten der Monopolkommission, Decision No. 34 of 21 May 2002.............................................................................................. 55 E.ON/Ruhrgas, German Federal Cartel Office ............................................................................... 55 Facebook Germany, BKA decision 2019 ................................................................................... 1024 Flugpreisspaltung, Bundesgerichtshof, Judgment of 22 July 1999, NVZ 2000, 326 ........... 920, 930 Galopprennübertragung, Bundesgerichtshof, Judgment of 10 February 2004, Wirtschaft und Wettbewerb/E DE-R 1251 ........................................................................ 1018–9 IMS/Pharma Intranet, Judgment of the Landgericht Frankfurt of 16 November 2000 ................ 626 Intellectual Ventures – Vodafone 4c O 81/17 District Court of Düsseldorf ................................... 839 Lotterievertrieb, Bundesgerichtshof, Judgment of 7 March 1989, WuW/E BGH 2535 ................. 69 Mehrpreis von 11%, Bundesgerichtshof, Judgment of 30 October 1975, Wirtschaft und Wettbewerb/E BGH 1413............................................................................. 1016 Orange Book Standard, Federal Supreme Court, Case KZR 39/06, 6 May 2009 ..................................................................................................... 848, 855, 859, 861 Pay-TV-Durchleitung, Bundesgerichtshof, Judgment of 19 March 1996, Wirtschaft und Wettbewerb /E BGH 3058............................................................................ 1022 Pioneer v Acer 7 O 96/14, Regional Court of Mannheim, 8 January 2016 .......................... 836, 863 Pioneer v Acer 2016 6 U 55/16, Karlsruhe Higher Regional Court, 6th Division, 31 May 2016 ........................................................................................................................... 863 Puttgarden/Rødby, Case KVR 7/12, Federal Court of Justice (Bundesgerichtshof), 11 December 2012 .................................................................................................................. 658 Sisvel v. Haier, I-15 U 65/15 and I-15 U 66/15, Düsseldorf Higher Regional Court, 13 January 2016 ...................................................................................................................... 863 Sisvel v Haier, Higher Regional Court of Düsseldorf, 66/15 OLG Düsseldorf, 15 March 2017 ..........826 St Lawrence v Vodafone 4a 073/14, District Court of Düsseldorf, 31 March 2016 .............. 836, 862 St Lawrence v Vodafone, 1-15 U 36/16, Düsseldorf Regional Court of Appeal, 9 May 2016 ...... 862 Valium I, Bundesgerichtshof, Judgment of 16 December 1976, BGHZ 68, 23, 33, 37 ............ 930–1 Verband der Wetterdienstleister v Google, District Court of Hamburg, 4 April 2014 ......................................................................................... 275, 1084, 1088, 1093–4, 1102, 1106 Vitamin B12, Kammergericht, Judgment of 19 March 1975, WuW/E 1975, 649 ........................ 924

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Greece Pepsico/Tasty Foods, Decision of the Hellenic Competition Commission of 9 February 2012 ... 516 Ireland Aer Lingus plc – Reduction In Travel Agent Commissions By Aer Lingus plc, Case COM/15/02, Irish Competition Authority Decision of 10 June 2003.................... 1029–30 Appeal Numbers ECAP6/2005/03, 04, 05, 06, 07, 08, Decision No 08/05 of the Electronic Communications Appeals Panel.................................................................. 238 Competition Authority v John O’Regan and others [2007] IESC 22 .............................. 169, 719–20 Drogheda Independent Company Ltd, Case COM/05/03, Irish Competition Authority Decision of 7 December 2004 ................................................................................................ 386 Greenstar Recycling Holdings Ltd – Alleged excessive pricing by Greenstar Recycling Holdings Ltd in the provision of household waste collection services in northeast Wicklow, Case COM/108/02, Enforcement Decision Series, No. E/05/002, Irish Competition Authority of 30 August 2005 ........................................... 1183 O2/Vodafone, Commission for Communications Regulation, Document No 04/118 ...... 238, 245–6 Ticketmaster Ireland, Case COM/107/02, Irish Competition Authority Decision of 26 September 2005 ......................................................................................................... 517–8 Vodafone Ireland Ltd – Increase in the Wholesale Price of Electronic Top-Up by Vodafone Ireland Ltd, Case COM/118/02, Irish Competition Authority Decision of 25 October 2002 ......1028 Italy Aereoporti di Roma-Tariffe Aereoportuali, Case A376, IAA Decision of decision of 23 October 2008, Bollettino 40/2008 ......................................................................... 919, 924 Aspen n. 8948/2017 Lazio Regional Administrative Tribunal judgment of 26 July 2017 ....................................................................................................... 890, 927, 942 Associazione Italiana Internet Providers/Telecom, Provvedimento n. 7978, IAA Decision of 28 January 2000, Bollettino 4/2000 ............................................................ 989 Bayer CropScience SRL, IAA Decision of 28 June 2011, upheld on appeal by the Council of State 29 January 2013 ................................................................................ 643 Cesare Fremura-Assologistica/Ferrovie Dello Stato, Provvedimento n. 8065, in Bollettino 8/2000, IAA Decision of 24 February 2000 ...................................................... 989 Consorzio Risposta/Ente Poste Italiane, IAA Provvedimento n. 6698, Decision of 17 December 1998, Bollettino 51/1998 ............................................................................. 989 ENI-Trans Tunisian Pipeline, Case A358, Competition Authority ............................................... 658 Ente Ferrovie Dello Stato, Provvedimento n. 1312, in Bollettino 18-19/1993, IAA Decision of 23 July 1993 ................................................................................................ 989 GlaxoSmithKline, Case A.363, IAA Decision of 8 February 2006 .............................................. 755 Incremento prezzi farmaci/Aspen, Autorità Garante della Concorrenza e del Mercato, A480 – Bollettino n. 36/2016 ......................................................................................... 890, 927 Merck Italia s.p.a., Case A.364, IAA Decision of 17 June 2005 .................................................. 755 Pfizer Consiglio di Stato, CdS, judgment no. 693 of 12 February 2014....................................... 782 Pfizer, TAR, I, decision No. 7467 Judgment of the Regional Administrative Court of 3 September 2012 ............................................................................................................... 782 Pfizer/Ratiopharm (Xalatan), IAA Decision of 11 January 2012 ............................................ 780–2 Pfizer (Xalatan), IAA Decision of 11 January 2012 ..................................................................... 755 Poste Italiane, Judgment of the Lazio Regional Administrative Court of 25 June 2012 .............. 494 SEA-Tariffe Aereoportuali, Case A377, IAA Decision of 26 November 2008 ..................... 919, 924 Telecom Italia, Case A 351, IAA Decision of 19 November 2004 ........................................... 496–7 Veraldi/Alitalia, IAA Decision of November 15, 2001 ................................................................. 918

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Jersey ATF Overseas Holdings Ltd v The Jersey Competition and Regulatory Authority [2018] JRC 004 ....................................................................................................................... 687 Luxembourg Decision 2016 FO-04 Utopia, Luxembourg Competition Council decision of 17 June 2016 ....... 55 The Netherlands BT 1239 Sandd BV/TNT, Case 6207/233, Competition Authority................................................ 373 Interpay, Case 2910-700, Decision of the Dutch Competition Authority of 28 April 2004 ......... 944 N.V. Nederlandse Spoorwegen, ROT 18/2537, 27 June 2019, Rotterdam District Court .............. 356 Vereniging Vrije Vogel v KLM and Stewart v KLM, Case 273 and 906, Decision of the Dutch Competition Authority of 8 November 2000 .................................. 944–5 Voorburg, Wassenaar & Melissen v Casema, Case 1793/222, Decision of the Dutch Competition Authority of 12 June 2003 ............................................. 944 Spain Abertis, Case no. S/0207/09, CNC Decision of 8 April 2010 ....................................................... 494 AIE, Sociedad de Gestión, AIE, Cases S/2785/07, CNC Decision of 23 February 2011.............. 890 Cofares/Organon, File R.547/02 CNC Decision of 22 September 2003 ................................ 219–20 Difar, Case R 388/01, CNC Decision of 27 April 2001, upheld on appeal by the Tribunal for the Defence of Competition on 5 December 2001 .................................. 219 Estación Sur de Autobuses, Case 627/07, CNC decision of 31 March 2008 ................................ 994 Hewlett-Packard v Oracle Corporation, Case S/0354/11 26 February 2013, CNMC .................. 158 Laboratorios Farmacéuticos, Case R 488/01, CNC Decision of 5 December 2001 .................... 220 SGAE, Case S/0220/10, CNC Decision of 7 June 2012 ............................................................... 890 Telefónica decision of 11 February 2010, Basque Competition Tribunal ..................................... 241 Telefónica/Vodafone/Orange, Case S/0248/10, CNC Decision of 19 December 2012 ................. 241 Sweden Arlanda Terminal 2, Decision of the Swedish Court of Appeal of 27 April 2001 ...................... 1209 Statens Järnvägar v Konkurrenverket & BK Täg AB, Case No. 2000:2, Marknadsdomstolen decision of 1 February 2000 ................................................................................................... 387 Swedish Competition Authority v Nasdaq (Case PMT 7000-15, judgment of 15 January 2018, Patent and Market Court ......................................................................................................... 328 Swedish Competition Authority v Nasdaq July 2019 Patent and Market Court of Appeal ........... 328 United Kingdom 2 Travel Group Plc (in liquidation) v Cardiff City Transport Services Ltd [2012] CAT 19 .... 1223–5 Aberdeen Journals Ltd v Office of Fair Trading [2003] CAT 11 .................................. 360, 386, 422 Achilles Information Ltd v Network Rail Infrastructure Ltd [2019] CAT 20 ............................ 24, 48 Achilles Information Ltd v Network Rail Infrastructure Ltd [2020] EWCA Civ 323 ............... 24, 48 Albion Water/Dwr Cymru, Case CA98/01/2004, Ofwat Decision of 26 May 2004...................... 450 Albion Water Ltd v Dŵr Cymru Cyfyngedig [2013] CAT 6 .................................................... 1223–4 Albion Water Ltd v Water Services Regulation Authority (Albion Water I) [2006] CAT 23 .......... 473 Albion Water Ltd v Water Services Regulation Authority (Albion Water II) [2008] CAT 31 ......... 473, 907 Albion Water Ltd v Director General of Water Services [2005] CAT 40 .................................... 1190 Albion Water Ltd v Water Services Regulation Authority [2009] CAT 31 ..................................... 920 Allen and Hanburys Ltd.’s (Salbutamol) Patent [1987] RPC 327 ................................................. 812 American Cyanamid Co’s (Fenbufen) Patent [1990] RPC 309 ..................................................... 812

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Arriva The Shires Ltd v London Luton Airport Ltd [2014] EWHC 64 (Ch) ................................. 682 Association of British Travel Agents and British Airways plc, Case CA98/19/2002, OFT Decision of 11 December 2002 ............................................................................ 450, 1028 ATTHERACES Ltd & Anr v The British Horse Racing Board & Anr [2005] EWHC 3015 (Ch) ..................................................................................... 685, 904, 1020 ATTHERACES Ltd & Anr v The British Horse Racing Board & Anr [2007] EWCA Civ 38 ........................................................................... 829, 904, 912, 982, 1020 BetterCare Group Ltd/North & West Belfast Health & Social Services Trust, Case CE/1836-02, OFT Decision of 18 December 2003 ..................................................... 1030 British Sky Broadcasting and others v OFCOM [2012] CAT 20.................................................. 634 British Telecom UK-SPN, Case CW/00496/01/02, Oftel Decision of 23 May 2003 ...... 450, 489–90 BSkyB, Case CA98/20/2002, OFT Decision of 17 December 2002 .................... 403, 450, 457, 459, 476, 487, 746–7, 983 BT, Case CW/00760/03/04, Ofcom Decision of 12 July 2004 ............................................. 450, 498 BT/BSkyB, OFT Decision of 15 May 2003 ................................................................................... 983 BTOpenworld, Ofcom Decision of 20 November 2003 ............................ 446, 450, 459, 465, 488–9 BT Surf Together and BT Talk & Surf Together Pricing Packages, Oftel Decision of 4 May 2001 ......................................................................................................................... 445 Cardiff Bus, Case CE/5281/04, Decision No CA98/01/2008, Decision of the Office of Fair Trading of 18 November 2008 .............................................................. 386, 426, 1224–5 Claymore Dairies Ltd and Arla Foods UK PLC v Office of Fair Trading [2005] CAT 30.... 389, 393 Companies House, the Registrar of Companies for England and Wales, Case CP/1139-01, Decision of the Director General of Fair Trading of 25 October 2002..... 450 Competition and Markets Authority v Pfizer UK Ltd and others (Phenytoin) [2020] EWCA Civ 339 .......................................................................... 561, 890, 904, 906, 914, 928–9, 940, 1104 Conversant v Huawei and ZTE [2020] EWHC 256 (Pat) ......................................................... 813–4 Deutsche Börse AG, Euronext NV and London Stock Exchange plc., Decision of the Competition Commission of 1 November 2005............................................ 217 Direction Setting the Margin between IPStream and ATM interconnection prices, Ofcom Consultation of 26 August 2004 ................................................................................. 459 E.I. du Pont de Nemours & Company and Op. Graphics (Holography) Ltd, Case CP/1761/02, OFT Decision of 9 September 2003 ..................................................... 660–2 English Welsh and Scottish Railway Ltd, Decision of 17 November 2006, Office of Rail Regulation ........................................................................................ 969, 983, 988 Enron Coal Services Ltd (In Liquidation) v English Welsh & Scottish Railway Ltd [2009] CAT 36 .......................................................................................................... 319, 1215–6 Enron Coal Services Ltd (In Liquidation) v English Welsh & Scottish Railway Ltd [2011] EWCA Civ 2 ....................................................................................... 319, 1215–7, 1223 EWS v E.ON UK Ltd [2007] EWHC 599 (Comm) ................................................................. 1208–9 First Edinburgh/Lothian, Case CA98/05/2004, (Case CP/0361-01) OFT Decision of 29 April 2004 ...................................................................................................... 313, 367, 424 Flybe, Case MPINF-PSWA001, OFT Decision of 5 November 2010 .................. 112, 311–2, 425–6 Genzyme v Office of Fair Trading [2004] CAT 4 ...................................................... 220, 483–4, 670 Genzyme v Office of Fair Trading [2005] CAT 32 .............................................................. 444, 1182 Greene King/Spirit Case ME/6501/14, CMA ............................................................................... 154 Hendry a.o. v The World Professional Billiards and Snooker Association Ltd [2002] ECC 8, ChD .............................................................................................................. 1215 HMSO v Automobile Association [2001] ECC 272 ....................................................................... 636 Humber Oil Terminals Trustee Ltd v Associated British Ports [2011] EWHC 352 (Ch) .............. 855

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Iberian UK Ltd v BPB Industries PLC [1996] 2 CMLR 601, ChD ...................................... 75, 1211 ICL/Synstar, Case CA98/6/2001, OFT Decision of 20 July 2001 ................................................ 172 IDEXX Laboratories, Case CE/9322/10, OFT Decision of November 2011 ............... 732, 748, 751 Intecare Direct Ltd v Aventis Pharma Ltd, Claim No: HC09C04203, High Court Order of 11 November 2009 ................................................................................ 696 Intecare Direct Ltd v Pfizer Ltd [2010] EWHC 600 (Ch) ..................................................... 683, 695 Intel Corporation v Via Technologies Inc. and Elitegroup Computer Systems (UK) Ltd, [2002] EWHC 1159 (Ch) ....................................................................................................... 667 Intel Corporation v Via Technologies Inc and Elitegroup Computer Systems (UK) Ltd [2002] EWCA Civ. 1905................................................................................................. 667, 674 IPCom v Nokia (18 May 2012) ..................................................................................................... 885 Kaisha v Green Cartridge Company (Hong Kong) Ltd (Hong Kong) [1997] UKPC 19 .............. 172 Lloyd v Google LLC [2019] EWCA Civ 1599 ............................................................................ 1057 London Electricity, Ofgem Decision of 12 September 2003 ........................................................ 983 Micula and others v Romania [2020] UKSC 5 ............................................................................... 73 Napp Pharmaceuticals Holdings Ltd and Subsidiaries, Case CA98/2/2001, Decision of Director General of Fair Trading, 30 March 2001 .......................... 921, 947–8, 951 Napp Pharmaceutical Holdings Ltd and Subsidiaries v Director General of Fair Trading [2002] CAT 1, [2002] CompAR 13 .................................. 254, 430–1, 921, 930, 936–7, 940, 948, 952, 1182 National Grid, Decision of the UK Gas and Electricity Markets Authority of 21 February 2008................................................................................................................ 541 National Grid Electricity Transmission plc v ABB and others [2012] EWHC 869 (Ch) ............ 1235 National Grid plc v Gas and Electricity Markets Authority [2010] EWCA Civ 114........ 266, 320, 527–8 Pay TV Statement, 31 March 2010, OFCOM ............................................................................ 491–2 Pfizer UK Ltd and others v Competition and Markets Authority (Phenytoin) [2018] CAT 11 ..................................................................... 890, 904, 906, 910, 913–5, 919–21, 924, 927–8, 932–3, 1182 Phenytoin, Case CE/9742-13, 7 December 2016, CMA ................ 890, 904, 918–9, 942, 954, 1182 Philips v ASUS [2020] EWHC 29 (Ch)......................................................................................... 833 Philips v ASUS [2020] EWHC 169 (Pat) ...................................................................................... 833 Philips Electronics NV v Ingman Ltd [1998] 2 CMLR 839, ChD (Patents Ct) ............................ 636 Poundland/99p Stores Case ME/6467-14, CMA .......................................................................... 154 Pricing of BT Analyst, Ofcom Decision of 26 October 2004.................................................. 169–70 Purple Parking Ltd v Heathrow Airport Ltd [2011] EWHC 987 (Ch) .......... 112, 658, 665–6, 684, 1092 Reckitt Benckiser Healthcare (UK) Ltd and Reckitt Benckiser Group plc, Case CE/8931/08, OFT Decision of 13 April 2011 .................................................... 755, 778–9 Remicade (Case 50236), 14 March 2019, CMA ........................................................................... 325 Royal Mail plc v Office of Communications [2019] CAT 27 ...................... 293–4, 330–1, 348, 1092 Ryanair/Gatwick Airports Ltd, Civil Aviation Authority Decision of May 2011.......................... 975 Smith Kline & French’s (Cimetidine) Patents [1990] RPC 203, CA ............................................ 812 Sandvik AB v KR Pfiffner (UK) Ltd [1999] EuLR 755, ChD (Patents Ct) .................................... 636 SEL-Imperial Ltd v The British Standards Institution [2010] EWHC 854 (Ch) ........................... 682 Streetmap.EU Ltd v Google Inc and others [2016] EWHC 253 (Ch) ........... 275, 321, 325, 330, 348–51, 1080–3, 1088, 1091–2, 1102, 1105–6 Syntex Corp’s Patent [1986] RPC 585 .......................................................................................... 812 THUS plc and Gamma Telecom Ltd: complaint against BT about alleged margin squeeze in Wholesale Calls pricing, 20 June 2013 .................................................................. 467–8, 470 TM Property Services Ltd/Transaction Online, Case CA98/07/2004, OFT Decision of 18 August 2004................................................................................................................... 450

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TQ Delta v ZyXEL [2019] EWCA Civ 1277................................................................................. 833 UKRS Training Ltd v NSAR Ltd [2017] CAT 17 ....................................................................... 24, 48 Unwired Planet International Ltd and others v Huawei Technologies Co. Ltd and others [2017] EWHC 711 (Pat) .................................................................. 806, 811–4, 819–20, 825–7, 830–3, 834–5, 842, 862–5 Unwired Planet International Ltd and others v Huawei Technologies Co. Ltd and others [2018] EWCA Civ 2344 .................................................. 801–2, 806, 809, 811, 826, 828, 832–3, 836, 862–5 Vodafone, O2, Orange and T-Mobile, Case CW/00615/05/03, Ofcom Decision of 21 May 2004 ............................................................................................................... 450, 465 Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111 (QB) ............ 106, 118 Yeheskel Arkin v Borchard Lines Ltd & Ors [2003] EWHC 687 (Comm).......................... 412, 1215

VIII. Decisions from Other Jurisdictions Australia Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5 ......................................................................................................................... 367 Brazil BUSCAPE v. Google, 18th Civil Court of Sao Paulo, Lawsuit No. 583.00.2012.131958-7 ........................................................................... 1084, 1106 Canada Commissioner of Competition v Air Canada, CT-2000/004, Competition Tribunal, Decision of 22 July 2003 ................................................................................................ 364, 371 Commissioner of Competition v Canada Pipe, 2005 Comp. Trib. 3............................................. 602 Commissioner v Air Canada, CT-2001/002, [2003] Competition Tribunal 13 ............................. 429 Statement Regarding Investigation Into Alleged Anti-Competitive Conduct By Google, Competition Bureau, 19 April 2016 ........................................................................... 1084, 1106 China Huawei v InterDigital (2013) Guangdong High Ct. Civ. Third Instance No 305, Guangdong High People’s Court .................................................................................... 836, 839 EFTA Court Posten Norge AS v EFTA Surveillance Authority, Case E-15/10, judgment of 12 April 2012.................................................. 44, 320–1, 325, 519–20, 525–9, 541 European Court of Human Rights A. Menarini Diagnostics SRL v Italy, Case 43509/08............................................................... 44, 94 Hong Kong Television Broadcasts Ltd v Communications Authority And Another, HCAL176/2013, Hong Kong Competition Tribunal, 29 January 2016.............................................................. 321 Japan Samsung v Apple (No 2013 (Ne) 10043), IP High Court of Japan, 16 May 2014 ........................ 836

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New Zealand Clear Communications Ltd v Telecom Corp of New Zealand Ltd, HC 22 December 1992, CA 28 December 1993, [1995] 1 NZLR 385, PC ................................................................ 1189 South Africa Competition Commission v South African Airways, Case 18/CR/MAR01 Decision of 28 July 2005 ............................................................................................................... 334, 580 Mittal Steel South Africa Ltd v Harmony Gold Mining, Case 70/CAC/Apr07, [2009] ZACAC 1 .................................................................................................................... 912 Sasol Chemical Industries Ltd v Competition Commission, Case No 131/CAC/ 17 June 2015 ................................................................................................................... 891, 922 South African Airways v Nationwide/Comair, Case 92/CAC/MAR10 Decision of 11 April 2011 .......................................................................................................... 334–5, 580 Taiwan Google – Decision to close the investigation, July 2015, Taiwan Fair Trade Commission ....... 1084, 1106 United States A.A. Poultry Farms, Inc v Rose Acre Farms, Inc, 881 F.2d 1396 at 1402 (7th Cir. 1989) ........ 376–7 Abbott Laboratories v. Teva Pharmaceuticals USA, Inc. (TriCor) 432 F. Supp. 2d 408 (D. Del. 2006) ......................................................................................................................... 778 Alaska Airlines v United Airlines, 948 F.2d 536 (9th Cir. 1991), cert denied 503 US 977 (1992) ............................................................................................... 635 Allied Tube & Conduit Corp. v Indian Head, Inc., 486 US 492 (1988) ............................... 754, 875 Alternative Regulatory Framework for Local Exchange Carriers, Invest. No. 87-11-033, 33 C.P.U.C.-2d 43, 107 P.U.R.4th 1 (1989), and Decision 94-09-065 at 204-24 (15 September 1994), California Public Utilities Commission ............................................ 1189 Apple, Inc. v Motorola, Inc., No. 1:11-cv-08540, 2012 U.S. Dist. LEXIS 89960 (N.D. Ill. 22 June 2012) .................................................................................................. 819, 846 Apple Inc v Qualcomm Inc (Case No 3:17-cv-00108-GPC-MDD) (S.D. Cal. 2018) ................... 836 Apple Inc. v. Samsung Elecs. Co., Case No. 11–CV–01846–LHK, 2011 WL 4948567 (N.D. Cal. 18 October 2011) ................................................................................................... 851 Apple v Motorola, 2012 WL 2376664 (N.D. Ill) 22 June 2012 .................................................... 854 Apple v Motorola, Opinion and Order, Case No. 1:11-OV-08540 (22 June 2012) ....................... 819 Aspen Skiing Co v Aspen Highlands Skiing Corp, 472 US 585 .................................................... 280 Barry Wright Corp. v ITT Grinnell Corp., 724 F.2d 227 (1st Cir.1983) ....................................... 370 Berkey Photo, Inc v Eastman Kodak Co, 603 F.2d 263, 294 (2nd Cir. 1979) ............................... 941 Biovail Corp., In re, Dkt. No. C-4060, 2002 WL 31233020 (2 October 2002) (consent order) ............................................................................................................ 767–8, 883 Blue Cross & Blue Shield United v Marshfield Clinic, 65 F.3d 1406 (7th Cir. 1995)................. 1011 Bristol-Myers Squibb Co., In re, Dkt. No. C-4076, 2003 WL 21008622 (F.T.C. 14 April 2003) (consent order)............................................................................ 768, 883 Broadcom Corp. v Qualcomm Inc., 501 F.3d 297 (3d Cir. 2007) ......................................... 807, 869 Brooke Group Ltd v Brown & Williamson Tobacco Corp, 509 US 209 (1993) ...................................................................................... 83, 271, 367, 381–2, 384, 745, 749, 956 Campos v Ticketmaster Corp., 140 F.3d 1166 (8th Cir. 1998) ...................................................... 741 Cascade Health Solutions v PeaceHealth, 515 F.3d 883 (9th Circ. 2007).................................... 748 CDC Technologies Inc v IDEXX Laboratories Inc, 186 F.3d 74 (2nd Cir. 1999) ......... 520, 524, 526 Chevron Corp., 140 F.T.C. 100 (2005) .......................................................................................... 869

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ChriMar Sys. v. Cisco Sys., 72 F. Supp. 3d 1012 (N.D. Cal. 2014) .............................................. 851 Chrysler Credit Corporation v J. Truett Payne Co., 670 F. 2d. 575 .............................................. 983 Clamp-All Corp. v Cast Iron Soil Pipe Inst., 851 F.2d 478 (1st Cir.1988) ................................... 370 Confederated Tribes of Siletz Indians of Oregon v Weyerhaeuser Co., 411 F.3d 1030 (9th Cir. 2005)....................................................................................................................... 1026 Continental TV v GTE Sylvania, 433 US 36 (1977) ..................................................................... 270 Conwood Co, LP v United States Tobacco Co, 2002 Fed App. 0171P, 290 F. 3d 768 (6th Cir. 2002)................................................................................................................. 536, 754 Covad Communications Company v Bell Atlantic Corporation, 398 F.3d 666, 365 U.S.App.D.C. 78, (2005).......................................................................................... 310, 476 Dell Computer Corp., 121 FTC 616 (1996) FTC Lexis 291 (20 May 1996) ........................... 868–9 Digital Equip. Corp. v Uniq Digital Techs., 73 F.3d 756 (7th Cir. 1996) ..................................... 741 Eastman Kodak Co v Image Technical Serv. Inc, 504 US 451 (1992) .................................. 271, 741 Ericsson v D-Link 773 F.3d 1201 (Fed Cir 2014) ................................................................. 827, 836 Falls City Indus. v Vanco Beverage Inc, 460 U.S. 428 (1983)....................................................... 983 Federal Trade Commission v Actavis, Inc, 570 U.S. 136 (2013) ........................................... 785, 787 Federal Trade Commission v Qualcomm, Case No. 17-CV-00220-LHK, US Northern District of California, 21 May 2019 .......................................................... 203, 839 Federal Trade Commission v Watson Pharmaceuticals, Inc, 677 F.3d 1298 (11th Cir. 2012) ...... 787 FTC v Morton Salt, 334 U.S. 37 (1948) ........................................................................................ 983 Georgia-Pacific Corp. v U.S. Plywood Corp., 318 F. Supp. 1116, 6 USPQ 235 (S.D.N.Y. 1970)............................................................................................................... 811, 818 Google Inc, In the Matter of, Statement of the Federal Trade Commission Regarding Google’s Search Practices FTC File Number 111-0163, 3 January 2013 ........ 1084, 1093, 1106 Hanover Shoe v United Shoe Mach. Corp., 392 US 481 (1968) ................................................ 1218 HTC America Inc. et. al. v Ericsson Inc., Case No. 6:18-cv-00243-JRG (E.D. Tex., 7 Jan 2019).............................................................................................................................. 839 Hynix v Rambus C-00-20905 RMW jury verdict of 23 March 2008 (N.D. Cal.) ......................... 871 Hynix v Rambus C-00-20905 RMW Findings of Fact and Conclusions of Law of 3 March 2009 (N.D. Cal.) ........................................................................................... 869, 871 Hynix v Rambus C-00-20905 RMW final judgment of 10 March 2009 (N.D. Cal.)..................... 869 ILC Peripherals Leasing Corp. v IBM Corp., 458 F. Supp. 423 (N.D. Cal. 1978) ....................... 798 Illinois Brick Co. v Illinois, 431 US 720 (1977) ......................................................................... 1218 Innovatio IP Ventures, LLC Patent Litig., No. 11 C 9308, 2013 WL 5593609 (N.D. Ill. 3 October 2013) ....................................................................................... 812, 820, 836 International Salt Co v United States, 332 US 392 (1947)........................................................... 269 Int’l Travel Arrangers, Inc. v. W. Airlines, Inc., 623 F.2d 1255 (8th Cir. 1980) ............................. 796 Jack Walters & Sons Corp. v Morton Bldg., Inc., 737 F.2d 698 (7th Cir. 1984) ............... 698–9, 721 LaserDynamics, Inc. v. Quanta Computer, Inc 694 F 3d 51 (Fed Cir 2012) ................................ 812 Le Page v 3M 324 F. 3d 141 (3d Cir 2003) ............................................................................... 744–5 Lee v Life Ins. Co. of North America, 23 F.3d 14 (1st Cir.), cert denied 513 U.S. 964 (1994)...... 741 MCI Communications Corp v AT&T, 708 F.2d 1081 (7th Cir. 1983) ................................... 603, 798 Microsoft Corp. v Motorola, Inc., 696 F.3d 872 (9th Cir. 2012) ................................................... 846 Microsoft v Motorola, 2012 WL 5993202 (W.D. Wash. 30 November 2012)............................... 848 Microsoft v. Motorola, Findings of Fact and Conclusions of Law, Case No. C10-1823JLR, 2013 US Dist LEXIS 60233 (25 April 2013) (2013 W.D. Wash.) .............................. 818–9, 836 Microsoft v. Motorola, No. C-10-1823JLR, 2013 WL 2111217 (CL-0001)................................. 812 Microsoft Corp v Motorola Inc Case No 10-CV-1823 6 June 2012 (W.D. Wash.) ........................ 855 Minnesota Mining and Manufacturing Co v Appleton Papers Inc, 35 F. Supp. 2d 1138, 1144 (D. Minn. 1999) ............................................................................................................. 523

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Motorola Mobility LLC, Google Inc, In the Matter of FTC Decision and Order, July 24 2013 ......... 859 Mylan Pharmaceuticals v. Warner Chilcott (Doryx) No. 15-2236, 2016 WL 5403626 (3d Cir. 28 Sept 2016)............................................................................................................. 778 Nat’l Ass’n of Pharm. Mfrs., Inc. v. Ayerst Labs., 850 F.2d 904, 914–17 (2d Cir. 1988) .............. 796 Negotiated Data Solutions LLC, 2008 WL 258308, 32 (FTC, 22 January 2008)......................... 869 New York ex rel. Schneiderman v. Actavis PLC (Namenda), 787 F.3d 638 (2d Cir. 2015)............ 778 Ohio v. Am. Express Co., 138 S. Ct. 2274 (2018) ....................................................... 178, 180, 1048 Omega Environmental Inc v Gilbarco Inc, 127 F.3d 1157 (9th Cir. 1997) ........................... 519, 524 Otter Tail Power Co v United States 410 US 366 (1973)............................................................ 1102 Pacific Bell Telephone Co v linkLine Communications Inc, 129 S. Ct. 1109 (2009)........................................................................ 103, 478–9, 495, 664, 675 Paddock Publications Inc v Chicago Tribune Co., 103 F 3rd. 42, 45 (7th Circ. 1996)................. 504 PSI Repair Servs., Inc. v Honeywell, Inc., 104 F.3d 811 (6th Cir. 1997) ...................................... 741 Qualcomm Inc. v Broadcom Corp., 548 F.3d 1004 (Fed. Cir. 2008) (1 December 2008) ............ 854 Queen City Pizza, Inc. v Domino’s Pizza, Inc., 124 F.3d 430 (3d Cir. 1997)................................ 741 Rambus, In the matter of, Docket 9302, FTC decision of 2 August 2006 .................................... 868 Rambus, In the matter of, Docket 9302, FTC Chief Administrative Law Judge decision of 23 February 2004................................................................................................................ 868 Rambus Inc. v FTC, 522 F.3d 456 (DC Circuit, 22 April 2008) ....................................... 868–9, 875 Rambus Inc. v Infineon Technologies AG, 318 F.3d 1081, 1102 (Fed. Cir. 2003) ......................... 871 Realtek Semiconductor Corp. v LSI Corp. (Case No C12-3451-RMW) (N.D. Cal. 2014) .......... 836 RxCare of Tennessee, Inc., No. 951-0059, 1996 FTC LEXIS 284 (F.T.C. 10 June 1996) .......... 1012 St Louis SW Ry -Trackage Rights over Missouri Pac RR-Kansas City to St Louis, 1 I.C.C.2d 776 (1984), 4 I.C.C.2d 668 (1987), 5 I.C.C.2d 525 (1989), 8 I.C.C.2d 80 (1991), Interstate Commerce Commission .................................................... 1189 SmithKline Corp v Eli Lilly & Co, 575 F.2d 1056 (3d Cir. 1978) ................................................. 745 SMS Sys. Maint. Servs., Inc. v Digital Equip. Corp., 11 F. Supp. 2d 166 (D. Mass. 1998) .......... 741 Standard Oil Co v United States, 221 US 1 (1911) ............................................................ 269, 1197 Suboxone Antitrust Litigation 64 F. Supp. 3d 665 (E.D. Pa. 2014) ............................................... 778 TCL v Ericsson, Case 8:14-cv-00341(unreported) (C.D. Cal.) ................................................. 826–7 TCL Comm. Tech. Holdings, Ltd. v. Telefonaktiebolaget LM Ericsson, No. 14-CV-341-JVS-DFM, Dkt. 1802 (C.D. Cal. 21 December 2017) .......................... 812, 820 United Farmers Agents Ass’n v Farmers Ins. Exch., 89 F.3d 233 (5th Cir. 1996)......................... 741 United States v AMR Corp, 140 F. Supp. 2d 1141 (D. Kan. 2001), aff ’d, 335 F.3d 1109 (10th Cir. 2003)............................................................................................... 272, 280, 364, 405 United States v AT&T Co., 552 F. Supp. 131 (D.D.C. 1982) ....................................................... 1197 United States v Delta Dental Plan of AZ, 59 F.R. 47349 (Sept. 15, 1994) ................................. 1012 United States v Dentsply International Inc, 399 F.3d 181 (3rd Cir. 2005) ........................... 519, 527 United States v E.I. Du Pont de Nemours & Co, 351 US 377 (1956) ........................................... 145 United States v E.I. Du Pont de Nemours & Co, 366 US 316 (1961) ......................................... 1200 United States v Microsoft, CA No. 98-1232 (CKK) (6 November 2001) ................................... 1207 United States v Microsoft Corp., 97 F. Supp. 2d 59 (D.D.C. 2000) (final judgment), vacated, 253 F.3d 34 (D.C. Cir. 2001) ................................................................................... 1200 United States v Microsoft Corp – Cases No. 00-5212 consolidated with No. 00-5213, 253 F. 3d. 34 (DC Cir 2001) .......................................................................... 271, 286, 719, 754, 757–8, 1206–7 United States v Oregon Dental Service, 1995 WL 481363, No. C95-1211 (N.D. Cal. 1995) .............1012 United States v Paramount Pictures, Inc, 85 F. Supp. 881 (S.D.N.Y. 1949) ............................... 1197 United States v Sabre and Farelogix, C.A. No. 19-1548-LPS, (April 2020), US District Court, District of Delaware............................................................................ 180–81

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United States v Terminal Railroad Ass’n, 224 US 383 (1912) ...................................... 269, 603, 606 United States v Vision Service Plan, 60 Fed. Reg. 5210, 1995 WL 27332 (D.D.C. 26 January 1995) ................................................................................................. 1011–2 Universal Analytics v MacNeal Schwendelr Corp, 707 f. Supp. 1170 (C.D. Cal 1989) ............... 795 Verizon Communications, Inc v Law Office of Curtis V. Trinko LLP, No. 02-682 (docketed US Sup Ct 13 Dec. 2002)................................................................................... 281–2 Verizon Communications, Inc v Law Offices of Curtis V. Trinko LLP, 540 US 398, 124 S.Ct. 872, 157 L. Ed. 823 (2004) .................................... 34–5, 279–80, 285, 310, 476, 479, 495, 603, 638, 646, 654, 670, 891, 938 Verizon New Hampshire & Delaware Order 2002, 17 FCC Rcd 18660 Rz 148 .......................... 463 Volvo Trucks N. Am., Inc. v Reeder-Simco GMC, Inc., 546 US 164, No. 04-905, 2006 WL 43971 (10 January 2006) ...................................................... 959, 966, 979, 983, 1022 Walgreen Co. v. AstraZeneca Pharmaceuticals (Walgreens) 534 F. Supp. 2d 146 (D.D.C. 2008).......................................................................................................................... 778 Warfarin Sodium Antitrust Litig., Re, 214 F.3d 395, 396–97 (3d Cir. 2000)................................. 796 Weyerhaeuser Co. v Ross-Simmons Hardwood Lumber Co. Inc., 549 U.S. 312 ......................... 1026

Table of Legislation EU Treaties Charter of Fundamental Rights of the European Union OJ 2007 C 303/1 ..................... 43, 110, 111 Art. 17(2) .................................................................................................................................. 44 Arts. 20, 21 ............................................................................................................................. 999 Art. 23 ..................................................................................................................................... 999 Art. 47 ............................................................................................................. 44, 109, 116, 1104 EC Treaty (Treaty of Rome) 1957 .......................................................... 1, 76, 77–80, 82, 84–5, 999 Art. 3(f) ..................................................................................................................................... 52 Art. 3(g) ................................................................................................................................ 1, 52 Art. 9 ................................................................................................................................. 13, 201 Art. 10 ....................................................................................................................................... 56 Art. 12 ..................................................................................................................................... 999 Art. 81 ................................................................................................................................. 51, 52 Art. 81(3) .......................................................................................................................... 89, 353 Art. 82 .............................................................. 5, 6, 7, 51, 52, 76, 77, 79, 81, 85, 89–90, 92, 94, 97, 99, 101–2, 112, 190–1, 224, 263, 267–8, 271, 279, 296, 299, 302, 308, 315–6, 335, 337, 343, 377, 390, 515, 517, 522, 540, 545, 548, 608, 629, 642, 651, 669–70, 683, 689, 693, 714–5, 803, 892–3, 934, 941, 949, 999, 1016, 1023, 1044, 1131, 1208 Art. 85 ....................................................................................................................................... 67 Art. 86 ......................................................................................... 10, 67, 84, 200, 312, 318, 1002 Art. 162 ..................................................................................................................................... 98 Art. 226 ................................................................................................................................... 493 Art. 230 ................................................................................................................................. 1159 Art. 232 ................................................................................................................................. 1143 ECSC Treaty (European Coal and Steel Community Treaty) ....................................... 77, 80–2, 980 Art. 3 ......................................................................................................................................... 80 Art. 60 ............................................................................................................................. 968, 979 Art. 60(1) ................................................................................................................................ 999 Art. 66(7) ............................................................................................................................ 80, 84 EEA Agreement (Agreement on the European Economic Area) Art. 53 ................................................................................................................................... 1158 Art. 54 ........................................................................................................... 520, 525, 527, 1158 Art. 57 ................................................................................................................................... 1158 Lisbon Treaty ................................................................................................................................ 1, 2 Maastricht Treaty 1993 ..................................................................................................................... 1 Treaty of Paris 1951 ........................................................................................................................ 80 Treaty on European Union (TEU) Art. 3 ........................................................................................................................................... 2 Art. 3(3) ...................................................................................................................................... 2 Art. 4(3) .............................................................................................. 36, 56, 68, 71, 98, 1163–5 Art. 5(4) ................................................................................................................................ 1133 Art. 6 ....................................................................................................................................... 111

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Art. 6(1) .................................................................................................................................... 43 Art. 6(2) .................................................................................................................................. 111 Art. 19(1) ........................................................................................................................ 73, 1159 Art. 51 ......................................................................................................................................... 1 Treaty on the Functioning of the European Union (TFEU) Pt III, Ch I title VII ..................................................................................................................... 1 Art. 3(1)(b).................................................................................................................................. 2 Art. 18 ............................................................................................................................. 958, 999 Art. 101 .................................................................. 2–4, 9, 10, 14, 16, 17, 23, 28, 36–37, 41, 43, 45–54, 56, 66, 69, 79, 82, 85, 89–90, 92–3, 96–7, 104, 108–9, 115, 121, 130, 138, 176, 215, 222, 233, 237, 242, 249–51, 260, 270, 278, 287, 289, 320–1, 325–7, 351, 353, 412, 420, 501–3, 508, 510, 516, 521, 527, 531, 538, 645, 667–8, 673, 690, 695, 768, 783, 788–9, 791–4, 802–3, 865–8, 879–80, 882, 900, 933, 1004, 1007–8, 1021, 1027, 1029, 1032, 1047, 1105, 1107–9, 1119, 1123, 1132–3, 1139, 1153, 1159–60, 1162, 1164, 1166, 1168, 1171–2, 1174, 1176, 1208–9, 1211–14, 1220, 1222–3, 1232, 1235 Art. 101(1) ..................................................................................... 9, 26, 49, 176, 222, 537, 690, 695, 843, 868, 1165, 1168, 1212 Art. 101(2) .......................................................................................................... 868, 1162, 1208 Art. 101(3) ......................................................... 46, 49, 93, 96–7, 100, 222, 251, 287, 327, 343, 347, 354, 521, 532, 537, 668, 695, 1007, 1168 Art. 102 see Introductory Note Art. 102(a) ..................................................... 2, 12, 83, 294, 296, 298, 314–5, 338, 444, 472–3, 477, 561, 611, 634, 716, 887, 889–90, 896, 904, 922, 934, 936, 941–3, 947, 949, 953, 1001, 1004, 1023, 1030, 1033, 1040–1, 1043–4, 1084 Art. 102(b) ............................................................... 2, 85, 286, 288, 296–300, 304, 307, 314–6, 337, 473, 477, 497, 604, 606, 612, 629–30, 649–51, 653, 656, 665–6, 681, 752, 956, 985, 1020–1, 1038 Art. 102(c) ............................................................. 2, 10, 81, 82, 85, 114, 292, 298, 302–4, 306, 314, 335, 338, 354, 451, 484, 497, 499, 612, 665–6, 683–5, 696, 824–5, 827–9, 840–1, 955–8, 962, 964, 966–9, 971–4, 976–80, 982–8, 990, 994–7, 999–1000, 1006, 1011, 1013–5, 1018, 1020–1, 1030, 1092, 1221 Art. 102(d) .............................................. 3, 298, 306–7, 314, 335, 338, 699–700, 714, 733, 832 Art. 104 ..................................................................................................................................... 53 Art. 105 ..................................................................................................................................... 53 Art. 106 ................................................................................................. 56–7, 68, 394, 977, 1000 Art. 106(1) .............................................................................................................. 56–9, 1094–5 Art. 106(2) .......................................................................................................................... 57, 59 Art. 106(3) ................................................................................................................................ 57 Art. 119 ............................................................................................................................... 1, 603 Art. 120 ............................................................................................................................... 1, 603 Art. 258 ............................................................................................................................. 34, 493 Art. 260 ................................................................................................................................... 850 Arts. 261–264 ....................................................................................................................... 1143 Art. 263 ................................................................................................................................. 1159

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Art. 267 ....................................................................................... 71, 73, 107, 693, 773, 789, 861 Art. 276 ................................................................................................................................... 864 Art. 288 ................................................................................................................................. 1233 Art. 296 ................................................................................................................................. 1173 Art. 345 ................................................................................................................... 607, 609, 675 Art. 351(1) ................................................................................................................................ 73 Art. 352 ....................................................................................................................................... 1 Protocol 27 ............................................................................................................ 1–2, 52, 56, 68

EU Secondary Legislation Agreement on a Unified Patent Court OJ 2013 C 175/1 Art. 32(1)(c) ............................................................................................................................ 848 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)........................... 609 Art. 13 ..................................................................................................................................... 609 Art. 21 ................................................................................................................................... 1040 Berne Convention ......................................................................................................................... 609 Convention on the Safety of Air Navigation – International Convention on Cooperation for the Safety of Air Navigation signed in Brussels on 13 December 1960, as revised and consolidated by the Protocol of 27 June 1997 ................................................................... 23 Decision 30/53 of the High Authority, OJ 1954 L 217/1 .............................................................. 980 Decision 72/440/ECSC, OJ 1972 L 297/39 .................................................................................. 980 Decision 94/800 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay round (1986–1994), OJ 1994 L 336/1 .................................................................................... 609 Decision of the President of the European Commission of 13 October 2011 on the function and terms of reference of the hearing officer in certain competition proceedings, OJ 2011 L 275/29 ................................................................................................................... 108 Directive 65/65/EEC of 26 January 1965 on the approximation of provisions laid down by law, regulation or administrative action relating to medicinal products, OJ 1962 L 22/369 ....................................................................................................... 770–1, 775 Art. 4(3) point 8(a)(iii)............................................................................................................ 776 Art. 12 ..................................................................................................................................... 771 Directive 86/653 on the coordination of the laws of the Member State relating to self-employed commercial agents, OJ 1986 L 382/17............................................................ 689 Directive 87/601 on fares for scheduled air services between Member States, OJ 1987 L 374/12 Art. 3 ....................................................................................................................................... 919 Directive 91/440 on the development of the Community’s railways, OJ 1991 L 237/25 Art. 10 ..................................................................................................................................... 606 Directive 93/13/EEC of 5 April 1993, on unfair terms in consumer contracts, OJ 1993 L 95/29 ............................................................................................... 1031, 1041, 1234 Directive 94/47 on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis, OJ 1994 L 280/83 ................................................................................................................. 1033 Directive 96/9 on the legal protection of databases, OJ 1996 L 77/20 Arts. 6 and 9............................................................................................................................ 606 Directive 96/67 on access to the ground handling market at Community airports, OJ 1996 L 272/36 ................................................................................................................... 975 Art. 6 ....................................................................................................................................... 606

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Directive 97/67 on common rules for the development of the internal market of Community postal services and the improvement of quality of service, OJ 1998 L 15/14 Art. 11 ..................................................................................................................................... 606 Directive 98/6/EC of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers OJ 1998 L 80/27 ................................................................................................................... 1234 Directive 2001/83 on the Community code relating to medicinal products for human use, OJ 2001 L 311/67 (as amended by Directive 2004/27 of the European Parliament and of the Council, OJ 2004 L 136/34) Art. 1(18) ................................................................................................................................ 692 Directive 2002/19 on access to and interconnection of electronic communications networks and associated facilities, OJ 2002 L 108/7 .............................................................. 606 Art. 11 ............................................................................................................................. 394, 991 Art. 12 ............................................................................................................................. 606, 991 Art. 13 ..................................................................................................................................... 991 Directive 2002/21 on a common regulatory framework for electronic communications networks and services, OJ 2002 L 108/33 Art. 13 ..................................................................................................................................... 394 Directive 2003/54 concerning common rules for the internal market in electricity, OJ 2003 L 176/37 Art. 20 ..................................................................................................................................... 606 Directive 2003/55 concerning common rules for the internal market in natural gas, OJ 2003 L 176/57 Arts. 18–25 ............................................................................................................................. 606 Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights, OJ 2004 L 157/24................... 848, 850, 857 recital 24 ................................................................................................................................. 848 recital 25 ................................................................................................................................. 850 Art. 12 ..................................................................................................................................... 850 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market, OJ 2005 L 149/22 ................................................................................................................. 1234 Directive 2009/22/EC of the European Parliament and of the Council of 23 April 2009 on injunctions for the protection of consumers’ interests, OJ 2009 L 110/30 ...................... 1234 Directive 2009/24/EC Of The European Parliament And Of The Council of 23 April 2009, on the legal protection of computer programs, OJ 2009 L 111/16 ......................................... 756 recital 15 ................................................................................................................................. 756 Art. 4 ....................................................................................................................................... 756 Art. 6 ....................................................................................................................................... 756 Art. 6(1) .................................................................................................................................. 606 Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, OJ 2011 L 304/64................................................................................. 1234 Directive 2014/53/EU of the European Parliament and of the Council of 16 April 2014 on the harmonisation of the laws of the Member States relating to the making available on the market of radio equipment, OJ 2014 L 153/62 ............................................................ 800 Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union OJ 2014 L 349/1 ............................................................................. 1211, 1214–5, 1219, 1234–6 Art. 2(14) .............................................................................................................................. 1223

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Art. 3 ........................................................................................................................... 1215, 1219 Art. 3(2) ................................................................................................................................ 1219 Art. 5(1) ................................................................................................................................ 1234 Art. 5(3), (4).......................................................................................................................... 1234 Art. 5(7) ................................................................................................................................ 1235 Art. 6 ..................................................................................................................................... 1235 Art. 6(2), (3).......................................................................................................................... 1235 Art. 6(5), (6).......................................................................................................................... 1235 Art. 9 ..................................................................................................................................... 1235 Art. 10(3), (4)........................................................................................................................ 1236 Art. 13 ................................................................................................................................... 1218 Art. 14(1), (2)........................................................................................................................ 1219 Art. 17(1) .................................................................................................................... 1217, 1219 Art. 17(2) .................................................................................................................... 1218, 1219 Directive (EU) 2018/1972 Of The European Parliament And Of The Council of 11 December 2018 establishing the European Electronic Communications Code, OJ 2018, L 321/36 .................................................................................................................. 492 recital 178 ................................................................................................................................. 61 Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019 on copyright and related rights in the Digital Single Market and amending Directives 96/9/EC and 2001/29/EC, OJ 2019 L 130/92...................................................... 1145 European Convention on Human Rights (ECHR) .................................................... 42, 44, 110, 111 Art. 6 ..................................................................................................... 44–5, 110–11, 116, 1104 Art. 6(2) .................................................................................................................................... 43 Regulation 17/62, of 6 February 1962 First Regulation implementing Articles 85 and 86 of the EC Treaty, OJ 1962 L 13/204 .................................................. 108, 1126, 1132, 1139–40, 1143–4, 1170, 1173–4, 1197–8, 1207 Art. 3 ................................................................................................... 1127–8, 1133, 1135, 1143 Art. 3(1) ...................................................................................................................... 1126, 1135 Regulation 4064/89 EU Merger Regulation ............................................ 42, 52–5, 104, 121–3, 212, 219, 223, 238, 317, 744, 879, 1158, 1187, 1198, 1201 Art. 2(3) .................................................................................................................................... 16 Regulation 1768/92 concerning the creation of a supplementary protection certificate for medicinal products), OJ 1992 L 182/1 .............................................................................. 770 Art. 19(1) ................................................................................................................................ 770 Regulation 95/93 on common rules for the allocation of slots at Community airports, OJ 1993 L 14/1 Art. 10 ..................................................................................................................................... 606 Regulation 3652/93 on the application of Article 85(3) of the Treaty to certain categories of agreements between undertakings relating to computerised reservation systems for air transport services, OJ 1993 L 333/37 Art. 3 ....................................................................................................................................... 606 Regulation 2790/1999 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices, OJ 1999 L 336/21 ......................................... 89 Regulation (EC) No 2887/2000 Of The European Parliament And Of The Council Of 18 December 2000 On Unbundled Access To The Local Loop, OJ 2000 L 336/4 ..... 63, 676 recital 11 ........................................................................................................................... 64, 680 Art. 1(1) ............................................................................................................................ 64, 680 Art. 3(3) .................................................................................................................................... 62

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Regulation (EC) No 1049/2001 of the European Parliament and of the Council of 30 May 2001 regarding public access to European Parliament, Council and Commission documents ........................................................................... 110, 1235 Regulation 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ 2003 L 1/1 .......................... 45, 53, 67–8, 70–1, 75, 108, 110–11, 688, 1032, 1103, 1107, 1126, 1133, 1135–6, 1139–41, 1143–6, 1149, 1154, 1157, 1165, 1169, 1171–4, 1197, 1207–8 recital 7 ................................................................................................................................. 1211 recital 9 ..................................................................................................................................... 69 recital 11 ............................................................................................................................... 1136 recital 12 ................................................................................................. 1134, 1197, 1199–1200 recital 13 ......................................................................................... 1146–7, 1152, 1156, 1164–5 recital 14 ............................................................................................................................... 1168 recital 22 ........................................................................................................................... 1164–5 recital 38 ............................................................................................................................... 1171 Art. 1(3) .......................................................................................................................... 74, 1209 Art. 2 ............................................................................................................................. 354, 1103 Art. 3 ........................................................................................................... 66–8, 96, 1163, 1213 Art. 3(1) .................................................................................................................................... 66 Art. 3(2) ............................................................................................ 66–7, 70, 1107, 1164, 1213 Art. 3(3) ................................................................................................................ 69, 1032, 1213 Art. 6 ..................................................................................................................................... 1213 Art. 7 ................................................................................... 1143, 1146, 1157, 1161, 1167, 1203 Art. 7(1) ...................................................................... 1126–7, 1131, 1133–4, 1173, 1197, 1199 Art. 7(2) ................................................................................................................................ 1143 Art. 8 ....................................................................................................................... 1143–4, 1174 Art. 8(1) .................................................................................................................. 1135, 1137–9 Art. 8(2) ................................................................................................................................ 1135 Art. 9 .............................................................................................. 10, 13, 15, 54, 317, 521, 686, 731, 805, 868–71, 1009, 1037, 1145–8, 1151–61, 1163–7, 1170–1, 1174, 1184, 1195, 1201, 1203 Art. 9(1) .................................................................................................................. 1152–3, 1158 Art. 10 ............................................................................................................................... 1168–9 Art. 11 ................................................................................................................................... 1163 Art. 11(6) .............................................................................................................................. 1152 Art. 14(4) .............................................................................................................................. 1169 Art. 15 ................................................................................................................................... 1163 Art. 16 ............................................................................................... 74, 1163, 1169, 1213, 1216 Art. 17 ........................................................................................................................... 766, 1202 Art. 19 ............................................................................................................................. 580, 774 Art. 23 ......................................................................................................................... 1159, 1175 Art. 23(2) .............................................................................................................................. 1173 Art. 23(2)(a) ............................................................................................................ 41, 110, 1174 Art. 23(3) .............................................................................................................................. 1174

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Art. 23(5) .............................................................................................................................. 1174 Art. 24 ................................................................................................................................... 1159 Art. 27(4) .............................................................................................. 520, 1008, 1152–5, 1169 Regulation (EC) No 139/2004 of 20 January 2004, on the control of concentrations between undertakings, OJ 2004 L 24/1 ...................................................................................... 2 Art. 3 ......................................................................................................................................... 53 Art. 21(1) .................................................................................................................................. 53 Regulation 772/2004 on the application of Article 81(3) of the Treaty to categories of technology transfer agreements, OJ 2004 L 123/11 ............................................................. 89 Regulation 773/2004 relating to the conduct of proceedings by the Commission pursuant to Articles 81 and 82 of the EC Treaty, OJ 2004 L 123/18 Art. 2 ..................................................................................................................................... 1152 Art. 2(2) ................................................................................................................................ 1169 Art. 7(1) ....................................................................................................................... 970, 1005, 1041, 1154 Art. 7(2) ................................................................................................................................ 1155 Art. 7(3) ................................................................................................................................ 1154 Regulation (EC) No 906/2009 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia), OJ 2009 L 256/31 .............................................................................. 237 Regulation 330/2010 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, OJ 2010 L 102/1 ................................................................................................ 89, 270, 501 537 recital 9 ................................................................................................................................... 521 Art. 3(1) .......................................................................................................................... 501, 521 Regulation (EU) No 461/2010 of 27 May 2010 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 in the motor vehicle sector (OJ 2010 L 129/52) ............. 48 Regulation (EU) No 1308/2013 of the European Parliament and of the Council of 17 December 2013 establishing a common organisation of the markets in agricultural products (OJ 2013 L 347/671) .......................................................................... 14 Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements Text with EEA relevance, OJ 2014 OJ L 93/17.............................. 89, 1031 Art. 2 ..................................................................................................................................... 1032 Art. 5 ..................................................................................................................................... 1032 Art. 5(2) ................................................................................................................................ 1032 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (GDPR), OJ 2016 L119/1 ............ 1057, 1099–100 Art. 5(1)(c) ............................................................................................................................ 1057 Art. 8(1) ................................................................................................................................ 1057 Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services (P2B) (OJ 2019 L 186/57) ...................................................................................... 1104 Art. 5 ..................................................................................................................................... 1091 Art. 7 ..................................................................................................................................... 1091

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National Legislation Austria KartG s 9(4) ..................................................................................................................................... 1054 Canada Competition Act s. 50(1)(a)................................................................................................................................ 975 Predatory Pricing Enforcement Guidelines, Competition Bureau s 2.2.2 ...................................................................................................................................... 433 Regulations Respecting Anticompetitive Acts of Persons Operating a Domestic Service (SOW2000-324) para 1(a), (b) ........................................................................................................................... 364 France Code de Commerce Art. L.420-5198 ........................................................................................................................ 68 Art. L.442-6-1 ......................................................................................................................... 983 Germany Act against Restraints of Competition (GWB) ..................................................................... 888, 930 para 19 s (4) no 2 .................................................................................................................... 888 s. 19(4) .................................................................................................................................... 930 s. 20(1) ...................................................................................................................................... 69 s. 35(1a) ................................................................................................................................ 1054 Act Against Unfair Practices (Gesetz gegen den unlauteren Wettbewerb (UWG)) .............. 69, 1031 [Draft] Act on Digitalisation of German Competition Law 2020 ................................. 69, 275, 1104 Competition Act s. 29 ........................................................................................................................................... 69 Gesetz gegen Wettbewerbsbeschränkungen 1957 (GWB) .............................................................. 80 Hong Kong Competition Ordinance s. 21(1) .................................................................................................................................... 326 Italy Council of State, Order No. 2790, dated 22 May 2013 ................................................................ 782 The Netherlands Competition Act 2001 ................................................................................................................... 442 Telecommunications Act ............................................................................................................... 442 Joint Guidelines issued for the appraisal of unfairly low end user prices charged by telecommunications companies that have significant power within the meaning of the Dutch Telecommunications Act or that have a dominant position within the meaning of the Dutch Competition Act. Dutch Competition Authority/Dutch Postal and Telecommunications Authority (2001)............................................................................. 442

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United Kingdom Civil Procedure Rules 1998, SI 1998/3132 (CPR) ..................................................................... 1234 Pt 31 ...................................................................................................................................... 1234 Competition Act 1998 .......................................................................... 254, 399, 403, 413, 427, 430, 432, 442, 490, 746 Chap II (ss 17–24) ...................................................................................................... 746–7, 939 s. 18 ............................................................................................................................... 665, 1092 s. 58 ....................................................................................................................................... 1216 Patents Act 1977 ........................................................................................................................... 811 United States of America Copyright Act s. 110(5) .................................................................................................................................. 609 Department of Justice Antitrust Division and Federal Trade Commission 1992 Horizontal Merger Guidelines, 57 Fed. Reg. 41522 (1992) (revised 8 April 1997) ............... 132 para 1.32 ................................................................................................................................. 132 para 3 ...................................................................................................................................... 136 Department of Justice & Federal Trade Commission, Antitrust Guidelines for the Licensing of Intellectual Property, 1995 section 2.1 ............................................................................................................................... 620 Department of Justice & Federal Trade Commission Merger Guidelines issued 19 August 2010 ....................................................................................................................... 139 Federal Trade Commission Act s. 5 ............................................................................................................... 859, 869, 1152, 1156 Foreign Trade Antitrust Improvement Act 1982, Pub. L. No. 97–290, 96 Stat. 1246 (codified at 15 U.S.C. §6a)........................................................................................................ 15 Horizontal Merger Guidelines 1982 ............................................................................................. 124 Robinson-Patman Act 1936 .......................................... 300, 338, 956, 959, 965–6, 971, 979, 984–5 s. 2(a) ...................................................................................................................................... 965 Sherman Act 1890 ............................................................................................................. 76, 78, 248 s. 2 ................................................................ 12, 35, 76–7, 79, 81–3, 85, 87, 138, 185, 191, 223, 267, 274, 279, 281, 285–6, 342, 416, 421, 495, 745, 748–9, 758, 796, 859, 869, 872–3, 956, 999, 1044, 1102, 1201 Telecommunications Act 1996 ................................................................................................ 35, 896

European Commission Documents Communication from The Commission, Amendments to the Commission Notice on the conduct of settlement procedures in view of the adoption of Decisions pursuant to Article 7 and Article 23 of Council Regulation (EC) No 1/2003 in cartel cases, OJ 2015 C 256/02 ................................................................................................................. 1174 Communication from The Commission: Guidelines For National Courts On How To Estimate The Share Of Overcharge Which Was Passed On To The Indirect Purchaser, OJ 2019/C 267/07 ................................................................................................................. 1222 para 12 .................................................................................................................................. 1223 fn (5) ..................................................................................................................................... 1223

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Communication from the Commission—Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, OJ 2011 C 11/1 ......................................................................................................................... 89 para 257 .................................................................................................................................. 800 para 263 .................................................................................................................................. 800 paras 265–269 ......................................................................................................................... 801 para 269 .................................................................................................................................. 843 para 286 .................................................................................................................................. 875 para 298 .................................................................................................................................. 876 paras 308–311 ......................................................................................................................... 876 Communication from the Commission: Guidelines on market analysis and the assessment of significant market power under the EU regulatory framework for electronic communications networks and services, C (2018) 2374, Final ................................................ 60 Communication from the Commission Notice-Guidelines on the application of Article 81(3) of the Treaty, OJ 2004 C 101/97 paras 3–5 ................................................................................................................................... 96 para 106 .................................................................................................................................. 353 Communication from the Commission on quantifying harm in actions for damages based on breaches of Article 101 or 102 of the Treaty on the Functioning of the European Union, C (2013) 3440........................................................................................... 1211 Communication from the Commission on quantifying harm in actions for damages based on breaches of Article 101 or 102 of the Treaty on the Functioning of the European Union, OJ 2013 C 167/19 ..................................................................................... 1222 Communication from The Commission To The European Parliament, The Council, The European Economic And Social Committee And The Committee Of The Regions, “Online Platforms and the Digital Single Market Opportunities and Challenges for Europe,” COM/2016/0288 Final, pp. 2–3 ....................................................................... 1048 Communication from The Commission To The European Parliament, The Council And The European Economic And Social Committee Setting Out The EU Approach To Standard Essential Patents, 29 November 2017 ................................................ 806 p 6 ........................................................................................................................................... 840 pp 9–10 ................................................................................................................................... 863 Section 2.1 .............................................................................................................................. 822 Section 2.2 .............................................................................................................................. 831 Communication of 10 December 2008 (COM (2008) 666) “Safe, Innovative and Accessible Medicines: A Renewed Vision for the Pharmaceutical Sector.” ............................................. 766 Communication on the Single Market in Pharmaceuticals, COM (1998) 588 ............................ 692 Decision 94/90 on public access to Commission documents ......................................................... 98 Art. 1 ......................................................................................................................................... 98 Annex – Code of Conduct ........................................................................................................ 98 Decision of the European Ombudsman Closing His Inquiry Into Complaint 1935/2008/FOR Against the European Commission of 14 July 2009 .............................................................. 109 Decision of the President of the European Commission of 13 October 2011 on the function and terms of reference of the hearing officer in certain competition proceedings, OJ 2011 L 275/29 ................................................................................................................... 108 DG Competition “Antitrust decisions on standard essential patents (SEPs) – Motorola Mobility and Samsung Electronics – Frequently asked questions,” MEMO/14/32, 29 April 2014 ...................................................................................................................... 858–9 DG Competition Manual Of Procedure ........................................................................................ 110

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DG Competition Best Practices On The Conduct Of EC Merger Control Proceedings, paras 45–46 ........................................................................................................................... 1158 Final report of the Hearing Officer in Case COMP/37.214, DFB Joint Selling of Media Rights (Bundesliga), OJ 2005 C 130/2 .................................................................. 1155 Final report of the Hearing Officer in Case COMP/39.116, Coca-Cola, OJ 2005 C 239/19 ..... 1155 General Court press release No. 84/02, of 22 October 2002 ........................................................ 123 Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings – Guidance Paper (2009 C 45/02), OJ 2009 C 45/7 ........... 5, 94–5, 97–8, 101, 104, 107, 111–15, 237, 268, 291, 300–2, 335, 351–3, 368, 397, 419, 442, 507, 510, 512, 545–7, 554–6, 560, 576, 580, 582, 585, 597, 715–6, 718, 731, 733, 744, 748–50, 900, 1179–80 Section IV.C, fn 3 .................................................................................................................... 404 para 2 ........................................................................................................................................ 96 para 3 .......................................................................................................................... 95–96, 112 para 4 ...................................................................................................................................... 224 para 5 ........................................................................................................................ 99, 300, 335 para 6 ................................................................................................................................ 99, 300 paras 9–22 ................................................................................................................................. 99 para 9 .............................................................................................................................. 943, 950 para 13 .................................................................................................................................... 190 para 14 .................................................................................................................................... 194 para 15 .................................................................................................................................... 190 para 17 ........................................................................................................................ 203, 206–7 para 18 .................................................................................................................................... 218 para19 ..................................................................................................................... 101, 300, 730 para 20 ..................................................................................................... 112, 300, 323, 339–40, 510, 515, 519, 575, 726 para 20 (fifth bullet) ................................................................................................................ 732 para 21 ............................................................................................................................ 320, 527 para 22 .................................................................................................................... 263, 326, 328 para 23 ............................................................................................................................ 290, 448 para 24 .......................................................................................................................... 290, 1180 para 25 .................................................................................................................................... 100 para 26 .................................................................................................................................... 372 para 27 ............................................................................................................................ 290, 342 paras 28–31 ............................................................................................................. 100, 343, 537 para 28 .................................................................................................................................... 344 para 29 .................................................................................................................................... 537 para 30 ............................................................................................................................ 347, 537 para 30 fourth indent............................................................................................................... 103 para 31 .................................................................................................................................... 347 para 34 .................................................................................................................................... 510 para 35 ............................................................................................................................ 510, 515 para 36 ................................................................................................ 502, 510, 515, 517–8, 524 paras 37–46 ............................................................................................................................. 545 para 37 ............................................................................................................................ 548, 582 para 39 ............................................................................................................................ 284, 582

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para 40 .................................................................................................................................... 583 paras 40–42 ............................................................................................................................. 278 paras 41–44 ..................................................................................................................... 284, 583 para 42 ........................................................................................................................ 585–6, 593 para 43 ...................................................................................................................................... 97 para 44 .................................................................................................................... 326, 586, 589 para 45 .................................................................................................................................... 583 para 46 ............................................................................................................ 511, 538, 583, 593 para 47 .................................................................................................................................... 598 para 48 .................................................................................................................................... 718 para 49 ............................................................................................................................ 715, 718 para 50 ............................................................................................................................ 715, 718 para 51 .................................................................................................................... 720, 722, 724 para 53 .................................................................................................................................... 732 paras 55–58 ............................................................................................................................. 730 para 59 .................................................................................................................................... 746 para 60 .................................................................................................................. 746, 748, 1196 paras 61–68 ..................................................................................................................... 100, 300 para 61 .................................................................................................................................... 750 para 62 .................................................................................................................... 715, 718, 734 para 62 fn 1 ............................................................................................................................. 397 para 63 fn 1 ............................................................................................................................. 387 para 64 .................................................................................................................................... 370 para 64 et seq .......................................................................................................................... 366 paras 64–66 ............................................................................................................................. 366 para 66 ............................................................................................................................ 374, 448 paras 67–74 ............................................................................................................................. 367 para 67 .................................................................................................................... 277, 372, 399 para 68 ............................................................................................................................ 378, 419 paras 69–72 ............................................................................................................................. 386 para 72 ............................................................................................................................ 378, 419 para 74 ............................................................................................................................ 413, 424 paras 75–88 ..................................................................................................................... 605, 856 para 75 ............................................................................................................................ 102, 609 para 76 .................................................................................................................................... 682 para 79 .................................................................................................................... 632, 638, 854 para 80 ...................................................................................................... 443, 456, 478, 949–50 para 81 ...................................................................................................... 102, 112, 478, 949–50 para 82 ............................................................................................................................ 478, 664 para 84 .................................................................................................................................... 670 para 85 .................................................................................................................................... 648 para 86 .................................................................................................................................... 652 para 87 ............................................................................................................................ 608, 652 para 88 .................................................................................................................................... 609 para 89 ........................................................................................................................ 660–1, 663 para 90 .................................................................................................................................... 663 paras 117–8 ............................................................................................................................. 442 paras 134–170 ......................................................................................................................... 100 fn 29 ........................................................................................................................................ 585 fn 34 ........................................................................................................................................ 740

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Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements, OJ 2014/C 89/03) .............. 89, 1032 Section 4.4 ...................................................................................................................... 867, 882 Guidelines on the Application of the EEC Competition Rules in the Telecommunications Sector, OJ 1991 C 233/2 para 86 .................................................................................................................................... 395 Guidelines On the Assessment Of Horizontal Mergers Under The Council Regulation On The Control Of Concentrations Between Undertakings, OJ 2004 C 31/5 .................. 89, 244 Section 6 ................................................................................................................................. 122 Section VIII............................................................................................................................... 55 para 10 .................................................................................................................................... 122 para 42 .................................................................................................................................... 227 para 54 .................................................................................................................................... 244 para 62 .................................................................................................................................. 1025 paras 80–86 ............................................................................................................................. 287 Guidelines on the Method of Setting Fines Imposed Pursuant to Article 15(2) of Regulation No 17 and Article 65 (5) of the ECSC Treaty, OJ 1998 C 9/3 ............. 1174, 1177 Guidelines On the Method of Setting Fines Imposed Pursuant to Article 23(2)(a) of Regulation No 1/2003, OJ 2006 C 210/2 ......................................... 110, 1174, 1176–7, 1179 point 30 ..................................................................................................................................... 41 para 13 .................................................................................................................................. 1177 paras 21–22 ........................................................................................................................... 1177 paras 28–32 ........................................................................................................................... 1175 paras 35–37 ........................................................................................................................... 1176 MEMO/09/516 of 24 November 2009, “Antitrust: Commission Closes Formal Proceedings Against Qualcomm.” .......................................................................................... 805 Memorandum on Concentration 1966 ........................................................................................ 84–5 Mémorandum sur le Problème de la Concentration dans le Marché Commun (1 December 1965), Commisison ........................................................................................... 295 Notice—Guidelines on the applicability of Article 81 to horizontal cooperation agreements, OJ 2001 C 3/2 ........................................................................................................................... 89 Notice—Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements, OJ 2004 C 101/2...................................................................................... 89 Notice—Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, OJ 2011 C 11/01 para 16 ...................................................................................................................................... 45 para 28 .................................................................................................................................... 287 para 286 .................................................................................................................................. 866 Notice—Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty, OJ 2004 C101/81 ............................................................................................ 1108 para 3 .................................................................................................................................... 1108 para 17 .................................................................................................................................. 1114 para 19 .................................................................................................................................. 1109 para 28 .................................................................................................................................. 1111 para 32 .................................................................................................................................. 1111 para 30 .................................................................................................................................. 1111 paras 37, 38 ........................................................................................................................... 1114 para 41 .............................................................................................................. 1111, 1113, 1120 para 42 .................................................................................................................................. 1113 para 43 .................................................................................................................................. 1121

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para 44 .............................................................................................................................. 1114–5 para 53 .................................................................................................................................. 1115 paras 61–76 ........................................................................................................................... 1115 para 75 .............................................................................................................................. 1112–3 para 93 .................................................................................................................................. 1110 para 94 .................................................................................................................................. 1117 para 95 ........................................................................................................................ 1116, 1118 para 96 .............................................................................................................................. 1117–8 para 98 ........................................................................................................................ 1120, 1122 paras 104, 105 ....................................................................................................................... 1124 para 107 ................................................................................................................................ 1125 para 109 ................................................................................................................................ 1125 Notice—Guidelines on Vertical Restraints, OJ 2000 C 291/1 ........................................................ 89 paras 152–155 ......................................................................................................................... 532 Notice—Guidelines on Vertical Restraints, OJ 2010 C 130/1 ................................ 89, 270, 501, 537 para 97 .................................................................................................................................... 537 para 106 .................................................................................................................................... 46 para 127 .................................................................................................................................. 537 para 128 .................................................................................................................................. 514 para 129 ................................................................................................................................ 1007 para 133 .................................................................................................................................. 532 Notice Guidelines on Vertical Restraints, C(2010) 2365, para. 177 ............................................... 49 Notice on the application of the competition rules to access agreements in the telecommunications sector—framework, relevant markets, and principles, OJ 1998 C 265/2 ............................................................................................... 88, 268, 399, 442 para 79 .................................................................................................................................... 659 para 85 .................................................................................................................................... 661 para 86 .................................................................................................................................... 992 para 88 .................................................................................................................................... 606 para 91 .................................................................................................................................... 661 para 118 .................................................................................................................................. 449 Notice on the application of the competition rules to the postal sector and on the assessment of certain State measures relating to postal services, 1998 OJ C 39/02 ....................................................................................................... 88, 395, 992 point 2.8 .................................................................................................................................. 992 para 3.3 ................................................................................................................................... 395 para 3.4 ............................................................................................................................... 391–2 Notice on the cooperation between the Commission and the courts of the EU Member States in the application of Article 81 and 82 EC, OJ 2004 C 101/54 para. 10 ................................................................................................................................. 1164 Notice on the definition of the relevant market for the purpose of Community competition law, OJ 1997 C 372/5.......................................................................................... 137 s III .......................................................................................................................................... 139 Pt IV ........................................................................................................................................ 188 para 3 ...................................................................................................................................... 155 para 7 ...................................................................................................................................... 121 para 8 .............................................................................................................................. 121, 159 para 13 .................................................................................................................................... 127 para 17 .................................................................................................................................... 142 para 19 .................................................................................................................................... 145

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para 20 ............................................................................................................................ 131, 156 para 21 .................................................................................................................................... 157 para 22 ............................................................................................................................ 130, 131 para 23 .................................................................................................................................... 131 para 24 .................................................................................................................... 131, 132, 135 para 25 .................................................................................................................................... 152 paras 28–30 ............................................................................................................................. 160 para 29 .................................................................................................................................... 162 para 32 .................................................................................................................................... 160 para 34 .................................................................................................................................... 132 para 39 .................................................................................................................................... 127 para 41 ................................................................................................................................ 153–4 para 43 .................................................................................................................................... 166 para 49 .................................................................................................................................... 160 para 53 .................................................................................................................................... 188 para 56 ................................................................................................................................ 171–2 para 57 .................................................................................................................................... 134 Notice on the handling of complaints by the Commission under Articles 81 and 82 of the EC Treaty, OJ 2004 C 101/65 para 80 .............................................................................................................................. 1143–4 Notice on informal guidance relating to novel questions concerning Articles 81 and 82 of the EC Treaty that arise in individual cases (guidance letters) (“Informal Guidance Notice”), OJ 2004 C 101/78 ................................................................................................. 1171 para 8 .................................................................................................................................... 1171 para 8(b) ................................................................................................................................ 1172 paras 9, 10 ............................................................................................................................. 1171 para 24 .................................................................................................................................. 1172 para 25 .............................................................................................................................. 1172–3 Notice on the rules for access to the Commission file in cases pursuant to Articles 81 and 82 of the EC Treaty, Articles 53, 54 and 57 of the EEA Agreement and Council Regulation (EC) No 139/2004, OJ 2010 C 325/7 ................................................... 1158 para 31 .................................................................................................................................. 1158 Opinion of the Advisory Committee on restrictive practices and dominant positions given at its 386th meeting on 6 December 2004 concerning a preliminary draft decision in Case COMP/A.37.214, DFB, OJ 2005 C 130/04 ............................................................. 1155 Opinion of the Advisory Committee on restrictive practices and dominant positions given at its 390th meeting on 20 May 2005, concerning a draft decision in Case COMP/A.39.116/B2, Coca-Cola, OJ 2005 C 239/20.................................................. 1155

Commission Press Releases Press Release IP/88/615 of 13 October 1988 Coca-Cola Export Corporation–Filiale Italiana ........................................................................................ 599, 1017 Press Release IP/90/7 of 9 January 1990 ...................................................................................... 712 Press Release IP/96/456 of 30 May 1996 Elsinore Port ............................................................... 623 Press Release IP/96/975 of 11 November 1996 ............................................................................ 929 Press Release IP/97/292 of 11 April 1997 .................................................................................... 929 Press Release IP/97/868 of 10 October 1997 .............................................................................. 1015 press release IP/98/707 of 27 July 1998................................................................................ 36, 1184

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press release IP/01/419 of 20 March 2001 .................................................................................. 1198 press release IP/01/1832 of 14 December 2001 .................................................................. 405, 1181 press release IP/02/1852 of 11 December 2002 ............................................................ 36, 184, 1184 Press Release IP/04/574 of 30 April 2004 .................................................................................... 594 Press Release IP/04/1314 of 26 October 2004 ............................................................................ 1007 Press Release IP/08/22 of 9 January 2008 “European Commission welcomes Apple’s announcement to equalise prices for music downloads from iTunes in Europe” ................. 1004 Press Release, IP/19/3410, of 26 June 2019 ............................................................................... 1136 Report From The Commission To The European Parliament, The Council And The European Economic And Social Committee on the implementation of the Commission Recommendation of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union law, COM/2018/040, 25 January 2018 ................................................................................................................ 1233–4 Resolution on the Tenth Report of the Commission of the European Communities on Competition Policy, OJ 1982 C 11/78 ............................................................................... 111 Staff Working Document – Practical Guide on Quantifying Harm in Actions for damages based on breaches of Article 101 or 102 of the Treaty on the Functioning of the European Union (“Damages Guide”), SWD (2013) 205 ..................................................... 1211 Staff Working Document Practical Guide Quantifying Harm In Actions For Damages Based On Breaches Of Article 101 Or 102 Of The Treaty On The Functioning Of The European Union, OJ 2013 C 3440.............................................................. 1222–3, 1233 Pts III, IV .............................................................................................................................. 1222 para 4 .................................................................................................................................... 1233 para 9 .................................................................................................................................... 1223 paras 21–23 ........................................................................................................................... 1233 paras 155–60 ......................................................................................................................... 1222 paras 188–93 ......................................................................................................................... 1222

Other Documents Autorité de la Concurrence, Projet révisé des lignes directrice de l’Autorité de la concurrence relative au contrôle des concentrations, February 2013 .................................... 140 Certain Wireless Communication Devices, Portable Music & Data Processing Devices, Computers and Components Thereof, Re – Inv. No. 337-TA-745, United States Federal Trade Commission’s Statement on the Public Interest filed on 6 June 2012 ......... 846–7, 857 IBA Rules on the Taking of Evidence in arbitrations Art. 9(5) .................................................................................................................................... 71 International Chamber of Commerce Arbitration Rules Art. 35 ....................................................................................................................................... 74 Memorandum Of The United States Of America In Response To The Court’s Inquiries Concerning ‘Vapourware’ in United States v Microsoft, Civil Action No. 94-1564 (SS) ...... 798

Office of Fair Trading Guideline Assessment of Individual Agreements and Conduct 1999, OFT 414 .......................... 442 para 3.8 ................................................................................................................. 602, 964, 1018

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Guidelines in relation to Chapter II prohibition under the UK Competition Act 1998, OFT 402 (1999) para. 4.7 .................................................................................................................................. 939 Guidelines on the application of the Competition Act 1998 in the telecommunications sector, OFT 417 .............................................................................................................. 399, 403 paras 7.17–7.18 ....................................................................................................................... 413 para 7.19 ................................................................................................................................. 430 para 7.23 ................................................................................................................. 427, 432, 490 para. 7.26 ................................................................................................................................ 442 Market Definition Guidelines, OFT 403, December 2004 para 2.10 ................................................................................................................................. 145 para 3.5 ................................................................................................................................... 148 para. 3.11 ................................................................................................................................ 134 para 5.11 ................................................................................................................................. 169 paras 6.1–6.7 ........................................................................................................................... 171 Office of Fair Trading and Competition Commission, Merger Assessment Guidelines, CC2 (Revised) ........................................................................................................................ 140 OFT 1254, September 2010.................................................................................................... 140 US Department of Justice and Patent & Trademark Office Policy Statement on Remedies for Standard-Essential Patents Subject to Voluntary FRAND Commitments (8 January 2013) .................................................................................. 846–7, 857 WTO Panel Report – United States–Section 110(5) of the US Copyright Act, WTO Document WT/DS160/R of 15 June 2000 .................................................................... 609

Conventions Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) ......................................................................................... 72 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 ..... 72

Chapter 1 INTRODUCTION, SCOPE OF APPLICATION, AND BASIC FRAMEWORK 1.1

INTRODUCTION

Article 102 TFEU in the context of the Treaty on the Functioning of the European Union. Ensuring a system of free competition is a central objective of the Treaty on the Functioning of the European Union (TFEU) (and its progenitor, the original Treaty of Rome (1957)). 1 Article 119 TFEU states that the economic activities of the EU and its Member States should be “conducted in accordance with the principle of an open market economy with free competition.” Similar principles are repeated in Article 120 TFEU—a provision concerning economic policy—which requires Member States and the EU to “act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources.” These broad policy objectives are reflected in detail in Title VII, Chapter I of Part III the TFEU, which contains the competition provisions. Superficially, the TFEU appeared to downgrade the EU’s competition objectives. Previously, Article 3(g) EC stated that “a system ensuring that competition in the internal market is not distorted” was one of the core objectives of the (then) European Community. But this has been replaced by Protocol 27 of the TFEU which states as follows: 2 “The High Contracting Parties, considering that the internal market as set out in Article 3 of the Treaty on European Union includes a system ensuring that competition is not distorted, have agreed that: to this end, the Union shall, if necessary, take action under the provisions of the Treaties, including under Article 352 of the Treaty on the Functioning of the European Union. This protocol shall be annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union.”

This apparent relegation of competition law objectives in the TFEU generated significant discussion among commentators, since it involved a change to the rank of a provision that had stood for over 50 years. 3 Article 3(g) EC had also been referred to in 1 The original title “European Economic Community” as set out in the Treaty of Rome was changed to “European Community” by the Maastricht Treaty in 1993 which in turn was changed to the “European Union” by the Lisbon Treaty with effect from 1 December 2009. The term “EU” is therefore generally used in this book unless, for example, reference is being made to a purely historical situation. The TFEU also renamed the European Court of Justice the “Court of Justice” and the Court of First Instance the “General Court.” Again, the TFEU terms are adopted in this work unless the context specifically requires otherwise. 2 This initiative was taken by the then French government. Under Article 51 of the Treaty on European Union (TEU) protocols form an integral part of the Treaties. 3 See, e.g., A Riley, “The EU Reform Treaty And The Competition Protocol: Undermining EC Competition Law,” CEPS Policy Briefs (24 September 2007) and A Weitbrecht, “From Freiburg to Chicago and Beyond—The First 50 Years of European Competition Law,” European Competition Law

2

The Law and Economics of Article 102 TFEU

a number of seminal judgments on competition law as the cornerstone of competition policy. 4 Thus far, it appears that the direct practical impact has been little or nothing. Indeed, in its judgment in TeliaSonera the Court of Justice referred to Protocol 27 in terms that clearly conveyed that it saw no effective difference between the pre- and post-TFEU situations in this regard. 5 Perhaps even more directly, the General Court held in Timab that “Article 3 TEU, read in conjunction with Protocol No 27 on the internal market and competition, has changed neither the purpose of Article 101 TFEU nor the rules for the imposition of fines.” 6 This obviously applies mutatis mutandis to Article 102 TFEU. Agreements and unilateral conduct. A basic distinction can be made under EU competition law between contractual relations involving two or more firms and the unilateral conduct of a single firm. Article 101 TFEU and Council Regulation 139/2004 on the control of concentrations between undertakings 7 are the basic EU legal instruments governing agreements. The latter concerns agreements that bring about a lasting change in the control of an undertaking—mergers, acquisitions, and fullyfunctional joint ventures—whereas the former deals with other types of horizontal and/or vertical agreements that have a non-trivial impact on competition. Article 102 TFEU complements the provisions of EU competition law dealing with agreements by placing certain restrictions on the unilateral conduct of firms. It provides that “any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States.” The text goes on to offer the following examples of an “abuse”: “(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading

Review, (2008) Volume 2, pp. 81-88. Others were more circumspect: see N Petit and N Neyrinck, “A Review Of The Competition Law Implications Of The Treaty On The Functioning Of The European Union,” Competition Policy International, January 2010(2) and B Van Rompuy, “The Impact Of The Lisbon Treaty On EU Competition Law: A Review Of Recent Case Law Of The EU Courts,” CPI Antitrust Chronicle, (December 2011) Volume 1. 4 See, e.g., Case 6/72, Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 215, para. 24 (“This requirement is so essential that without it numerous provisions of the treaty would be pointless.”). 5 Case C-52/09, Konkurrensverket v TeliaSonera Sverige AB [2011] ECR I-527, paras. 20-22 (“In order to answer those questions, it must be observed at the outset that Article 3(3) TEU states that the European Union is to establish an internal market, which, in accordance with Protocol No 27 on the internal market and competition, annexed to the Treaty of Lisbon, is to include a system ensuring that competition is not distorted. Article 102 TFEU is one of the competition rules referred to in Article 3(1)(b) TFEU which are necessary for the functioning of that internal market. The function of those rules is precisely to prevent competition from being distorted to the detriment of the public interest, individual undertakings and consumers, thereby ensuring the well-being of the European Union.”) (citations omitted). 6 Case T-456/10, Timab Industries and Cie financière et de participations Roullier (CFPR) v Commission, EU:T:2015:296, para. 212. 7 Council Regulation (EC) No 139/2004 of 20 January 2004, on the control of concentrations between undertakings, OJ 2004 L 24/1.

Introduction, Scope of Application, and Basic Framework

3

parties, thereby placing them at a competitive disadvantage; (d) 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.”

The EU Courts have insisted on the broad unity of the purpose that exists between the competition provisions of the EU Treaties, 8 even if they seek to achieve them in different ways. One reason is that the laws on agreements and unilateral conduct share a common concern: to curb the adverse welfare effects of monopoly power. It is welldocumented in industrial organisation literature that a firm, or group of firms, with a dominant position (or its synonym market power) have the possibility to reduce output (or innovation) and raise prices, thereby harming consumer welfare. 9 In the case of mergers and acquisitions and other agreements, market power can be acquired, maintained, or increased through contractual arrangements. Such agreements may be subject to review under Article 101 TFEU and merger control laws. In the case of anticompetitive unilateral conduct, a firm typically relies on its market power to engage in strategic actions that unlawfully exclude rival firms, to the detriment of consumers (or it may also directly exploit consumers by charging excessive prices). Article 102 TFEU, and analogous provisions of national laws, therefore seek to place restrictions on unilateral conduct that harms consumer welfare. The general scheme of Article 102 TFEU. The basic aim of Article 102 TFEU is to set standards for the conduct of firms with a position of such economic strength that they have a degree of immunity from the normal disciplining effects of a competitive market. In markets characterised by the presence of one or more firms with economic power of this kind, Article 102 TFEU seeks to avoid the use and misuse of market power and, more controversially, to bring about some of the results that would occur if competition did exist. Thus, Article 102 TFEU has been used to force prices down towards a level that would exist in a competitive market, 10 to increase prices where low prices are part of a deliberate plan to exclude rivals and raise prices following exit, 11 or to require a dominant firm to share key non-replicable assets with rivals. 12 But Article 102 TFEU also goes further and requires dominant firms to refrain from certain acts that would be perfectly lawful if carried out by a non-dominant firm—the so-called “special responsibility” of a dominant firm. 13 The wording of Article 102 TFEU requires a number of cumulative conditions to be satisfied before a violation can be established: (1) there must be an undertaking; (2) that undertaking must hold a dominant position on a properly defined relevant market; (3) the dominant position must be held in a substantial part of the common market; 8 See Case 6/72, Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 215. 9 For a detailed treatment of the welfare effects of monopoly conditions and behaviour, see D Carlton and J Perloff, Modern Industrial Organisation, Pearson Addison Wesley (2005) (4th edn.) Ch. 4. 10 See Ch. 14 (Excessive Pricing) below. 11 See Ch. 6 (Predatory Pricing) below. 12 See Ch. 10 (Refusal to Deal) below. 13 Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission [1983] ECR 3461, para. 10.

4

The Law and Economics of Article 102 TFEU

(4) there must be an abuse; and (5) that abuse must affect trade between Member States. A basic overview of these minimum requirements for the application of Article 102 TFEU is provided below: 1. Undertaking. In common with Article 101 TFEU, Article 102 TFEU only applies to “undertakings.” The TFEU does not define this term, but it has been extensively developed in the decisional practice and case law. In basic terms, an undertaking is any person engaged in an “economic activity.” Most of the controversy surrounding this issue concerns State undertakings and private firms that are not for profit and whether such entities can be regarded as “undertakings” for purposes of EU competition law. Section 1.3 below discusses the main areas of difficulty in detail. 2. Dominant position. The concept of dominance contained in Article 102 TFEU relates to a position of economic strength on a properly-defined relevant market. The relevant market therefore provides a framework for analysing whether an undertaking holds a dominant position. The techniques used in this regard are similar to those used under Article 101 TFEU and EU merger control: a detailed analysis of the category of products that consumers regard as effective substitutes based on characteristics, use, or price. However, once such a market is defined, the assessment of dominance further requires the calculation of market shares, an analysis of barriers to entry, and other factors that might affect the nature and scope of dominance. Consistent with economic theory and the EU Merger Regulation, dominance can be that of a single firm or a number of collectively dominant firms. Market definition and dominance are treated in detail in Chapters Three and Four, respectively. 3. Substantial part of the common market. The requirement that dominance should arise in a substantial part of the common market reflects the consideration that EU competition law should not be concerned with trivial or localised matters. In practice, this condition is nearly always satisfied. For example, a single port within a Member State has been regarded as a substantial part of the common market in several cases. This requirement is analysed in more detail in Chapter Four (Dominance). 4. Abuse. The key element of Article 102 TFEU is to identify conduct that amounts to an “abuse.” A basic distinction can be made between: (a) exclusionary abuses, i.e., unlawful attempts to exclude rival firms; (b) exploitative abuses, i.e., direct exploitation of consumers through, e.g., excessive prices; and (c) reprisal abuses, i.e., when a dominant company injures or damages another company to punish it for having, e.g., dealt with a rival. 14 Even if these basic categories are reasonably clear, the operational definition of an abuse under Article 102 TFEU has generated controversy. Some of the controversy is inevitable given that legitimate, harsh competition and unlawful exclusion look very similar. This classification was initially proposed in C Bellamy and G Child, European Community Law Of Competition, Sweet and Maxwell (1978) (2nd edn.) and developed further in J Temple Lang, “Abuse Of Dominant Positions In European Community Law,” in BE Hawk (ed.), Fifth Fordham Corporate Law Institute, Law and Business (1979) pp. 25–83. 14

Introduction, Scope of Application, and Basic Framework

5

Charging a low price for example, if it is low enough, will put a rival out of business and is generally the essence of competition. In some cases, however, the price may be so low as to be predatory and therefore potentially harmful to consumers in the long-run. The challenge under Article 102 TFEU is therefore to develop clear standards that allow legitimate and harmful behaviour to be distinguished. The majority of this book deals with the principal types of behaviour that raise abuse concerns. 5. Effect on trade. The final criterion for the application of Article 102 TFEU is that the abuse should affect trade between Member States. This condition delineates the jurisdictional divide between Community and Member State competencies. The concept of effect on trade is discussed in Chapter Eighteen.

1.2

OBJECTIVES OF ARTICLE 102 TFEU

Basic objectives of Article 102 TFEU. The precise objectives of Article 102 TFEU had not been articulated in any formal EU document or decision until the Commission’s Guidance Paper published in late 2008. 15 In terms of the objectives of Article 102 TFEU the Guidance Paper states: 16 “Article [102] applies to undertakings which hold a dominant position on one or more relevant markets. Such a position may be held by one undertaking (single dominance) or by two or more undertakings (collective dominance). This document only relates to abuses committed by an undertaking holding a single dominant position. In applying Article [102] to exclusionary conduct by dominant undertakings, the Commission will focus on those types of conduct that are most harmful to consumers. Consumers benefit from competition through lower prices, better quality and a wider choice of new or improved goods and services. The Commission, therefore, will direct its enforcement to ensuring that markets function properly and that consumers benefit from the efficiency and productivity which result from effective competition between undertakings. The emphasis of the Commission's enforcement activity in relation to exclusionary conduct is 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. In doing so the Commission is mindful that what really matters is protecting an effective competitive process and not simply protecting competitors. This may well mean that competitors who deliver less to consumers in terms of price, choice, quality and innovation will leave the market. Conduct which is directly exploitative of consumers, for example charging excessively high prices or certain behaviour that undermines the efforts to achieve an integrated internal market, is also liable to infringe Article [102]. 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 adequately ensured.”

Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings (hereinafter, the “Guidance Paper”), OJ 2009 C 45/2. 16 Guidance Paper, paras. 4-7. 15

6

The Law and Economics of Article 102 TFEU

Thus, consumer welfare and efficiency are now said to be at the heart of Article 102 TFEU. In addition, however, other objectives have undoubtedly played a role under Article 102 TFEU. 17 These include promoting fairness, ensuring that small and medium-sized firms are not unduly hampered by firms with market power, and furthering other EU Treaty objectives, most notably market integration. These latter objectives are obscure in certain respects and controversial in others, but they undeniably play some role in the application of Article 102 TFEU. Promoting economic efficiency and welfare. The first objective under Article 102 TFEU—which is the basic legitimacy for all competition law enforcement—is to prevent practices that would harm society and consumers through the exercise of market power; in other words, to promote efficiency and welfare. There is a complicated debate among economists on whether the welfare concerns under competition law should refer to: (1) consumer welfare—the difference between what a person is willing to pay for a commodity and the amount he/she actually is required to pay; (2) producer welfare—the difference between what producers are willing and able to supply a product for and the price they actually receive; or (3) total welfare—the sum of (1) and (2). 18 While there is considerable debate as to what extent consumer welfare is the objective of EU competition law, or simply one of a number of important objectives, it is clear that EU competition law is not based on either producer welfare or total welfare. The role of consumer welfare objectives under Article 102 TFEU is examined in more detail in Chapter Five (The General Concept of an Abuse), but the following preliminary comments can be offered. First, it is more than tolerably clear that consumer welfare is now the primary objective of EU competition law. 19 Second, a consumer welfare focus does not mean that only those agreements or practices that involve a measurable, or direct, impact on final consumer prices or output can be impugned under EU competition law. As the Court of Justice stated in GlaxoSmithKline, EU competition law “aims to protect not only the interests of competitors or of consumers, but also the structure of the market and, in so doing, competition as such.” 20 A good example of this under Article 102 TFEU is predatory pricing. Below-cost pricing clearly benefits consumers (certainly in the short-term) unless and until the low prices are recouped via higher prices at a subsequent stage. But predatory pricing may be condemned under Article 102 TFEU without proof of recoupment because it can cause rival exit or 17 See generally BE Hawk, “Article 82 And Section 2: Abuse And Monopolising Conduct,” in Issues In Competition Law And Policy (ABA Section of Antitrust Law 2008), Ch. 36. 18 See M Motta, Competition Policy: Theory and Practice, Cambridge University Press (2004) section 1.3.1 (Objectives of competition policy) for a review of the competing arguments. 19 Case C-413/14 P, Intel Corp. v Commission, EU:C:2017:632, paras. 134 (“not every exclusionary effect is necessarily detrimental to competition. Competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation”) and 140 (“the exclusionary effect arising from such a system, which is disadvantageous for competition, may be counterbalanced, or outweighed, by advantages in terms of efficiency which also benefit the consumer”). This was a judgment of a Grand Chamber of the Court of Justice and so carries the highest possible authority. 20 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] ECR I-9291, para. 63.

Introduction, Scope of Application, and Basic Framework

7

marginalisation that alters the structure of competition in such a way that harm to consumers may occur. 21 Third, even if there is broad-level agreement that consumer welfare is the primary concern under EU competition law, there is considerable discussion and complexity within EU competition law generally, and Article 102 TFEU specifically, as to what this means in individual cases. 22 Finally, as discussed in the following sections whatever the precise status of consumer welfare under Article 102 TFEU, it is clear that other objectives may also come into play—sometimes materially so. The potential adverse effects of the exercise of significant market power are welldocumented in the industrial organisation literature. 23 The measurement of optimally competitive markets is perfect competition—a largely theoretical benchmark of a market in which there are homogeneous products, many suppliers, consumers with full information, and no transaction costs. Price and output are optimal under this theorem. Against this benchmark, degrees of market power can be measured. All profitmaximising firms have, in the short-term at least, a degree of market power as compared to conditions of perfect competition due, inter alia, to sunk investments and other factors that may prevent immediate and costless switching to other suppliers. Such “power” is of no concern under competition law. Instead, competition law is concerned with the exercise of a significant degree of market power, that is where a firm, or group of firms acting together, have the power, for a meaningful period, to profitably sustain prices above the level that would prevail in a competitive market and/or to reduce output, innovation, or quality. The key concern under competition law is significant power over price for a persistent period. Market power is always a matter of degree and a function of the performance of a particular market: even a monopoly or oligopoly can function in a manner consistent with effective competition. Increases in prices above the competitive level as a result of the exercise of market power have two negative effects on consumer welfare: first, they transfer wealth, or rents, from consumers to firms, as every consumer who purchases the goods and services on offer pays more for them than in a competitive market; second, they destroy rents by forcing out of the market some consumers with relatively modest valuations.

21 Case COMP/38.233, Wanadoo Interactive, Commission decision of 16 July 2003, upheld on appeal in Case T-340/03, France Télécom SA v Commission [2007] ECR II-107 and Case C-202/07 P, France Télécom SA v Commission [2009] ECR I-2369. See further Ch. 6 (Predatory Pricing). 22 The literature is vast on this subject. See, e.g., KJ Cseres, “The Controversies Of The Consumer Welfare Standard,” The Competition Law Review (2007) Vol. 3(2), pp. 121-173; KG Elzinga, “The Goals Of Antitrust: Other Than Competition And Efficiency, What Else Counts?,” (1977) 125 University of Pennsylvania Law Review 1191; P Akman, “Consumer Welfare And Article 82 EC: Practice And Rhetoric,” University of East Anglia CCP Working Paper, 08-25; L Lovdahl Gormsen, “The Conflict Between Economic Freedom And Consumer Welfare In The Modernisation Of Article 82 EC,” (2007) 3(2) European Competition Journal 329; and GJ Werden, “Competition Policy On Exclusionary Conduct: Toward An Effects-Based Analysis?,” (2006) 2 European Competition Journal 53. 23 See, e.g., D Carlton and J Perloff, Modern Industrial Organisation, Pearson Addison Wesley (2005) (4th edn.) Ch. 4.

8

The Law and Economics of Article 102 TFEU

These effects are illustrated in Figure 1 below. The first effect is given by area A, while the second effect is given by area B. The sum of areas A and B measures the reduction in consumer welfare resulting from supra-competitive prices. In economic theory, area B is known as the “deadweight loss of monopoly,” since it measures the loss in overall welfare (consumer welfare plus firms’ profits) resulting from a market price above the competitive benchmark. 24 In economic terminology, at perfectly competitive prices, the allocation of resources is allocatively efficient and all gains from trade are exhausted: there is no deadweight loss. Figure 1: The deadweight loss of monopoly Price

S (MC) Area A

Pe

Area B

Pc

D Qe Qc

Output

Article 102 TFEU does not, however, condemn the mere possession of dominance.25 Instead, it is directed at strategic actions carried out by a firm in a dominant position that unlawfully exclude competition and therefore risk maintaining or strengthening the dominant position. Firms without a dominant position may lawfully engage in such actions: the general implication is that, without market power, such actions are either irrational or would not have sufficient adverse long-term effects on consumer welfare to justify policy intervention. The identification of a dominant position is therefore of enormous potential significance, and not without controversy given the difficulties of unambiguously identifying a position in the continuum of market power in which a firm acquires such a position. Promoting the EU’s wider objectives. Uniquely among legal instruments that seek to control abuses of dominance, Article 102 TFEU is not a stand-alone piece of competition legislation: it forms part of the EU Treaties. The EU Treaties include a wide range of different objectives that may affect the scope and meaning of the

24 The “deadweight loss of monopoly” does not include area A, because this area corresponds to the increase in profits associated to the above-competitive price. Hence, area A captures a pure transfer of rents from consumers to firms. 25 According to the Court of Justice, while the finding of dominance is not a recrimination in itself, it means “that, irrespective of the reasons for which it has such a position, the undertaking concerned has a special responsibility not to allow its conduct to impair genuine undistorted competition on the common market.” See Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission [1983] ECR 3461, para. 10

Introduction, Scope of Application, and Basic Framework

9

competition provisions, including Article 102 TFEU. 26 Indeed, the Commission has stated that “it is inconceivable that competition policy could be applied without reference to the priorities fixed by the Community.” 27 The Commission has also spoken of the “federating” role of EU competition law, 28 which explains why the integration of national markets has featured prominently in competition policy. 29 Thus, unlike legal structures that are predicated on public international law principles that involve great deference to national sovereignty, the EU treaties, and their institutions, are integrationist and as such necessarily impinge on national sovereignty to a greater extent. This circumstance has important implications under Article 102 TFEU and indeed EU law more generally. One clear manifestation of the impact of other TFEU objectives on EU competition law is the role that the EU’s Single Market objectives have played, particularly in Article 101 TFEU cases. 30 Two leading authors note that “competition law plays a hugely important part in facilitating and defending the single market” and that “EU competition law has been (and will continue to be) strongly influenced by single market integration; this has meant that decisions have sometimes been taken prohibiting behaviour which a competition authority elsewhere, unconcerned with single market considerations, would not have reached.” 31

26 For example, environmental protection, a core TFEU objective, has played a role in EU competition analysis. See S Kingston, Greening EU Competition Law And Policy, Cambridge University Press (2012); JH Jans, European Environmental Law, Europa Law Publishing (2000) (2nd edn.) Ch. 7 (Competition Policy and Environmental Protection) and in particular p. 285; and H Vedder, Competition Law And Environmental Protection In Europe: Towards Sustainability?, Europa Law Publishing (2003). With climate change being a priority of the von der Leyen Commission, and in light of the European Green Deal, certain commentators argue that environmental protection should play an even more significant role. See, e.g., J Nowag, Competition Law’s Sustainability Gap? Tools for an Examination and a Brief Overview, Lund University Legal Research Paper Series, October 2019 and S Holmes, “Climate Change, Sustainability and Competition Law,” Journal of Antitrust Enforcement, Vol. 8, Issue 2 (2020). 27 XXIIIrd Report on Competition Policy (1993), p. 1. 28 XXVIIth Report on Competition Policy (1997), foreword by the then Commissioner responsible for competition policy, Karel Van Miert. 29 See CD Ehlermann, “The Contribution Of EC Competition Policy To The Single Market,” (1992) 29 Common Market Law Review 257. 30 This issue is, if anything, even more prevalent under Article 101 TFEU, and in particular the treatment of restrictions on “passive” sales as likely “object” restrictions of competition. For a recent decision see Case AT.40428 GUESS, Commission Decision of 17 December 2018, para. 135 (“The [agreements] individually and in combination restrict active and passive sales by members of a selective distributions system to end users located outside the allocated territory of those members and, therefore, are capable of creating, maintaining or restoring national divisions in trade between Member States so as to frustrate the Treaty’s objective of achieving the integration of national markets through the establishment of an internal market. In accordance with established case-law, those provisions restrict competition by object with the meaning of Article 101(1) of the Treaty.” (emphasis added) Similar issues arise with licensing agreements under Article 101 TFEU. See, e.g., Joined cases C403/08 and C-429/08 Football Association Premier League and Others, EU:C:2011:631, para. 139. 31 See R Whish and D. Bailey, Competition Law (9th edition, OUP 2018), pp.23-24. Similarly, Bellamy & Child explain that: “The TFEU is designed to create and maintain a single market:” Bellamy & Child, European Union Law of Competition (8th edition, OUP 2018), para. 1.018.

10

The Law and Economics of Article 102 TFEU

These views have also spilled over to a certain extent into leading Article 102 TFEU cases. For example, in British Leyland, the Commission and Court of Justice objected to an excessive fee imposed by a dominant firm for a document that was necessary to import a car from mainland Europe to the United Kingdom. 32 In United Brands, 33 the Court of Justice objected to a series of measures designed to impede intra-EU trade in bananas, including export restrictions, price discrimination, and threats to de-list distributors who dealt in competing products. And several cases involving tariffs set by national rail and airport operators were pursued by the EU institutions on the grounds that they discriminated against foreign undertakings. 34 Perhaps most strikingly of all, in its decision in 1998 Football World Cup, the Commission held that discrimination on the basis of nationality by a dominant firm fell within Article 102(c) “notwithstanding the absence of any effect on the structure of competition.” 35 In its decision in the Gazprom Article 9 commitments case, the Commission set out an extremely broad—and in many respects aspirational—principle that direct or indirect territorial restraints or other forms of “market partitioning” may infringe Article 102 TFEU (albeit this carries the significant caveat that it is a commitments decision, not a prohibition decision): 36 “The Court of Justice has also applied Article 102 of TFEU to territorial restrictions practiced by dominant companies. In the Suiker Unie case, a dominant sugar refinery was found to have violated Article 102 of TFEU by threatening to stop sugar supply unless the distributors complied with its restrictive export policy. In the United Brands Case the Court of Justice stated, regarding a contractual provision imposed by United Brands on wholesalers not to sell bananas while they were still green, that ‘to impose on the ripener the obligation not to resell bananas so long as he had not had them ripened and to cut down the operations of such a ripener to contacts only with retailers is a restriction of competition’, notably because it had the effect of partitioning the market along national lines. The Court of Justice considered that the clause at issue in that case infringed Article 102 of TFEU (then Article 86). In the energy sector, the Commission took the view that a clause in a gas transport agreement between GDF and ENI that precluded ENI from selling in France the gas that was being transported through France was a restriction of competition contrary to Article 101 of TFEU on the grounds that it prevented customers in France from purchasing that gas. The Commission also accepted legally binding commitments from EDF in response to its concerns that resale restrictions included in the supply contracts EDF entered into with large industrial customers could infringe Article 102 of TFEU. Market partitioning can also be achieved by more indirect means than explicit export bans or destination clauses. In this regard, what counts for establishing a measure’s anti-competitive object is whether such measure - by artificially altering the conditions of competition - is obviously capable of inducing traders to give priority to the national market over exports, thereby giving rise to a compartmentalisation of the internal market in contrast to the economic interpenetration desired by the Treaty. Ensuring compliance with the territorial Case 226/84, British Leyland plc v Commission [1986] ECR 3263. Chiquita, OJ 1976 L 95/1, confirmed by the Court in Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207. 34 See Ch. 15 (Abusive Discrimination). 35 1998 Football World Cup, OJ 2000 L 5/55, para. 100. 36 CASE AT.39816, Upstream Gas Supplies In Central And Eastern Europe, Commission Decision of 24 May 2018, paras. 48-50. 32 33

Introduction, Scope of Application, and Basic Framework

11

restriction can be achieved by different means, e.g. by reducing discounts or by charging additional fees in the event of sales outside the destination territory.”

The application of Article 102 TFEU to further the market integration objectives of the EU Treaties is controversial in certain respects. One problem is that the meaning of the competition provisions is likely to be much less clear if they also include the broad, and poorly-defined, remit of furthering EU market integration. Firms can take a range of unilateral measures that reduce trade between Member States, without implying that they are also abusive. The extreme case would be of course to withdraw from a market entirely, which must in general be legal, even if a firm is dominant. There is, however, growing evidence that the EU Courts are becoming more conscious of these difficulties and that there is a greater reluctance than in the past to use competition tools to promote wider and ill-defined policy objectives, however legitimate. In Glaxo Greece, the Court of Justice undertook a fundamental review of the extent to which Article 102 TFEU applies to refusals to deal in the context of parallel trade. 37 While the Court was not prepared to accept that the features of the pharmaceutical industry—and in particular State price regulation and the limited consumer price benefit from parallel trade—justified treating parallel trade refusals to deal as objectively justified as a general matter, it accepted that a dominant firm is entitled under Article 102 TFEU to protect its commercial interests. The compromise reached by the Court was that the dominant firm could legitimately refuse to meet an order from an existing customer that was “out of the ordinary.” 38 This requires an appraisal of both the “previous business relations” between the pharmaceutical company and the wholesalers, and the “size of the orders in relation to the requirements of the market” concerned. 39 But the judgment is clearly still a compromise and its conclusions cannot be explained purely by considerations of consumer welfare or competition economics. This can be easily demonstrated by the following example. Suppose a manufacturer, M, is dominant in a particular class of drug in Greece. It sells the drug to a Greek wholesaler, at €10 and the (State regulated) retail price in Greece is €12. M also sells the drug to wholesalers in France at €15. The (State regulated) retail price of the drug in France is €20. So the Greek wholesaler buys the drug in Greece at €10 and exports for sale in France where, quite rationally, it has incentives to price at €20. M then refuses to sell to the Greek wholesaler (because it is exporting to France) and also simultaneously refuses to sell to the French wholesalers (because it wishes to reduce over-supply in France). Under Article 102 TFEU, the former refusal would be prima facie unlawful (absent objective justification) whereas the latter would be legal (since there is no cross-border element). But the two situations are, in terms of economic effects, essentially the

Joined Cases C-468/06 to C-478/06, Sot. Lélos kai Sia EE and Others v GlaxoSmithKline AEVE Farmakeftikon Proïonton, formerly Glaxowellcome AEVE [2008] ECR I-7139. 38 Ibid., paras. 67-69. 39 Ibid., para. 73. 37

12

The Law and Economics of Article 102 TFEU

same. 40 This suggests that market integration continues to play a role under Article 102 TFEU, 41 albeit a now somewhat reduced one. Fairness. Basic notions of “fairness” and the idea that large, well-resourced firms should not unduly hamper the activities of small and medium-sized undertakings feature more prominently under Article 102 TFEU than, say, the equivalent provision in Section 2 of the United States Sherman Act 1890. For one thing, “unfair” prices and contractual terms are specifically mentioned in Article 102(a). The clearest manifestation of this is of course excessive pricing. 42 The Court of Justice has also sought to justify certain forms of exclusionary conduct on the basis that they are unfair to smaller rivals. For example, in the context of predatory pricing the Court of Justice justified a prohibition on below-cost pricing on the basis that it “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 competition waged against them.” 43 The origins of “fairness” concerns under Article 102 TFEU are not entirely clear, 44 but they most likely reflect the impact of German ordoliberal thinking—which attached importance to the notion that large firms should not unfairly limit their rivals’ production and access to markets 45—on the initial drafting of Article 102 TFEU, as well certain populist notions that sometimes underpin competition law enforcement. But as discussed in Chapter Sixteen (Other Exploitative Abuses), issues of fairness play a nontrivial role in the decisional practice and case law. Much of the earlier case law under Article 102 TFEU in fact concerned allegations of unfair prices and contractual terms applied by copyright collecting societies. 46 Similarly, one of the seminal cases under Article 102 TFEU—Tetra Pak II—in part concerned with a series of onerous contractual conditions governing the lease, purchase, and use of machines and consumables offered by a dominant carton manufacturer. 47 Issues of unfairness based on inequality of bargaining power were at the heart of the analysis, including the need for a proportionate link between the objective of a particular clause and its scope. The fairness and proportionality of clauses in trademark licensing agreements were the

40 It might be argued that the Greek wholesaler has some margin to play with and so could offer lower prices in France than domestic wholesalers. But this element formed no necessary part of the test in Glaxo Greece. 41 See speech by former Competition Commissioner Almunia, “The Citizen At The Heart Of EU Law: 20th Anniversary Of The Academy Of European Law (ERA),” Trier, 18 October 2012 (“[Competition policy] has a role that goes beyond the preservation of a level playing field in the internal market, because competition policy—as reflected in our Treaties—is also a major tool for the political and institutional development of Europe.”). 42 See Ch. 14 (Excessive Prices). 43 See Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3359, para. 72. 44 For a detailed discussion see P Akman, The Concept of an Abuse in EU Competition Law, Hart Publishing (2012), Ch. 4. 45 This issue is discussed in more detail in Chapter 2 (History, Development, and Reform). 46 See Case 127/73, Belgische Radio en Televisie v SV SABAM and NV Fonior [1974] ECR 313 and GEMA II, OJ 1982 L 94/12. 47 Tetra Pak II, OJ 1992 L 72/1, on appeal Case T-83/91, Tetra Pak v Commission [1994] ECR II755.

Introduction, Scope of Application, and Basic Framework

13

central issues in the DSD (Green Dot) proceedings. 48 Finally, while it was only an Article 9 commitment decision, the Commission’s decision in Standard & Poor’s concerned allegations of “unfair” pricing that were not expressly limited to excessive prices. 49 The Commission for example stated that charging a price for a service/product not requested by the customer/user would be unfair and potentially abusive. 50 This (preliminary) objection seems to encapsulate some form of “unfairness” of foisting on a customer a product or service that he/she does not want. Recently, in the EU and elsewhere, there have been calls, of varying degrees of precision of focus, that “fairness” should play a greater role in general in competition law, and in particular concerning the laws on unilateral conduct and abuse of dominance. 51 The current Competition Commissioner, Margrethe Vestager, has been at the vanguard of these calls. 52 In a narrow sense, these calls seek modifications of varying degrees to competition law rules due inter alia to concerns about their general effectiveness, over-reliance on technical economics, the alleged under-inclusiveness of a consumer welfare standard, and the growth of multi-sided digital platforms and other aspects of “Big Data.” In a wider sense, these issues are linked to growing concerns about perceived rising inequality in society, perceived increases in market concentration, and a disconnect between growth in wages and firm profits, as well as a more basic point that growth in monopoly rents is likely to have an unduly regressive effect on those with the least means. These issues are discussed in more detail in other chapters of this work, since they do not, at least yet, firmly constitute an existing objective in their own right under Article 102 TFEU. Chapter Two (History, Development, and Reform) discusses these issues as part of the on-going and potential future evolution of Article 102 TFEU. Chapter Five (The General Concept Of An Abuse) also touches on these issues, since the discussion at its core advocates for the redefinition of the general concept of abusive conduct, in part or in whole. Finally, Chapter Seventeen (Abuses in Digital Platform Markets) discusses these issues in some detail, since much of the origin of the discussion concerns digital products and digital platform markets. 48 DSD, OJ 2001 L 166/1, on appeal Case T-151/01, Der Grüne Punkt - Duales System Deutschland GmbH v Commission [2007] ECR II-1607 and Case C-385/07 P, Der Grüne Punkt - Duales System Deutschland GmbH v Commission [2009] ECR I-6155. 49 Case COMP/39.592, Standard & Poor’s, Commission Decision of 15 November 2011. The case appears mainly based on an allegation of bundling of unnecessary services although it was not analysed as a tying/bundling case. 50 Citing Case C-179/90, Merci convenzionali porto di Genova SpA v Siderurgica Gabriella SpA [1991] ECR 5889, para. 19. 51 For a general overview, see A Lamadrid de Pablo, “Competition Law as Fairness,” Journal of European Competition Law & Practice, 2017, Vol. 8, No. 3, 147 and D Gerard, “Fairness in EU Competition Policy: Significance and Implications,” Journal of European Competition Law & Practice, 2018, Vol. 9, No. 4 211. 52 See, e.g., speech at the Web Summit in Lisbon, 7 November 2017, “Clearing The Path For Innovation,” available at https://ec.europa.eu/competition/speeches/index_2017.html (“Companies have to take fairness and trust just as seriously as they do innovation. So we can make the most of what technology can do for us.”). For a discussion see M Volnar and K Helmdach “Protecting Consumers And Their Data Through Competition Law? Rethinking Abuse Of Dominance In Light Of The Federal Cartel Office’s Facebook Investigation,” European Competition Journal, (2018) Vol 14, 195.

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The Law and Economics of Article 102 TFEU

1.3

SCOPE OF APPLICATION OF ARTICLE 102 TFEU

Overview. The scope of Article 102 TFEU raises a number of discrete issues. The first is its territorial scope. Second, in common with Article 101 TFEU, Article 102 TFEU applies only to the conduct of an “undertaking.” 53 The definition of an undertaking is obviously of central importance under Article 102 TFEU, since an entity that does not constitute an undertaking is not bound by the prohibition on abuse of dominance contained in that article. The EU Treaties do not define the term “undertaking.” The definition has instead been extensively developed by the case law of the EU Courts in a manner sufficiently broad to capture any meaningful form of economic activity. Some difficult questions arise concerning the activities of the State, and when they can be considered sufficiently economic in nature to justify the characterisation of the State as an undertaking. The general principles concerning the definition of an undertaking in the case of public bodies, and the principal difficulties raised, are discussed below. A third set of issues concerns entities that qualify as undertakings, but whose conduct is shielded from action under EU competition law because it results from State action that compels the conduct in question. Where the conduct is genuinely compelled by national law, responsibility for the infringement lies properly with the State, not the undertakings subject to the law in question. Of course, EU competition law on State action is not limited to the State action doctrine, but includes a number of affirmative obligations on the State in respect of the conduct of public undertakings and other State action. These obligations are discussed in Section 1.4. below: this section discusses the circumstances in which an entity can avoid the application of Article 102 TFEU on the grounds that the conduct in question results from State action. Finally, the circumstances in which a parent company can be liable for conduct carried out by its subsidiary in violation of Article 102 TFEU should also be considered. Although a parent and a subsidiary under its control will generally be considered as one and the same entity for purposes of Article 102 TFEU, it is important to identify the circumstances in which the parent’s liability for an infringement committed by its subsidiary can be automatically imputed, and when evidence of the parent’s involvement in the infringement or the actual exercise of its control rights in respect of the infringing conduct is also required.

1.3.1

Territorial Scope of Article 102 TFEU

Overview. Article 102 TFEU applies in full in each of the EU’s 27 Member States. 54 EU competition law also applies with modifications in certain sectors. For example, in the agriculture sector, Regulation (EU) No 1308/2013 of the European Parliament and of the Council of 17 December 2013 establishing a common organisation of the markets in agricultural products (OJ 2013 L 347/671) provides for certain exemptions from the application of Article 101 TFEU to the agricultural sector. However, these exceptions do not extend to Article 102 TFEU. Certain exemptions also exist for transport services, but these are mainly procedural rather than substantive in nature, and they have been greatly reduced over time. See generally in C Bellamy and G Child, European Union Law Of Competition, Oxford University Press (2018) (8th edn.) (D Bailey and L John eds.), paras. 12.171 et seq. (agriculture) and paras. 12.183 et seq. (transport). 54 Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, 53

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Some pernickety issues arise in connection with whether overseas territories or other parts of Member States are subject to EU competition law. 55 An issue of some practical importance under Article 102 TFEU is extraterritorial application. In decisions such as Microsoft 56 and Intel, 57 the Commission has asserted jurisdiction under Article 102 TFEU in relation to global practices, including in some cases contracts concluded outside the EU between non-EU legal entities where there is no direct supply of the contract goods into the EU but, at most, incorporation of those goods into a finished product exported from outside the EU into the EU. For example, in Microsoft and Intel, the defendants had no contractual connection with customers in the EU for a large proportion of their sales since the sales in question were effected through contracts with personal computer OEMs located outside the EU. At most, the OEMs may have sold computers to consumers in the EU, usually through the intermediary of a distributor or retailer, i.e., at best an indirect effect on the EU. And, yet, the prohibitory aspect of the remedies in those cases was not in terms limited to the EU territory. 58 The starting point. Two important starting points bear emphasis. The first is that the wording of Article 102 TFEU contains express territorial limitations. It prohibits “any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.” 59 However, unlike US law, there is no specific legislation setting out the conditions under which EU competition law can apply extraterritorially. 60 The second point is that the extraterritorial application of EU competition law is not uncontroversial under public international law, since it may be thought to infringe upon the sovereignty of the country in which those entities subject to extraterritorial application of EU competition law are located. Equally controversial, however, would be the notion that companies could evade the application of EU competition law merely by being domiciled outside the EU and concluding agreements or directing practices from abroad. This applies in particular as respects digital products, since they can be disseminated more or less instantly, at little or no cost, from any global location to another. An early cautious approach: implementation test. From an early stage, EU competition law accepted that the extraterritorial application of a State’s laws is exceptional under public international law and fully respected international law in the Portugal, Slovakia, Slovenia, Spain, Sweden, and Romania. It also remains applicable in the United Kingdom during the transition period following its exit from the European Union on 31 January 2020. 55 See generally in C Bellamy and G Child, European Union Law Of Competition, Oxford University Press (2018) (8th edn.) (D Bailey and L John eds.), Chapter 1. 56 Case COMP/C-3/37.792, Microsoft, OJ 2007 L 32/23, upheld on appeal in Case T-201/04, Microsoft v Commission [2007] ECR II-3601. 57 Case COMP/37.990 Intel, Commission decision of 13 May 2009, on appeal Case T-286/09 Intel v Commission, EU:T:2014:547 and on further appeal in Case C-413/14 P, Intel Corp. v Commission, EU:C:2017:632. 58 But see Case COMP/39.592, Standard & Poor’s, Commission Decision of 15 November 2011, para. 62, where the commitments under Article 9 were limited to the EEA (despite the complainants arguing for worldwide effect). 59 Emphasis added. 60 See Foreign Trade Antitrust Improvement Act 1982, Pub. L. No. 97-290, 96 Stat. 1246 (codified at 15 U.S.C. §6a).

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exercise of its powers, 61 including the principles of territoriality and comity. 62 As a result, in the early years of enforcement of EU competition law, the Commission and EU Courts applied a relatively cautious approach to the extraterritorial application of EU competition law. In Woodpulp I the Court of Justice held that Article 101 TFEU has two elements: (1) formation of an agreement; and (2) implementation thereof. 63 It further held that Article 101 TFEU could apply to entities based outside the EU only if it related to direct sales of the relevant products to purchasers established in the EU and if vendors engaged in price competition in order to win orders from those (EU) customers, through their subsidiaries making sales independently to purchasers in the EU. 64 This is the so-called EU “implementation” doctrine for the territorial application of EU competition law. The potential strictness of this test was outlined by Advocate General Mayras in the Dyestuffs case where he stated: 65 “…the agreement or the concerted practice must create a direct and immediate restriction on competition on the national market or, as here, on the Community market. In other words, an agreement only having effects at one stage removed by way of economic mechanisms themselves taking place abroad could not justify jurisdiction over participating undertakings whose registered offices are also situated abroad.”

Qualified approval of qualified effects test. Starting in the late 1990s, the Commission and EU Courts began to take gradual steps to expand the territorial scope of EU competition law. In Gencor, the General Court for the first time put forward a test for jurisdiction based on an “immediate, substantial and foreseeable effect” in the EU as an alternative to the implementation test; 66 sometimes known as the “qualified effects,” or effects-based, test. This was intended to capture conduct taking place outside the EU but which had significant (if not necessarily direct) enough impacts on the EU to justify the (extraterritorial) application of EU competition law. Gencor was, however, an EU merger control case, and the application of the qualified effects test to Article 102 TFEU had not yet been formally established. Developments in Intel. In Intel the Commission found that: (1) rebates offered by a US-based chipset manufacturer company to computer OEMs based in Asia who exported the finished products worldwide, including to the EU; and (2) a clause between Intel and an OEM postponing (and finally cancelling) the launch of two final

See Case C-286/90 Poulsen and Diva Corp [1992] ECR I-6019, para. 9. Cases 89/85, 104/85, 114/85, 116/85, 117/85 and 125/85 to 129/85 Ahlström Osakeyhtiö and Others v Commission [1988] ECR 447 (“Woodpulp I”), para. 18. 63 Woodpulp I, para. 16. 64 Woodpulp I, paras. 12–13. 65 Case 48/69 Imperial Chemical Industries Ltd v Commission 1972:EU:C:619, at 694. 66 Case T-102/96 Gencor Ltd. v Commission, [1999] ECR II-65, para. 92. The issue was whether a proposed merger between various companies in the Gencor and Lonrho groups, all of which were based in South Africa apart from the UK holding company of the Lonrho group, Lonrho Plc, would be contrary to Article 2(3) of the (then) EU Merger Regulation 4064/89 on the basis that it “creates or strengthens a dominant position as a result of which effective competition would be significantly impeded in the Common Market or in a substantial part of it.” 61 62

Introduction, Scope of Application, and Basic Framework

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products based on Intel’s competitor’s chipsets on the worldwide market fell within the scope of Article 102 TFEU. 67 Although no issue was raised in the proceedings before the Commission, in its appeal to the EU Courts Intel did challenge the Commission’s jurisdiction to apply Article 102 TFEU to such extraterritorial conduct, in the case of two of the OEMs concerned. The basic argument was that: (1) the OEMs manufacturing facilities were located outside the EU; (2) the OEMs did not purchase chipsets in the EU from Intel or its competitor, AMD; (3) the conduct at issue concerned sales of chipsets to customers in Asia; (4) the fact that a certain number of the OEMs’ finished products incorporating chips from Intel (or AMD) might subsequently have been sold within the EU is irrelevant to the question of the implementation of the conduct complained of; (5) in terms of effect, the immediate effects of the conduct were felt in Asia, and not in the EU: the conduct in the EU concerned the sale of finished computers by the OEMs, not Intel chips; and (6) the volume of computers concerned was negligible so the effect in the EU could not be regarded as substantial. Intel’s argument was rejected by both EU Courts. But it is important first to see the arguments that they implicitly rejected, since they confirm the broad approach to the question of territorial jurisdiction under Article 102 TFEU. In a careful analysis, the Advocate General in Intel found various legal errors in the General Court’s approach to both the implementation and qualified effects tests. On implementation, he said that it was wrong to focus on the fact that Intel’s OEM customers ultimately exported finished products containing Intel chips (or not containing AMD chips) to the EU, on the basis that such an indirect connection, if accepted, would create a territorial link between virtually any extraterritorial conduct so long as a finished product eventually ended up being sold in the EU. 68 The agreement was between a US company and a Chinese OEM and there was no evidence of conduct initiated or carried out by Intel in the EU territory to implement what had been agreed in the OEM agreement. Notably also he held that: 69 “…had the Commission concluded that Intel together with Lenovo had infringed Article 101 TFEU, it would have been correct for the General Court to look at whether their agreements were intended to be implemented by either party in the EEA. However, the decision at issue deals with conduct which the Commission challenged under Article 102 TFEU: unilateral conduct on the part of Intel. It is consequently that unilateral conduct—the alleged abuse—which must be implemented in the EEA.”

On qualified effects, he concluded that the only argument put forward by the General Court regarding the “substantial” nature of the effects in the EU internal market was that Intel’s challenged conduct formed part of an overall infringement that was found by the Commission to be a single and continuous infringement. He said that this was a legal error because the concept of single and continuous infringement is merely a procedural rule aimed at alleviating the evidentiary burden of competition authorities—it cannot extend the territorial ambit of the prohibitions under the Treaties. Case COMP/37.990 Intel, Commission Decision of 13 May 2009. Case C-413/14 P Intel Corp. v Commission, EU:C:2016:788, paras. 309-312. 69 Ibid., para. 309. 67 68

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The Court of Justice did not, however, adopt the Advocate General’s careful and perceptive reasoning on this point, which is striking and, statistically speaking, relatively unusual. It set forward a more general set of principles that seem more conducive to territoriality being satisfied under Article 102 TFEU. It held that: 70 (1) the qualified effects test is part of EU law—until Intel, this point had not been formally confirmed by the most senior EU Court; (2) it is sufficient to take account of the probable effects of conduct on competition in order for the “foreseeability” criterion under qualified effects test to be satisfied; (3) because Intel’s conduct vis-à-vis the OEM in question formed part of an “overall strategy” intended to ensure that no notebook from that OEM equipped with an AMD chipset would be available on the market, including in the EU, Intel’s conduct was capable of producing an immediate effect in the EU; (4) it was irrelevant in Intel that the directly affected volumes of computers important into the EU were negligible; and (5) a contrary approach would lead to an artificial fragmentation of comprehensive anticompetitive conduct, capable of affecting the market structure within the EU, into a collection of separate forms of conduct which might escape the EU’s jurisdiction. Post-Intel cases. In the period following Intel the Commission has continued to adopt an expansive approach to territoriality in Article 102 TFEU cases, particularly in the case of digital products and services. a. Google Android. 71 Google concluded a series of Mobile Application Distribution Agreements (MADAs) with smart device OEMs. These contained a variety of rights and obligations. Among the obligations placed on OEMs were: 72 (1) once a hardware manufacturer decides to pre-install one or more Google proprietary apps on its devices, it must pre-install all mandatory Google apps; (2) OEMs must place on the smart device’s default home page the icons which give access to the Google Search app, the Play Store, and a folder labelled “Google” which that provides access to a collection of icons for a number of mandatory Google apps; (3) any other pre-installed Google apps should be placed no more than one level below the home screen; (4) hardware manufacturers are required to “set Google Search as the default search provider for all Web search access points, albeit this was largely removed over time;” and (5) OEMs must ensure that direct access to Google Search is provided by either “(a) long pressing the ‘Home’ button on Devices with physical navigation buttons, or (b) swiping up on either the navigation bar or ‘Home’ button on Devices with soft navigation buttons.” On territorial jurisdiction, Google argued that: (1) the majority of the agreements were concluded and implemented outside the EU; and (2) the Commission had not demonstrated that Google's conduct would harm competition immediately, substantially, and foreseeably. The Commission rejected these arguments. It first stated that the fact that Google’s agreements were concluded outside the EU is irrelevant as they were implemented in the EU, given that customers had to comply with the terms of their agreements with Case C-413/14 P Intel Corp. v Commission, EU:C:2017:632, paras. 51-57. Case COMP/AT.40099, Google Android, Commission Decision of 18 July 2018 (currently on appeal). 72 Ibid., paras. 172 et seq. 70 71

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Google when supplying mobile and other devices into the EU that ran on the Android operating system. This view is arguably a development on Woodpulp I where the mere supply of a product into the EU was not itself considered sufficient but, in addition, the locus of competition for customers based in the EU was integral. 73 It seems likely that the Commission is seeking to expand further the concept of implementation in the context of digital products/services, since these can be traded seamlessly and virtually costless from any global location to another. But it can be argued that the answer to this issue, if it is an issue, is the qualified effects test, which was accepted in Intel. The Commission also found that Google’s conduct is capable of having: (1) substantial effects in the EU, given that Google Android devices sold into the EU represented between 45% and 76% of smart mobile devices sold into the EU between 2011 and 2017; (2) immediate effects in the EU, given that the agreements influenced the behaviour of customers, including those active in the EU; and (3) foreseeable effects in the EU, given that customers had to comply with the terms of the agreements when supplying devices into the EU. b. AdSense. 74 This case concerns objections by the Commission under Article 102 TFEU to exclusivity-type arrangements entered into by Google. The Commission’s concerns focus on Google has entered into three main categories of AdSense for Search (AFS) agreements with publishers: (1) individually negotiated, paper-based, Google Services Agreements (GSAs) with Direct Partners, who are typically the larger publishers; (2) standard form, non-negotiable, online agreements with a large number of other generally smaller publishers (Online Contracts); and (3) paper-based simplified agreements (Simplified Contracts). The essential concern the Commission found is a series of exclusivity-type clauses requiring the counterparty (1) to source all or most of their search ads requirements from Google; (2) to reserve the most prominent space on their search results pages for a minimum number of search ads from Google; and (3) to seek Google’s approval before making changes to the display of competing search ads. 73 See, however, the comments of Advocate General Wahl in Intel who noted “…I do not consider that only direct sales into the European Union by the undertaking in question can be regarded as meeting the implementation criterion for the purposes of the Woodpulp case-law. The ordinary meaning of ‘implementation’ is to carry out or to put into effect. Therefore, in order to meet that criterion, one of the essential constituent elements of the anticompetitive conduct must take place in the European Union. Whether that is so depends mainly on the nature, form and scope of the conduct in question. A case-by-case assessment of the unlawful conduct is required to verify whether that conduct is implemented within the European Union. For example, I am not convinced that indirect sales of the relevant product can never be regarded as implementation. To my mind, that depends on the circumstances of each case. Among the elements which should be considered in that context is, for instance, whether one of the undertakings that cartelised a product and the undertaking which incorporates it into another product which is then sold in the Union form part of a single economic entity or, failing that, whether there are other corporate or structural links between the undertakings in question.” See Case C-413/14 P Intel Corp. v Commission, EU:C:2016:788, para. 292. The Court of Justice did directly not pick up on this point and Advocate General Wahl candidly admitted that his view on this issue was different to that of Advocate General Wathelet in Case C-231/14 P InnoLux v Commission, EU:C:2015:292, para. 46. 74 Case AT.40411, Google Search (AdSense), Commission Decision of 20 March 2019 (currently on appeal).

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The Law and Economics of Article 102 TFEU

On territorial jurisdiction, Google argued that implementation of an agreement within the EU does not occur simply because a Direct Partner has a presence in the EU and the Commission has not shown that Google had a strategy to prevent other search advertising intermediaries from competing against it. The Commission concluded that it has jurisdiction individually and collectively over the three forms of conduct described above. Each form of conduct saw Google enter into agreements with undertakings that are active in the EU. The three forms of conduct were therefore both implemented in the EU and, further or alternatively, capable of having substantial, immediate and foreseeable effects in the EU. It found that the implementation test is satisfied not because Direct Partners have a presence in the EU but because they are active within the EU, on the basis that Direct Partners target an audience in the EU and receive revenue from clicks on search ads made by users located in the EU. Finally, the Commission added that, for the purpose of establishing jurisdiction, it is not required to show a strategy aimed at preventing competitors of a given undertaking from competing against it. The implication seems to be that an overall strategy of imposing the contractual terms, with a common aim, suffices. c. Qualcomm (predation). 75 The most recent case, from 2019, is Qualcomm, where Qualcomm was fined in excess of €242 million for two years of predatory pricing. The overarching case is that Qualcomm intended to eliminate Icera, its main competitor at the time in the niche market segment of UMTS chipsets offering advanced data rate performance. The Commission found that, by containing Icera’s growth at the two key customers in this segment, Huawei and ZTE, Qualcomm intended to prevent Icera, a small and financially constrained start-up, from gaining the reputation and scale necessary to challenge Qualcomm’s dominance in the UMTS chipset market. This applied in particular in view of the expected growth potential of the leading edge segment due to the global take-up of smart mobile devices, thus depriving OEMs in this segment from access to an alternative source of chipsets for their mobile phones and reducing consumer choice. The case is also striking on jurisdiction since Qualcomm is a US-based company supplying smart phone chips to OEMs in Asia. On implementation, the Commission considers that Qualcomm’s conduct was implemented in the EU because Qualcomm knew or could not have been unaware that devices assembled by the two OEMs concerned (Huawei and ZTE) which incorporated Qualcomm's chipsets would be also sold in the EU. This is a potentially significant expansion of Intel—which was itself already a significant expansion on the pre-existing position. In Intel, it was at least clear that one direct effect of the agreements would be stop the OEMs selling computers containing AMD chips at all. By contrast, in Qualcomm, the issue was that Qualcomm’s prices were too low and that, as a result, Icera risked being marginalised or excluded from the market (including in the EU). This seems more indirect. On qualified effects, the Commission focused on: (1) an argument that the EU was an important market for the relevant chipsets; and (2) Qualcomm's conduct took place in the context of Icera gaining technical approvals including at European carriers, such that Case AT.39711, Qualcomm (Predation), Commission Decision of 17 July 2019 (currently on appeal). 75

Introduction, Scope of Application, and Basic Framework

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Qualcomm’s behaviour was therefore liable to affect the “competitive structure” in the EU. This too seems much more indirect than previous cases since it concerns an effect on the OEMs’ customers (the European mobile carriers) who are at least two steps removed from Qualcomm (whereas in Intel, the effect was just one step removed).

1.3.2

The Definition Of An Undertaking 1.3.2.1 Generally

All “economic activities” covered. The EU Courts have taken a broad view of the concept of an undertaking, focusing on the type of activity performed rather than on the formal characteristics of the entity in question. An entity will thus qualify as an undertaking regardless of whether it possesses legal personality. 76 Case law has held that “the concept of an undertaking encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed.” 77 For example, in Höfner & Elser an issue arose whether a public employment agency could be characterised as an undertaking. 78 The Court of Justice reasoned that employment procurement is inherently an “economic activity” and that the fact that employment procurement activities are normally entrusted to public agencies does not affect the economic nature of such activities. Employment procurement has not always been, and is not necessarily, carried out by public entities, in particular for executive recruitment. Applying this broad definition, many different kinds of entities have been found to carry on an economic activity including limited companies, 79 partnerships, 80 trade associations, 81 sporting bodies, 82 agricultural cooperatives, 83 not-for-profit firms, 84 self-employed professionals, 85 and professional bodies regulating entry into a profession. 86 The mere act of purchasing goods or services does not, however, constitute a separate economic activity capable of resulting in the purchaser being classified as an

See Polypropelene, OJ 1986 L 230/1, para. 99 (“The subjects of EEC competition rules are undertakings, a concept which is not identical with the question of legal personality for the purposes of company law or fiscal law. The term ‘undertaking’ is not defined in the Treaty. It may, however, refer to any entity engaged in commercial activities and in the case of corporate bodies may refer to a parent or to a subsidiary or to the unit formed by the parent and subsidiaries together.”). 77 Case C-41/90, Klaus Höfner and Fritz Elser v Macrotron GmbH [1991] ECR I-1979, para. 21. 78 Ibid., paras. 20–23. 79 Case 258/78, L.C. Nungesser KG and Kurt Eisele v Commission [1982] ECR 2015. 80 See, e.g., Breeders’ Rights: Roses, OJ 1985 L 369/9. 81 See, e.g., Case 71/74, Nederlandse Vereniging voor de fruit- en groentenimporthandel, Nederlandse Bond van grossiers in zuidvruchten en ander geimporteerd fruit “Frubo” v Commission [1975] ECR 563. 82 Case T-193/02, Laurent Piau v Commission [2005] ECR II-209. 83 Case 61/80, Coöperatieve Stremsel-en Kleurselfabriek v Commission [1981] ECR 851. 84 Distribution of Package Tours During the 1990 World Cup, OJ 1992 L 326/31. 85 Case T-513/93, Consiglio Nazionale degli Spedizionieri Doganali v Commission [2000] ECR II1807. 86 Case C-309/99, JCJ Wouters, JW Savelbergh and Price Waterhouse Belastingadviseurs BV v Algemene Raad van de Nederlandse Orde van Advocaten, intervener: Raad van de Balies van de Europese Gemeenschap [2002] ECR I-1577. 76

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undertaking. 87 Rather, the issue is whether the purchase of the good or service is itself linked to an economic activity, such as a firm buying a raw material to produce a finished product. In a similar vein, individuals may be undertakings in so far as they engage in an economic activity in their own right. 88 The obvious case is a sole trader. However, holding shares in a company, even if at a level that would give rise to control, does not constitute an economic activity unless the shareholder also involves himself or herself in the business of the company in which it owns an interest. 89 1.3.2.2 Public bodies as undertakings Generally. Activities that involve the exclusive exercise of the functions of public authority, without an accompanying economic activity, fall outside the scope of EU competition law. 90 An obvious case is tax collection since private bodies do not have the power to collect general taxes. But the fact that a particular activity is carried out under the broad auspices of the State is not a barrier to the entity in question being regarded as an undertaking for purposes of Article 102 TFEU. 91 An entity may be an undertaking even if it engages in ostensibly social activities. The essential test in each case is whether the specific activity at issue involves offering goods or services on the market or, if this is not the case, is something that could in principle be carried out by a private entity for profit. 92 Different kinds of public bodies have been found to carry on an economic activity, such as the German Federal Employment Office’s handling of employment procurement, 93 or the Italian autonomous administration of State monopolies offering goods and services on the market for manufactured tobacco. 94 The regulation of professions. Difficult questions can arise where a body carries out regulatory functions with a public interest element while also regulating an activity that itself has a strong economic element. For example, in a case involving rules in the Netherlands prohibiting multi-disciplinary practices between lawyers and other 87 Case T-319/99, Federación Nacional de Empresas de Instrumentación Científica, Médica, Técnica y Dental (FENIN) v Commission [2003] ECR II-357. 88 Case C-309/99, JCJ Wouters, JW Savelbergh and Price Waterhouse Belastingadviseurs BV v Algemene Raad van de Nederlandse Orde van Advocaten, intervener: Raad van de Balies van de Europese Gemeenschap [2002] ECR I-1577. 89 Joined Cases T-208/08 and T-209/08, Gosselin Group NV and Stichting Administratiekantoor Portielje v Commission [2011] ECR II-3639, paras. 41-50. On appeal, the Court of Justice held that, contrary to the General Court’s findings, when it comes to considering whether an undertaking can be penalised for infringement of EU competition law, it is irrelevant whether an individual legal entity comprising the undertaking is itself economically active (and therefore individually constitutes an “undertaking”). But this concerned the question of liability of individual entities forming part of an overall “undertaking” to pay a penalty. The Court of Justice did not question the point that an entity may not itself be acting as an “undertaking” where it merely holds shares and exercises no economic activity. See Case C-440/11 P Commission v Gosselin Group NV and Stichting Administratiekantoor Portielje EU:C:2013:514. 90 Case 107/84, Commission v Germany [1985] ECR 2655, paras. 14-15. 91 See, e.g., Case C-327/12 SOA Nazionale Costruttori, EU:C:2013:827 where private bodies auditing undertakings carrying out public works were considered to be engaged in an economic activity and not exercising public powers. 92 Case C-67/96, Albany International BV v Stichting Bedrijfspensioenfonds Textielindustrie [1999] ECR I-5751, para. 311. 93 Ibid. 94 Case C-387/93, Giorgio Domingo Banchero [1995] ECR I-4663.

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professionals, the Court of Justice found that the relevant bar association was, in that specific capacity, acting as an undertaking. 95 The Court reasoned that, when it adopted a regulation concerning partnerships between members of the bar and members of other professions, the bar of a Member State is neither fulfilling a social function based on the principle of solidarity, nor exercising powers typical of those of a public authority. Instead, it acts as the regulatory body of a profession, the practice of which constitutes an economic activity. The fact that governing bodies of the bar are composed exclusively of members of the bar who are elected solely by members of the profession, and that in adopting acts such as that regulation, the bar is not required to do so by reference to specified public-interest criteria, supported the conclusion that such a professional organisation with regulatory powers could not escape the application of EU competition law. 96 Activities carried out in the interests of public safety or the environment. The Eurocontrol case concerned whether or not the international organisation responsible for air traffic control over much of Europe constituted an undertaking for the purposes of Articles 101 and 102 TFEU. 97 The Court explained that while the concept of undertaking encompasses any entity engaged in an economic activity, regardless of its legal status and the way it is financed, a task undertaken in the public interest, namely the safety of air passengers, could not be described as an economic activity. The collection of route charges could not be separated from the organisation’s other activities, which taken as a whole, resembled the exercise of public authority more than economic activities. Consequently, the organisation could not be considered an undertaking to which Articles 101 and 102 TFEU could apply. A further iteration on Eurocontrol is the SELEX case where the Court of Justice held that Eurocontrol was not acting as an undertaking either when providing assistance to national administrations in connection with tendering procedures carried out by those administrations for the acquisition, in particular, of equipment and systems in the field of air traffic management. 98 The key issue was that, under the Convention on the Safety of Air Navigation, Eurocontrol was to adopt and apply common standards and specifications to harmonise air traffic services regulations and to encourage common procurement of air traffic systems and facilities. This role also included assisting the contracting parties in the planning, specification, and setting up of air traffic systems and services. From this, the Court inferred that the activity of providing assistance, albeit for a fee, is one of the instruments of cooperation entrusted to Eurocontrol by the Convention on the Safety of Air Navigation, i.e., akin to a public safety role. In conducting such an activity Eurocontrol was thus not exercising an economic activity.

95 Case C-309/99, JCJ Wouters, JW Savelbergh and Price Waterhouse Belastingadviseurs BV v Algemene Raad van de Nederlandse Orde van Advocaten, intervener: Raad van de Balies van de Europese Gemeenschap [2002] ECR I-1577. 96 See also Case C-1/12 Ordem dos Técnicos Oficiais de Contas EU:C:2013:127 (chartered accountants). 97 Case C-364/92, SAT Fluggesellschaft mbH v Eurocontrol [1994] ECR I-43. 98 Case C-113/07 P, SELEX Sistemi Integrati SpA v Commission of the European Communities and Organisation européenne pour la sécurité de la navigation aérienne (Eurocontrol) [2009] ECR I-2207.

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Similarly, a company established to perform services to prevent and remove pollution in the Port of Genoa which acted on behalf of the port operator was held not to be an undertaking in Diego Cali. 99 Despite the fact that the company charged for its services, the Court held that its anti-pollution and cleaning up facilities involved the performance of a task in the public interest which formed part of marine environment protection, a central function of the State. However, in contrast to these rulings, an ambulance service which provided both emergency transport and also routine patient transport for which payment was made was considered an undertaking in Ambulanz Glöckner. 100 The Court of Justice held that the provision of emergency services was an economic activity since the services provided by Ambulanz Glöckner did not necessarily need to be carried out by public authorities, but could be offered on the market. The fact that payments were received from the public authority and from insurers was immaterial. Similarly, in Achilles it was found that Network Rail, the owner of most of the mainline rail infrastructure in Great Britain, acted as an undertaking when imposing terms on companies wishing to work on its managed infrastructure, to establish that a supplier is suitably competent and adequately resourced and can consistently deliver its products to the customer’s specification. The Competition Appeal Tribunal found that the distinction sought to be drawn by Network Rail between its economic activity and the regulation of its managed infrastructure was not well founded. Allowing access to its managed infrastructure was an essential part of, and not dissociable from, Network Rail’s operation of the railway infrastructure, which is an economic activity. The fact that Network Rail was, via its approved supplier process, setting out rules with a view to ensuring safety and to comply with regulatory obligations did not take it outside the scope of that activity. 101 Publicly-owned facilities. Complex issues may also arise where an entity is granted access to public property or facilities but then has some autonomy in deciding what to do with them, including in particular the ability to levy usage fees. In Aéroports de Paris 102 the defendant airport operator challenged the Commission’s finding that it was acting as an undertaking for purposes of Article 102 TFEU. On appeal the Court of Justice drew a distinction between, on the one hand, the purely administrative functions of Aéroports de Paris (ADP)—which would constitute public functions—and the management and operation of the Paris airports, which are remunerated by commercial fees which vary according to turnover. In particular, the ADP determined the procedures and conditions under which suppliers of groundhandling services operate, which the Court held could not be classified as a mere supervisory activity. The Court Case C-343/95, Diego Calí & Figli Srl v Servizi ecologici porto di Genova SpA (SEPG) [1997] ECR I-1547. 100 Case C-475/99, Firma Ambulanz Glöckner v Landkreis Südwestpfalz [2001] ECR I-8089. 101 See Achilles Information Limited v Network Rail Infrastructure Limited [2019] CAT 20, paras. 100-102, upheld on appeal in Achilles Information Limited v Network Rail Infrastructure Limited [2020] EWCA Civ 323. See also UKRS Training Limited v NSAR Limited, [2017] CAT 17, para. 72 (“We do not see that the safety aspects of the railway infrastructure can possibly be regarded as a distinct function of Network Rail from its role in the operation of that infrastructure. It is inherent in the function of the maintenance and operation of the infrastructure that it should be kept safe and operated in a safe manner.”). 102 Case C-82/01 P, Aéroports de Paris v Commission [2002] ECR I-9297. 99

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endorsed the view that the fact that an activity may be exercised by a private undertaking amounts to further evidence that the activity in question may be described as a business activity. 103 Insurance and social security funds. The area that has given rise to most litigation concerning the definition of an undertaking is when the State can be said to be acting in accordance with principles of “solidarity” rather than engaged in an economic activity, i.e., not-for-profit mutual insurance funds. Solidarity entails, for example, the redistribution of income between those who are better off and those who, in view of their resources and state of health, would be deprived of the necessary social cover. In other words, higher contributors to the fund receive the same basic entitlement as lower contributors. In principle, activities based on the principle of solidarity are excluded from the definition of an undertaking under EU competition law. 104 In practice, however, identifying exempt activities is not straightforward. a. Situations in which healthcare and insurance activities are not “economic.” In AOK Bundesverband, 105 the Court of Justice confirmed its consistent line of case law to the effect that organisations involved in public social security systems are not public undertakings where they are engaged in an economic activity governed by the principle of solidarity. 106 It held that the regional associations of German sickness funds were not 103 See also Commission decision of 2 May 2005 in complaint No COMP/D3/38469 Athens International Airport (Athens airport operator assumed to be an undertaking). The rejection of the complaint was upheld on appeal in Case T-306/05, Isabella Scippacercola and Ioannis Terezakis v Commission [2008] ECR II-4 and Case C-159/08 P, Isabella Scippacercola and Ioannis Terezakis v Commission [2009] ECR I-46. 104 See Case 238/82, Duphar BV and others v The Netherlands [1984] ECR 523, para. 16 (“[I]t is not possible ... to equate the competent authority of a Member State which, within the framework of a health care insurance scheme financed by contributions from the insured persons and by financing from the public authorities, draws up rules governing and limiting reimbursement of the costs of health care, with an economic operator who in each case freely chooses the goods which he acquires on the market.”). 105 Joined Cases C-264/01, C-306/01, C-354/01 and C-355/01, AOK Bundesverband and others v Ichthyol-Gesellschaft Cordes and others [2004] ECR I-2493. 106 In Poucet, the Court of Justice pointed to the principle of solidarity to hold that the French organisations involved in the public social security system were not public undertakings engaged in an economic activity: “Sickness funds, and the organisations involved in the management of the public social security system, fulfil an exclusively social function. That activity is based on the principle of national solidarity and is entirely non-profit making. The benefits paid are statutory benefits bearing no relation to the amount of the contributions.” See Joined Cases C-159/91 and C-160/91, Christian Poucet v Assurances Générales de France and Caisse Mutuelle Régionale du Languedoc-Roussillon [1993] ECR I-637, para. 18. The Court noted that the principle of solidarity was reflected by the fact that the scheme was financed by contributions proportional to the income, or pensions, of the contributor, whereas the benefits were identical for all those who received them. In contrast, in Fédération Française des Sociétés d’Assurance the benefits were based on the financial results of the fund’s investments and were proportionate to the contributions paid. The manager of the scheme was thus carrying on an economic activity in competition with the life insurance companies. See Case C244/94, Fédération Française des Sociétés d’Assurance, Société Paternelle-Vie, Union des Assurances de Paris-Vie and Caisse d’Assurance et de Prévoyance Mutuelle des Agriculteurs v Ministère de l’Agriculture et de la Pêche [1995] ECR I-4013. Likewise, in Cisal the fact that the amount of benefits and contributions was, in the last resort, fixed by the State led the Court of Justice to hold that a body entrusted by law with a scheme providing insurance against accidents at work and occupational

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undertakings engaged in an economic activity. Several pharmaceutical companies challenged the maximum prices for certain products under EU competition law. The Court held that “sickness funds in the German statutory health insurance scheme … are involved in the management of the social security system and fulfil an exclusively social function which is founded on the principle of national solidarity and is entirely non-profit making.” 107 Their management was therefore not subject to Article 102 TFEU. Likewise, in FENIN, the General Court upheld the Commission’s decision that the public body responsible for the management of the Spanish national health system (SNS) was not an undertaking for the purposes of Article 102 TFEU as it was governed by the principle of solidarity: 108 “[A]n organisation which purchases goods—even in great quantity—not for the purpose of offering goods and services as part of an economic activity, but in order to use them in the context of a different activity, such as one of a purely social nature, does not act as an undertaking simply because it is a purchaser in a given market. Whilst an entity may wield very considerable economic power, even giving rise to a monopoly, it nevertheless remains the case that, if the activity for which that entity purchases goods is not an economic activity, it is not acting as an undertaking for the purposes of Community competition law and is therefore not subject to the prohibitions laid down in Articles [101](1) and 102 TFEU.”

In light of the EU Courts’ precedents, it seems that EU competition rules are unlikely to apply where: (1) the entities are engaged in an activity which forms part of a social security scheme, such as a pension or sickness insurance scheme; (2) the benefits conferred on individuals by the entities are compelled by law; (3) the level of benefits granted is not proportionate to or dependent upon the amount of the contribution paid; diseases (such as the Italian National Institute for Insurance against Accidents at Work) was not an undertaking for the purpose of EU competition law. See Case C-218/00, Cisal di Battistello Venanzio & C. Sas v Istituto nazionale per l’assicurazione contro gli infortuni sul lavoro (INAIL) [2002] ECR I691, para. 22. 107 Ibid., para. 51. The Court also noted that the sickness funds must by law offer each member essentially identical obligatory benefits regardless of each member’s contributions. Concerning the element of competition between sickness funds relating to the amount of the required contributions, the Court held that this was introduced to encourage the sickness funds to operate in accordance with the principles of sound management in the most effective and least costly manner possible, in the interest of the proper functioning of the German social security system. Further, only the precise level of the fixed maximum amounts was not dictated by legislation, but decided by fund associations having regard to the criteria laid down by the legislature. The Court concluded that the latitude available to the sickness funds when setting the contribution rate and their freedom to engage in some competition with one another in order to attract members was insufficient to classify the activity as economic. Finally, the Court held that the equalisation mechanism—which included financial compensation between the funds whose health expenditure was lowest and those whose expenditure was highest—negated any notional competition that existed between the funds. 108 Case T-319/99, Federación Nacional de Empresas de Instrumentación Científica, Médica, Técnica y Dental (FENIN) v Commission [2003] ECR II-357, para. 37, upheld on appeal in Case C205/03 P, Federación Española de Empresas de Tecnología Sanitaria (FENIN) v Commission [2006] ECR I-6295. The Court of Justice agreed that there was no need to dissociate the activity of purchasing goods from the subsequent use to which they are put in order to determine the nature of that purchasing activity, and that the nature of the purchasing activity must be determined according to whether or not the subsequent use of the purchased goods amounts to an economic activity.

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(4) the principle of solidarity is ensured by a mechanism under which there is an equalisation of costs between those entities with a higher expenditure and those with a lower expenditure; and (5) an economic activity is a prerequisite for another activity that is not economic in nature, for example where a purchasing activity does not lead to the purchased goods being used for an economic activity downstream. b. Situations in which healthcare and insurance activities may be considered “economic.” It may be possible in certain cases that the activities of a public undertaking, while primarily based on the principle of solidarity, also include elements of economic activity. For example, in a number of Member States, public hospitals offer medical services to private individuals for commercial payment. If these activities fall outside the scope of their public service obligation and are non-trivial in nature, it may be possible to argue that the public authority acts as an undertaking for purposes of competition law. The EU institutions will therefore weigh the solidarity principle against other factors to determine whether the entity is an undertaking carrying on an economic activity. The Albany case involved a supplementary pension fund based on a system of compulsory affiliation that applied a solidarity mechanism to determine the amount of contributions due and benefits received. The Court of Justice concluded that the fund was engaged in an economic activity in competition with insurance companies, noting that the fund itself determined the amount of the contributions and benefits and operated in accordance with the principle of capitalisation, i.e., the amount of benefits was calculated on the basis of the amount of contribution. 109 Moreover, the amount of the benefits provided by the fund depended on the financial results of its investments, in respect of which it was subject to supervision by the Insurance Board. Thus, the Court held that neither the fact that the fund was non-profit-making nor the fact that it pursued a social objective was sufficient to deprive it of the status of an undertaking within the meaning of EU competition law. Similarly, in Beaudout the Court of Justice reiterated that the social aim of a body was not enough and that it is further necessary for that scheme to be regarded as applying the principle of solidarity and to be subject to supervision by the State which instituted it. 110 In that case, although non-profit-making and acting on the basis of the principle of solidarity, a scheme for reimbursement of supplementary healthcare costs could be classified as an undertaking because it was engaged in an economic activity which was chosen by the social partners, on the basis of financial and economic considerations, from among other undertakings with which it is in competition on the market in the provident services which it offers. 1.3.2.3 Sporting and cultural activities Each activity to be looked at on its merits. Activities of general public interest are not limited to public authority, public safety, and health services. Sporting and cultural activities may also fall outside the ambit of economic activities and, therefore, escape 109 Case C-67/96, Albany International BV v Stichting Bedrijfspensioenfonds Textielindustrie [1999] ECR I-5751. 110 Case C-437/09, AG2R Prévoyance v Beaudout Père et Fils SARL [2011] ECR I-973.

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the application of EU competition law. However, increased professionalism in a number of different sports has brought more sporting issues within the ambit of EU competition law. The activities in which a body or organisation is involved will be considered individually and not merely on the basis that they generally concern activities that are typically non-economic in character. The fact that an entity may be involved in other non-economic activities, whether sporting, cultural or otherwise in the public interest, does not preclude the economic activities in which it is involved from the application of EU competition law. The same may be true of sport clubs and individual athletes. Each case will turn on whether the particular activity is economic or non-economic. Although there have not been any cases directly related to cultural activities to date, the treatment of professional sport as an economic activity for the purposes of establishing an undertaking subject to EU competition law has been specifically addressed by the EU Courts. In general, these cases arise under Article 101 TFEU since the rules of the particular association will often amount to a decision of an association of undertakings, and the allegedly restrictive rules will generally turn on questions of proportionality on a case-by-case basis. 111 But the issue of an undertaking has also been discussed in the case law. Meca-Medina concerned two long-distance swimmers who had been disqualified by the Court of Arbitration for Sports after having tested positive for a banned substance. 112 The General Court made clear that sport is subject to competition law only to the extent that it constitutes an economic activity. Rules which relate to the nature and context of a sporting event, particularly rules which regulate the proper conduct of sports competitions, are not subject to competition law unless such rules have economic repercussions for the individuals subject to them. The anti-doping rules in question were considered sporting rules with purely social rather than economic objectives, and were not therefore subject to competition law. By contrast, in Laurent Piau, FIFA, the international football association, was considered an undertaking for the purposes of Article 102 TFEU. 113 Since FIFA is an emanation of various football associations, of which the football clubs are undertakings, FIFA was considered an undertaking for the purposes of EU competition law. Moreover, football players’ agents who initiate and manage player transfer contracts in exchange for a fee were also considered to be involved in an economic activity for purposes of EU competition law. Similarly, in MOTOE, the not-for-profit entity responsible for organising motorcycle races in Greece was found to be acting as an But see Case AT.40208, International Skating Union’s Eligibility Rules, Commission Decision of 8 December 2017 (treating certain eligibility rules as object restrictions under Article 101 TFEU). For a discussion of recent cases, see A Bret, T Watkins, and P Williams, “Swimming Case Shows Tension Between Sport And Competition Law,” Pinsent Masons, Out-Law Analysis, 21 December 2018. 112 Case T-313/02, David Meca-Medina and Igor Majcen v Commission [2004] ECR II-3291. 113 Case T-193/02, Laurent Piau v Commission [2005] ECR II-209. See also the rejection decision in Case COMP/39471 Certain joueur de tennis professionnel /Agence mondiale antidopage, ATP Tour Inc. et Fondation Conseil international de l'arbitrage en matière de sport, 12 October 2009, where the ATP, which organises and commercialises professional tennis events, was considered an undertaking for purposes of Articles 101 and 102 TFEU. 111

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undertaking for purposes of Article 102 TFEU because its activities were not merely organisational but included entering into sponsorship, advertising and insurance contracts designed to commercialise the races. 114 By contrast, however, an entity carrying out a non-economic ancillary aspect of the organisation of sport, such as organising doping controls, may not be an undertaking. 115 It is also settled law that high-level athletes participating in an international competition can exercise an economic activity even if the competition does not involve prize money or appearance fees. 116 This is due to the fact that such services are normally remunerated and that the athlete is participating in an event that generates economic activity (e.g., tickets, advertising). Thus, not even amateur athletes are exempt from being undertakings. However, athletes employed by a club do not constitute undertakings (unless the athlete himself or herself carries out an economic activity, e.g., sponsorship agreements), 117 any more than other employees of a company do. A sporting team carrying on an economic activity (selling broadcasting rights or concluding sponsoring or advertising agreements) will, however, constitute an undertaking. 1.3.2.4 Two-sided platforms and “free” services as undertakings Usually an undertaking where monetisation occurs. In two-sided platform markets the different but inter-dependent nature of the interests of the two user groups create socalled “externalities” between them whereby, if one side benefits a lot from interaction with the other side, the former can pay much more for it. As a result, in the case of certain two-sided platform markets, one side of the market may pay nothing at all for the goods or services they consume. For example, search engines typically offer online search services for free in an effort to attract users’ attention so that that can be monetised by selling adverts to retailers and intermediaries. Social media platforms are typically free but make money by selling ads. Nightclubs sometimes offer free entry or drinks to particular groups (e.g., women) on particular nights, in an effort to attract another group interested in connecting with the former group. Of course, in many cases, the users are effectively selling a raw material to the two-sided platform in the form of access to their data, which can then be monetised by the platform. So, the service may not in truth be “free,” and the price could indeed be negative. The “free” nature of some products and services on one side of a two-sided market raises a series of discrete issues. One issue is how to define relevant markets when products or services are free. The usual test for market definition is whether a small but Case C-49/07, Motosykletistiki Omospondia Ellados NPID (MOTOE) v Elliniko Dimosio [2008] ECR I-4863. 115 See the rejection decision in Case COMP/39471, Certain joueur de tennis professionnel /Agence mondiale antidopage, ATP Tour Inc. et Fondation Conseil international de l'arbitrage en matière de sport, 12 October 2009. The same conclusion applied to the CIAS, which was entrusted with supervising the administration and financing of the Court of Arbitration for Sport (CAS) (and the CAS itself). 116 Joined Cases C-51/96 and C-191/97, Christelle Deliège v. Ligue francophone de judo etc. [2000] ECR I-2549, paras. 56-57. 117 See Advocate General Lenz in Case C-415/93, URBSFA v. Bosman ECR [1995] I-4921, para. 263. 114

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significant non-transitory increase in price (SSNIP) would be profitable for the firm concerned. This test uses data on prices and sales volumes to assess whether a hypothetical monopolist could profitably increase the prices of the products in the candidate market by 5–10% during a sustained period of time. But this test cannot easily be applied to a zero price. As discussed in Chapter Three (Market Definition), alternatives such as the significant non-transitory decrease in quality test (SSNDQ) have been attempted instead, as well as other qualitative assessments. Another issue is whether “free” services on one side constitute predatory pricing under Article 102 TFEU. This issue is discussed in detail in Chapter Seventeen (Abuses In Digital Platform Markets). The final issue, discussed, here, is whether a supplier offering a “free” service acts as an “undertaking” for purposes of Article 102 TFEU. In general, if at least one side of the two-sided market involves monetisation of the products or services, the platform will be acting as an undertaking. One simply views the users on one side of the platform as something to be “sold” to the other side, which pays for access to those users (or at least the chance to gain their attention). Thus, in Google Shopping 118 the Commission found that the provision of general search services constitutes an “economic activity” despite users not paying for such services, for three main reasons: 119 (1) even though users do not pay a monetary consideration for the use of general search services, they contribute to the monetisation of the service by providing data with each query, usually be entering into a contractual relationship with Google; (2) the level of advertising revenue that a general search engine can obtain is related to the number of users of its general search service: the higher the number of users of a general search service, the more the online search advertising side of the platform will appeal to advertisers; and (3) even though general search services do not compete on price, there are other parameters of competition between general search services, such as the relevance of results and the speed with which results are provided.

1.3.3

State Action Defence

Basic definition. Anticompetitive State measures may occur by two principal methods: (1) direct restrictions of competition through legislative or regulatory measures; or (2) situations in which the State indirectly restricts competition by requiring that private undertakings act in an anticompetitive manner. EU competition law places a number of restrictions on State actions falling into the former category. These are discussed in Section 1.4. However, the second category is also important, since an undertaking that can demonstrate the requisite degree of State involvement in its actions can avoid the application of Article 102 TFEU. 120 This is based on the notion that the State may not 118 Case AT.39740, Google Search (Shopping), Commission Decision of 27 June 2017 (currently on appeal). 119 Ibid., paras. 157-160. 120 See Case 311/85, ASBL Vereniging van Vlaamse Reisbureaus v ASBL Sociale Dienst van de Plaatselijke en Gewestelijke Overheidsdiensten [1987] ECR 3801, para. 10; Case 267/86, Pascal Van Eycke v ASPA NV [1988] ECR 4769, para. 16; Case C-18/88, Régie des télégraphes et des téléphones v GB-Inno-BM SA [1991] ECR I-5941, para. 20; Case C-2/91, Wolf W. Meng [1993] ECR I-5751, para. 14; Case C-185/91, Bundesanstalt für den Güterfernverkehr v Gebrüder Reiff GmbH & Co KG [1993] ECR I-5801, para. 14; Case C-320/91, Paul Corbeau [1993] ECR I-2533, para. 10; Case C-153/93,

Introduction, Scope of Application, and Basic Framework

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only restrict competition directly, but may also leave the actual restriction of competition to the economic operators in the market. In this situation, the undertaking escapes liability under EU competition law (but the State does not). Examples of the State action defence. According to the case law of the Community Courts, undertakings cannot be found to infringe Article 102 TFEU if: (1) the persons engaging in the restrictive conduct are acting in the public interest; or (2) the undertakings concerned were compelled to participate by a State measure; or (3) State regulation eliminated the possibility of competitive activity. Undertakings participating in a State-implemented scheme that restricts competition can raise any of these points as a defence for their participation. These defences are available irrespective of whether or not the prior State measure appears to be legal, i.e., the defendant is not required, as a condition of this defence, to challenge the validity of the measure in question. 121 However, once the measure has been declared contrary to EU competition and/or national law, any immunity ceases with immediate effect. 122 a. State nominated bodies. Anticompetitive conduct may be carried out pursuant to decisions by a State nominated body, such as a committee of experts. It may be the case that the undertakings who benefit from the anticompetitive conduct were also responsible for the appointment of the members of the body. These undertakings will only escape liability under Article 102 TFEU if the members of the body can establish that they are representatives of the public interest, and not of the undertakings who benefited from the abusive conduct complained of (even though the undertakings were responsible for their appointment to the body). To avail of this defence, it must thus be established that: (1) the members are not bound by orders or instructions from the undertakings concerned; (2) the members are required by national legislation to take into account the general public interest and are thus prevented from acting in the exclusive interests of individual undertakings or a particular industry sector; and (3) public authorities verify that the decisions taken by the body in question correspond to the public interest and if necessary, substitute their decision for that of the organisation. If these conditions are satisfied, the members of the organisation in question are considered as independent experts and decisions taken by them are treated as public acts that do not fall under Article 102 TFEU. 123 If the

Bundesrepublik Deutschland (Germany) v Delta Schiffahrts und Speditionsgesellschaft mbH [1994] ECR I-2517, para. 14; Case C-96/94, Centro Servizi Spediporto Srl v Spedizioni Marittima del Golfo Srl [1995] ECR I-2883, para. 20; Joined Cases C-140/94, C-141/94, and C-142/94, DIP SpA v Comune di Bassano del Grappa, LIDL Italia Srl v Comune di Chioggia and Lingral Srl v Comune di Chiogga [1995] ECR I-3257, para. 14. 121 Joined Cases C-359/95 P and C-379/97 P, Commission v Ladbroke Racing Ltd [1997] ECR I6265, paras. 31–33. See also Case T-228/97, Irish Sugar plc v Commission [1999] ECR II-2969, para. 130; and Case T-513/93, Consiglio Nazionale degli Spedizionieri Doganali v Commission [2000] ECR II-1807, para. 58. 122 Case C-198/01, Consorzio Industrie Fiammiferi (CIF) v Autorità Garante della Concorrenza e del Mercato [2003] ECR I-8055. 123 Case C-185/91, Bundesanstalt für den Güterfernverkehr v Gebrüder Reiff GmbH & Co KG. [1993] ECR I-5801, paras. 19 and 24; Case C-153/93, Bundesrepublik Deutschland (Germany) v Delta Schiffahrts und Speditionsgesellschaft mbH [1994] ECR I-2517, paras. 17–18; and Joined Cases C-

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above conditions are not met, the undertakings responsible for the members’ appointment will be held liable for their actions under Article 102 TFEU (assuming abusive conduct is made out). 124 The legal nature of the organisation or its classification under national law does not influence such a finding. 125 b. State compulsion. Article 102 TFEU applies only to conduct that undertakings adopt autonomously. Undertakings cannot be held responsible for anticompetitive conduct that is required by the State. 126 State compulsion may result either from State legislation or from “the exercise of irresistible pressure” 127 by State authorities, such as the threat to adopt State measures that would cause substantial losses for the undertakings concerned. On the other hand, the mere encouragement, approval or authorisation of anticompetitive conduct by State authorities is not sufficient to exempt undertakings from liability under Article 102 TFEU. 128 Because it results in the non-application of the EU competition rules, the possibility to invoke State compulsion as a defence for anticompetitive conduct is construed narrowly. An undertaking relying on this defence has to demonstrate on the facts that it “was deprived of all independent choice in its commercial policy.” 129 It must show that the State eliminated “any margin of autonomy” on the part of the undertaking. 130 Even if undertakings are forced by the State to coordinate their conduct, Article 102 TFEU may apply if the undertakings enjoy a margin of discretion with regard to their conduct.

140/94, C-141/94, and C-142/94, DIP SpA v Comune di Bassano del Grappa, LIDL Italia Srl v Comune di Chioggia and Lingral Srl v Comune di Chiogga [1995] ECR I-3257, para. 18. 124 Case T-513/93, Consiglio Nazionale degli Spedizionieri Doganali v Commission [2000] ECR II1807, paras. 54–56; Case C-35/96, Commission v Italy (Customs agents) [1998] ECR I-3851, paras. 41– 45. 125 Case 123/83, Bureau national interprofessionnel du cognac v Guy Clair [1985] ECR 391, para. 17; Commission v Italy (Customs agents), ibid., para. 40. 126 Case T-513/93, Consiglio Nazionale degli Spedizionieri Doganali v Commission [2000] ECR II1807, para. 58; Case T-387/94, Asia Motor France SA and others v Commission [1996] ECR II-961, para. 61; Joined Cases C-359/95 P and C-379/97 P, Commission v Ladbroke Racing Ltd [1997] ECR I6265, para. 33; Case T-228/97, Irish Sugar plc v Commission [1999] ECR II-2969, para. 130. This applies also where compulsion is exercised by a non-Member State. See Franco-Japanese Ballbearings, IIIrd Report on Competition Policy (1974), para. 20. 127 Case T-387/94, Asia Motor France SA and others v Commission [1996] ECR II-961, para. 65. Case C-198/01, Consorzio Industrie Fiammiferi (CIF) v Autorità Garante della Concorrenza e del Mercato [2003] ECR I-8055, paras. 22-25. 128 Case 13/77, SA GB-Inno-BM v Association des détaillants en tabac (ATAB) [1977] ECR 2115, para. 34; Joined Cases 43/82 and 63/82, Vereniging ter Bevordering van het Vlaamse Boekwezen, VBVB, and Vereniging ter Bevordering van de Belangen des Boekhandels, VBBB, v Commission [1984] ECR 19, para. 40; Case T-151/89, Société de Treillis et Panneaux Soudés v Commission [1995] ECR II1191, para. 99; Case T-37/92, Bureau Européen des Unions des Consommateurs and National Consumer Council v Commission [1994] ECR II-285, para. 69; Case T-387/94, Asia Motor France SA and others v Commission [1996] ECR II-961, para. 71; Franco-Japanese Ballbearings, IIIrd Report on Competition Policy (1974); Aluminium imports from eastern Europe, OJ 1985 L 92/1, para. 10; Question left open in Case 260/82, Nederlandse Sigarenwinkeliers Organisatie v Commission [1985] ECR 3801, para. 30. 129 Case T-228/97, Irish Sugar plc v Commission [1999] ECR II-2969, para. 129. 130 Case T-387/94, Asia Motor France SA and others v Commission [1996] ECR II-961, para. 63.

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In such a case the undertakings must adopt the solution that restricts competition in the least possible way in order to comply with Article 102 TFEU. 131 c. Regulatory elimination of competition. Where State regulation eliminates any possibility of competitive activity, Article 102 TFEU does not apply since the conduct of undertakings cannot affect the competitive structure of the market. 132 Whether State regulation eliminates the possibility of competitive activity depends on a detailed analysis of the facts of the case and will only be assumed under exceptional circumstances. State regulation must reduce competition to such an extent that the remaining scope for competition loses all significance. 133 The fact that State regulation limits the scope of competition or renders competition more difficult is not sufficient to exclude an application of Article 102 TFEU. In such circumstances Article 102 TFEU requires undertakings to respect the scope of competition left by State regulation. 134 The Commission considers it all the more important where State measures limit the scope of competition to avoid any added restrictive effects by private action. 135 The scope of the State regulatory action defence under Article 102 TFEU was raised in Deutsche Telekom case. 136 The case concerned the prices Deutsche Telekom (DT) charged its competitors for unbundled access to local loops in Germany. The Commission received complaints from competitors of DT, who claimed that these 131 See Case T-513/93, Consiglio Nazionale degli Spedizionieri Doganali v Commission [2000] ECR II-1807, paras. 71–73. The Italian association of custom agents was required by national legislation to adopt a tariff for the services of custom agents. However, the legislation did not impose certain price levels. Because the association enjoyed a margin of discretion in this regard the Court of Justice held that the association infringed EU competition law by adopting a minimum price that exceeded the prices then in force by 400%. 132 Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114-73, Coöperatieve Vereniging “Suiker Unie” UA and others v Commission [1975] ECR 1663, paras. 67–72; Case T-513/93, Consiglio Nazionale degli Spedizionieri Doganali v Commission [2000] ECR II-1807, para. 58; Asia Motor, above, para. 61; Joined Cases C-359/95 P and C-379/97 P, Commission v Ladbroke Racing Ltd [1997] ECR I-6265, para. 33; Irish Sugar, above, para. 130. 133 The principal case where the defence has been successful so far is Suiker Unie, ibid. The Court of Justice held that the regulation of the Italian sugar market had fundamentally restricted competition such that the conduct of undertakings could not appreciably affect competition (paras. 67–72). The Court also observed that without the Italian regulation the conduct of the undertakings would have been different from that which effectively took place (para. 65). However, it does not appear that this can be invoked as an independent defence without showing that State regulation eliminated the possibility of competitive activity. 134 Joined Cases 209 to 215 and 218/78, Heintz van Landewyck SARL and others v Commission [1980] ECR 3125, paras. 131–132; Joined Cases 240, 241, 242, 261, 262, 268 and 269/82, Stichting Sigarettenindustrie and others v Commission [1985] ECR 3831, para. 29; Case T-513/93, Consiglio Nazionale degli Spedizionieri Doganali v Commission [2000] ECR II-1807, para. 72. 135 See Joined Cases 209/78 et al., Heintz van Landewyck SARL and others v Commission [1980] ECR 3125, para. 124; Stichting Certificatie Kraanverhuurbedrijf and the Federatie van Nederlandse Kraanverhuurbedrijven, OJ 1994 L 117/30, para. 239. 136 Deutsche Telekom AG, OJ 2003 L 263/9, upheld on appeal in both Case T-271/03, Deutsche Telekom AG v Commission [2008] ECR II-447 and Case C-280/08 P, Deutsche Telekom AG v Commission [2010] ECR I-9555. For commentary, see a series of articles in Competition Policy International Antitrust Chronicle (Spring 2008) Volume 5, Number 1. See also France Télécom/SFR Cegetel/Bouygues Télécom, Conseil de la Concurrence, Décision No. 04-D48 of 14 October 2004, where similar principles were applied in rejecting the defence.

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prices were incompatible with Article 102 TFEU. In its defence, DT argued that its local access tariffs had been approved by the national regulatory authority (NRA), the RegTP. DT contended that if there was any infringement of EU competition law, the Commission should not be acting against an undertaking whose charges were regulated, but against Germany under Article 258 TFEU. 137 The Commission, however, rejected that argument on the ground that “competition rules may apply where the sector-specific legislation does not preclude the undertakings it governs from engaging in autonomous conduct that prevents, restricts or distorts competition.” 138 The Commission considered that, despite the intervention of the RegTP, DT retained a commercial discretion, which would have allowed it to restructure its tariffs further so as to reduce or put an end to the margin squeeze. 139 These findings were upheld on appeal by the EU Courts. 140 Of particular note is the Court of Justice’s finding that the fact that the RegTP had in fact considered Deutsche Telekom’s pricing practice from the perspective of margin squeeze under both regulatory law and Article 102 TFEU without finding a violation was irrelevant because: (1) Deutsche Telekom still had the freedom to adjust its prices and in particular could apply to the RegTP to alter them; and (2) even if the RegTP had misapplied Article 102 TFEU, the possibility of the Commission bringing infringement proceedings against Germany was irrelevant to an infringement by Deutsche Telekom under Article 102 TFEU. 141 A similar conclusion was reached in Telefónica. 142 The EU Courts’ judgments on this point seem extremely harsh in some respects on the defendants. 143 What seems particularly unfair in Deutsche Telekom was that the NRA had specifically considered the issue of margin squeeze in at least five separate decisions, including decisions based on Article 102 TFEU, and concluded that there was no anti-competitive squeeze because the business model was based on firms selling access at a low price and recouping additional amounts through call charges. 144 It seems unfair on the defendant to have conduct examined in detail under a series of rules, including Article 102 TFEU, by the competent regulator only for the Commission to decide some years later that the same pricing was abusive after all. 145 This places Deutsche Telekom, ibid., para. 53. Ibid., para. 54. 139 Ibid., para. 57. 140 See Case T-271/03, Deutsche Telekom AG v Commission [2008] ECR II-447 (paras. 101-107 and 121-149) and Case C-280/08 P, Deutsche Telekom AG v Commission [2010] ECR I-9555 (paras. 8085). 141 Ibid., paras. 84-91. National margin squeeze decisions have followed Deutsche Telekom on this point. See, e.g., French Competition Council decision of 14 October 2004, 04-D-48, France Telecom, SFR Cegetel et Bouygues Telecom (confirmed by Court de cassation, 10 May 2006, Etna France and Paris Court of Appeals, 2 April 2008, SFR et France Telecom) and French Competition Council decision of 28 June 2007, case 07-MC-04, Direct Energie (interim measures). 142 See also Case T-336/07, Telefónica and Telefónica de España v Commission EU:T:2012:172, paras. 289, 290, 293, 299, and 301. 143 See R O’Donoghue, “Regulating The Regulated: Deutsche Telekom v European Commission,” Antitrust Chronicle (Spring 2008) Volume 5, Number 1. 144 Case T-271/03, Deutsche Telekom AG v Commission [2008] ECR II-447, para. 115. 145 The outcome would have been different under US antitrust law. Following Verizon Communications Inc v Law Offices of Curtis V. Trinko LLP, 540 U.S., 2, 682, (2004), there would be 137 138

Introduction, Scope of Application, and Basic Framework

35

regulated companies in a quandary: they must comply with any non-competition objectives sought by the NRA under ex ante regulation and at the same time respect the primacy of ex post competition law objectives, even in circumstances where the two regimes clearly overlap and pursue similar objectives. The costs of getting this wrong and being forced to second-guess the NRA are obviously enormous (consider the €152 million fine imposed in Telefónica). Whether regulatory action will be a defence will obviously vary from case to case, but a number of general remarks can be made. First, the scope for residual application of competition law in circumstances where there is also regulation of course depends on the level of detail of the regulatory regime. The more prescriptive and detailed the regulatory framework, the less likely that competition law has any residual role. One useful contrast is between Deutsche Telekom—where the EU institutions applied Article 102 TFEU notwithstanding the existence of regulation—and Trinko—where the United States Supreme Court refused to apply Section 2 of the Sherman Act in circumstances where a regulatory framework also existed. 146 An important factor in this regard was that the US regulatory regime applicable to telecommunications—the 1996 Telecommunications Act and its numerous implementing orders—is more extensive than the EU regulatory framework on electronic communications. The 1996 Act is a 600-page piece of legislation, which regulates in enormous detail the various aspects of the US telecommunications industry. By contrast, the new EU regulatory framework on electronic communications is composed of a small number of directives imposing a limited number of obligations on operators holding significant market power. 147 Second, when there is a sector-specific remedy that protects a competitive market structure in a given industry, and which has been correctly enforced by a national regulator and that does not violate EU competition rules (i.e., there is an “effective” regulatory remedy), a competition authority should not intervene. Sector-specific regulators will be generally better placed than the Commission to address the relevant issues, such as the pricing of wholesale inputs or retail products, etc. These issues require technical expertise, as well as a range of information, that the Commission does not generally possess. 148 Moreover, pricing decisions require constant monitoring (e.g., as costs evolve), which is not compatible with competition authorities’ publicly-stated reluctance to act as price control agencies. 149 Further, having two sets of rules and two

no scope for applying Section 2 of the Sherman Act to a regulated market. See generally S Genevaz, “Margin Squeeze After Deutsche Telekom,” Antitrust Chronicle (Winter 2009) Volume 1, Number 1. 146 See Verizon Communications Inc v Law Offices of Curtis V. Trinko LLP, 540 US 398 (2004). 147 See A de Streel, “The Integration Of Competition Law Principles In The New European Regulatory Framework For Electronic Communications,” (2003) 26 World Competition 489; D Geradin and JG Sidak, “European And American Approaches To Antitrust Remedies And The Institutional Design Of Regulation In Telecommunications,” in M Cave, S Majumdar, and I Vogelsang (eds.), Handbook Of Telecommunications Economics, Elsevier (2005) (Vol. 2). 148 See Organisation for Economic Co-operation and Development, “Relationship Between Regulators And Competition Authorities,” DAFFE/CLP(99)8, Ch. 8. 149 See, e.g., Xth Report on Competition Policy (1975) point 76.

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distinct authorities determining a similar issue raises the risk of contradictory decisions or the imposition of inconsistent remedies. 150 Finally, when there is a sector-specific regime designed to protect a competitive market structure, but that regime has not been applied by the regulator (i.e., the presence of a “lazy” and/or “captured” regulator), competition authorities should be free to launch proceedings on the basis of Article 102 TFEU. The Commission should also be entitled to act when the decision adopted by the NRA is not compatible with EU competition law. 151 In this scenario, however, as the Commission has done in the majority of cases in the telecommunications sector to date, the case should be transferred to the NRA to allow it to take a decision on the basis of the sector-specific legislation. 152 But such a transfer should only take place when the Commission is confident that the matter will be sufficiently addressed by the NRA(s) on the basis of sector-specific rules. This was, apparently, not the case in Deutsche Telekom.

1.3.4

Parent Liability For Subsidiary Actions Under Article 102 TFEU

The single economic unit doctrine. Entities that form part of a “single economic unit” cannot be found liable for violating Article 101 TFEU, e.g., restrictive agreements between a parent and a wholly-owned subsidiary. 153 The rationale is that there is no meaningful scope for competition between a parent and a wholly-owned subsidiary, since the parent could always achieve the same result as the agreement by exercising its prerogatives as shareholder. By the same token, however, companies that belong to the same economic entity constitute a single “undertaking” for purposes of Article 102 TFEU. 154 This is presumably based on the fact that an undertaking should not be able to circumvent the obligations arising from Article 102 TFEU by means of internal re-structuring, e.g., by splitting its business between different subsidiaries in order to reduce the market share held by each separate legal entity. If not, an undertaking could in theory arrange for several of its subsidiaries to carry out aspects of the infringing conduct, and, once all rivals had been foreclosed, recombine the businesses of its separate subsidiaries, without intervention under Article 102 TFEU.

150 See N Petit, “The Proliferation Of National Regulatory Authorities Alongside Competition Authorities: A Source Of Jurisdictional Confusion,” 02/04 Global Competition Law Centre Working Paper Series (Bruges, College of Europe). 151 In such case, the Commission could not only start proceedings against the incumbent as it did in Deutsche Telekom, but it could also launch proceedings against the NRAs themselves on the basis of Article 4(3) TEU. See section 1.4 below. 152 See, e.g., the approach taken by the Commission with regard to the pricing of leased lines and mobile termination charges. See Commission press release IP/02/1852 of 11 December 2002. See also Commission press release IP/98/707 of 27 July 1998. 153 See, e.g., Case C-73/95 P, Viho Europe BV v Commission [1996] ECR I-5457. 154 See, e.g., Chiquita, OJ 1976 L 95/1, para. 1, confirmed on appeal in Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207 (“United Brands Company … and its other subsidiary companies, which are under its control and do not possess any real autonomy, form a single economic unit and therefore constitute an undertaking within the meaning of Article [102].”). See also ECS/AKZO, OJ 1985 L 374/1, para. 90.

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Two entities are likely to form part of a single economic unit if one or more of the following conditions are met: (1) the subsidiary is wholly owned by the parent; 155 (2) the parent has a majority of voting rights, the right to appoint a majority of board members, and/or the right to appoint or otherwise control management; 156 (3) the parent issues very precise directions to the subsidiary; 157 (4) the parent has the right to approve all decisions within an area essential to the subsidiary’s operations; 158 (5) the parent and subsidiary share a common marketing strategy 159 or sales team; 160 (6) the two companies cooperate on a relatively permanent basis in other ways, such as the exchange of information, innovation, patents, and know-how; 161 (7) the parent and the subsidiary themselves consider that the subsidiary is not an autonomous entity; 162 and/or (8) the parent actually exercises its rights to control the subsidiary. 163 Circumstances in which a parent may be responsible for subsidiary conduct. In addition to the question of delineating the scope of the undertaking that may be subject to Article 102 TFEU, a second question arises regarding whether and in what circumstances a parent company may be imputed liability for agreements or practices entered into or committed by its subsidiary. This issue has primarily arisen in the context of cartel agreements under Article 101 TFEU where the consequences of a parent company being drawn into a formal Commission decision in circumstances where it was not itself a direct participant in the infringement agreement(s) may be of considerable practical importance in terms of fines, follow-on damages actions (including, notably, on issues of jurisdiction), and the parent’s reputation. By contrast, under Article 102 TFEU, this issue has tended to be of lesser importance. For a number of years there was a lack of clarity in the case law on the issue of imputation. Two different strands of thought applied. The first was that sole control over a subsidiary conferred strict liability for the conduct of that subsidiary. 164 The 155 See Case 107/82, Allgemeine Elektrizitäts-Gesellschaft AEG-Telefunken AG v Commission [1983] ECR 3151, para. 50. 156 See Gosme/Martell-DMP, OJ 1991 L 185/23; Eirpage, OJ 1991 L 306/22, para. 9. 157 See Kodak, OJ 1970 L 147/24. See also Case 48/69, Imperial Chemical Industries Ltd v Commission (Dyestuffs) [1972] ECR 619, para. 133. 158 See Distribution of Package Tours During the 1990 World Cup, OJ 1992 L 326/31. 159 See Case 30/87, Corinne Bodson v SA Pompes Funèbres des regions libérées [1988] ECR 2479, para. 20. 160 See Case C-73/95 P, Viho Europe BV v Commission [1996] ECR I-5457, para. 17. 161 See Christiani & Nielsen, OJ 1969 L 165/12. 162 See Gosme/Martell-DMP, OJ 1991 L 185/23, para. 30. 163 See Case 48/69, Imperial Chemical Industries Ltd v Commission [1972] ECR 619, paras. 130– 135. 164 According to this view, 100% ownership of a subsidiary creates a presumption that the parent has sole control, in the sense that full ownership normally allows it to exercise decisive influence over the strategic commercial behaviour of the subsidiary. This presumption can be rebutted only by showing that, despite 100% ownership, the parent company does not have sole control—for example, where the parent had temporarily assigned or otherwise ceded certain key rights over the subsidiary to a third party (e.g., under a management contract). It is irrelevant, under this view, whether the parent effectively exercised decisive influence over the subsidiary’s commercial behaviour and/or the infringing conduct. All that is relevant is that it had the ability to do so. See generally W Wils, “The Undertaking As Subject Of EC Competition Law And The Imputation Of Infringements To Natural Or Legal Persons,” (2000) 25(2) European Law Review 99.

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basic argument was that it was the ability to exercise decisive control that mattered and that a parent with such ability formed a single undertaking with its subsidiary (or “single economic unit”). 165 The alternative view was that mere ability to exercise decisive influence over a subsidiary was not, in itself, sufficient to impute liability for competition law infringements to the parent: it only created a rebuttable presumption. This view was predicated on a notion of at least minimal culpability on the part of the parent. Or, put another way, to make the parent liable without requiring a connection between the unlawful matter and the conduct of the parent company would infringe the doctrine of personal liability. 166 Its proponents argued that a parent should escape liability for its 100% owned subsidiary’s conduct if it demonstrated either that: (1) it does not have the ability to exercise decisive influence over the subsidiary; or (2) while it has the ability to exercise decisive influence, it did not (a) actively direct the subsidiary’s infringing conduct, (b) know of the subsidiary’s infringing conduct, and (c) act negligently in its oversight duties, i.e., it could not have been expected to have known and prevented the conduct. This issue has now largely been resolved in Akzo, 167 where the Court of Justice favoured an approach based on a rebuttable presumption of decisive influence in the case of sole control by a parent over a subsidiary. 168 The Court underscored the personal nature of culpability for infringements of EU competition law, meaning that it falls to the infringing entity to answer for the infringement. This means in particular that the infringement must be imputed unequivocally to a legal person on whom fines may be imposed and the Statement of Objections must be addressed to that person. On imputation specifically the Court held that: (1) conduct of a subsidiary may be imputed to a parent company where, although having a separate legal personality, that subsidiary does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company; (2) in the case of a 100% parent company shareholding, there is a rebuttable presumption that the parent company does in fact exercise a decisive influence over the conduct of its subsidiary; (3) the presumption stands alone in the sense that it does not require additional indicia above and beyond the existence of a 100% shareholding; and (4) the parent company bears the burden of rebutting the presumption by adducing sufficient evidence that the subsidiary decides its own conduct on the market. The latter evidence may include any evidence relating to the organisational, economic and legal 165 By contrast, the principle of corporate separateness is often applied outside the EU in competition law cases, notably in the United States. For a discussion see M Leddy, “Piercing the Corporate Veil in Competition Cases,” in Europäisches, Deutsches Und Internationales Kartellrecht, Festschrift For Dirk Schroeder Zum 65 Geburtstag, edited by J Kokott, P Pohlmann, and R Polley (2018) (Otto Schmidt). 166 See A Kalintiri, “Revisiting Parental Liability in EU Competition Law,” E.L. Rev. 2018, 43(2), 145 at p.156. 167 Case C-97/08 P, Akzo Nobel NV and Others v Commission [2009] ECR I-8237. 168 The existence of a single economic unit may occasionally have some positive implications. The Court of Justice has held for example that where the liability of a parent company for a cartel infringement is wholly derived from that of its subsidiary, and where both companies have appealed seeking a reduction of the fine on grounds of the duration of the infringement, the Court is entitled to take account of the outcome of the action brought by the subsidiary in the parent company’s appeal, even if the scope of applications of the companies and the arguments relied on to contest duration are not identical. See Case C-286/11 P, Tomkins plc v Commission EU:C:2013:29.

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39

links between its subsidiary and itself which are apt to demonstrate that they do not constitute a single economic entity. 169 The Akzo presumption has also been broadened further. It is clear that it can also be applied to parent companies that hold nearly 100% of the subsidiary’s shares. 170 And it can also be applied where the control is exercised via an intermediate company. 171 It is thus clear that the parent’s liability can arise by mere fact of being the parent, and irrespective of any direct involvement of the parent in the infringement committed by the subsidiary: “in certain circumstances, a legal person who is not the perpetrator of an infringement of the competition rules may nevertheless be penalised for the unlawful conduct of another legal person, if both those persons form part of the same economic entity.” 172 Equally, there is no requirement that the parent company is at “fault” as respects the subsidiary’s commission of the infringement: “what counts is not whether the parent company encouraged its subsidiary to commit an infringement …, or whether it was directly involved in the infringement committed by its subsidiary, but the fact that those two companies constitute a single economic unit and thus a single undertaking … which enables the Commission to impose a fine on the parent company.” 173 It is also clear that the Commission “may choose to penalise either the subsidiary that participated in the infringement or the parent company that controlled it during that period or both of them jointly and severally.” 174 However, the subsidiary’s liability

In theory, the presumption can be rebutted by, e.g., showing that: the parent company is an investment company and behaves like a pure financial investor; the parent company holds 100% of the shares in the subsidiary only temporarily and for a short period; or the parent company is prevented for legal reasons from fully exercising its 100% control over the subsidiary. See Advocate General Kokott in Case C-97/08 P, Akzo Nobel NV and Others v Commission [2009] ECR I-8237, para. 75, footnote 67, and the cross-references therein. In practice, the presumption is very rarely rebutted: see, e.g., J Joshua, Y Botteman, and L Atlee, “‘You Can’t Beat the Percentage:’ The Parental Liability Presumption in EU Cartel Enforcement,” (2012) The European Antitrust Review, 3, 5; I Vandenborre and TC Goetz, “Rebutting the Presumption of Parental Liability–A Probatio Diabolica?,” in The International Comparative Legal Guide To: Cartels & Leniency 2012, at 17 (Global Legal Grp. ed., 2012); and M Bronckers and A Vallery, “No Longer Presumed Guilty? The Impact of Fundamental Rights on Certain Dogmas of EU Competition Law,” 34 World Competition Law and Economics Review, 535, 535–70 (2011). In Case T-185/06, L’Air liquide, société anonyme pour l’étude et l’exploitation des procédés Georges Claude v Commission, EU:T:2011:275, the General Court annulled the decision due to the Commission’s failure to consider evidence from the defendant which, the defendant suggested, rebutted the presumption. But this was a procedural annulment: the General Court did not find that the presumption was in fact rebutted. See also Case C-521/09 P, Elf Aquitaine SA v Commission EU:C:2011:620, para. 63 (decision was partially set aside due to an inadequate statement of reasons concerning the fine imposed on Elf Aquitaine). 170 See Case T-217/06 Arkema France, Altuglas International SA, Altumax Europe SAS v Commission EU:T:2011:251, para. 53. 171 See, e.g., Case C-90/09 P General Química and Others v Commission EU:C:2011:21, paras. 8490. 172 Cases C-231/11 P to C-233/11 P Commission v Siemens Österreich and Others et Siemens Transmission & Distribution and Others v Commission, EU:C:2014:256, para. 45 (emphasis added). For an example of the practical difficulties of rebutting the presumption of decisive influence see Case C-508/11 P Eni SpA v Commission EU:C:2013:289. 173 Case C-90/09 P General Química and Others v Commission EU:C:2011:21, para. 102. 174 Case T-146/09 Parker ITR and Parker-Hannifin v Commission EU:T:2013:258, para. 125. 169

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The Law and Economics of Article 102 TFEU

should be confined “to the extent that it itself participated in the infringement.” 175 Issues of parent/subsidiary imputation initially featured relatively rarely in Article 102 TFEU cases. In the earlier phases of the development of Article 102 TFEU, abuses either tended to be national in nature or to concern a series of national markets and centrally coordinated abusive policies. In either case, the issue of imputation did not typically arise. More recently, however, the Commission has reoriented its priorities around major EU-wide or global abuses such as in the Microsoft, Intel, and the various Google proceedings. In such cases, the parent company has typically been a defendant in its own right in the Commission proceedings. Thus, in its most recent Article 102 TFEU decisions in Shopping, 176 Android, 177 AdSense, 178 the Commission also addressed the decision to the parent company, Alphabet Inc., despite the fact that it was not found that it had any direct role in the infringements found by the Commission. In AstraZeneca the dominant firm contested the Commission’s view that the abusive conduct results from a decision taken centrally at a management level and implemented by national marketing companies. 179 The General Court did not disturb this finding, since the national companies were wholly owned by AstraZeneca. In this circumstance, the Court held that it was not necessary to examine whether AstraZeneca was able to exert decisive influence over the policy of its subsidiaries, since those subsidiaries necessarily follow a policy laid down by the same executive bodies as those which determine that parent company’s policy. There was in any event evidence that the documents to which the Commission referred on the deregistration acts emanated from AstraZeneca’s central management and indicated that its management bodies were heavily involved. 180 Similarly in Telefónica the Commission treated the parent company Telefónica S.A. and its three as a single economic entity in the Spanish broadband markets for purposes of the abuse. 181 This was on the basis that: (1) they had consistently been treated as a single economic unit by the national regulatory authority; (2) they were 100% owned by the parent; and (3) the parent company “could not have been unaware of” the subsidiary’s conduct. 182 Ibid., para. 126. Case AT.39740, Google Search (Shopping), Commission Decision of 27 June 2017 (currently on appeal). 177 Case AT.40099, Google Android, Commission Decision of 18 July 2018 (currently on appeal). 178 Case AT.40411, Google Search (AdSense), Commission Decision of 20 March 2019 (currently on appeal). 179 See Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, paras. 818-822 (on appeal Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770). 180 In Wanadoo the Commission did not address the Article 102 TFEU decision to the parent company France Télécom. It did note, however, that the strategy pursued by the subsidiary could not be completely dissociated from the objectives of the parent company, and it examined those objectives without elevating them to specific objections. See Case COMP/38.233, Wanadoo Interactive, Commission decision of 16 July 2003, paras. 285 et seq. 181 Wanadoo España v Telefónica, OJ 2008 C 83/5, upheld on appeal in Case T-336/07, Telefónica and Telefónica de España v Commission, EU:T:2012:172 and on further appeal in Case C-295/12 P Telefónica and Telefónica de España v Commission, EU:C:2014:2062. 182 Ibid., paras. 703-707. 175 176

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Whilst technically correct that liability can be imputed to a parent company who exercises decisive influence over an infringing subsidiary, it is unclear why the Commission now, almost reflexively, makes parent companies with no direct role in the infringement addressees in their own right of decisions in Article 102 TFEU cases. Certainly, the subsidiary’s ability to pay the fine cannot be the reason in all but exceptional cases. One explanation is that such an approach is more likely to focus the mind of the parent company on group-wide compliance in other areas. But it is hard to imagine how the high levels of fines generally imposed by the Commission would not have the same effect even if the decision had only been addressed to the subsidiary. Another explanation is that it is easier to impose an increase for specific deterrence under the current Fining Guidelines—which permit an increase in the fine to be imposed on undertakings which have a particularly large turnover beyond the sales of goods or services to which the infringement relates—if the group parent is an addressee. 183

1.4

RELATIONSHIP BETWEEN ARTICLE 102 TFEU AND OTHER LEGAL INSTRUMENTS

Overview. As part of the competition chapter of the TFEU, Article 102 TFEU raises a number of issues concerning its interaction with other provisions of EU competition law, as well as other legal instruments. A basic and preliminary point is that Article 102 TFEU must be interpreted in light of the general principles of EU law such as proportionality, equality, and the rule of law. The next issue concerns the relationship between Articles 101 and 102 TFEU. It is well-established that both provisions can apply in parallel and that decisions under each provision should not seek to undermine their common aims. But it is not entirely clear where the boundary between Articles 101 and 102 TFEU lies. A second area of interface is between Article 102 TFEU and merger control laws, and in particular whether there is continued scope for applying Article 102 TFEU to mergers and acquisitions. A third issue concerns the relationship between Article 102 TFEU and the other Treaty provisions that affect State measures which restrict competition. As noted above, EU law on State action is not limited to the State action defence: it also imposes a number of affirmative obligations not to restrict competition directly on the State. The final area of interaction between Article 102 TFEU and other instruments of EU competition law concerns the interface between principles of competition law and the objectives of regulation. Article 102 TFEU also interacts with legal instruments and systems of enforcement. Most notably, Member States remain competent under the Commission’s modernisation reforms to apply their national abuse of dominance laws in parallel and to adopt stricter principles than would apply under Article 102 TFEU. Similarly, they remain competent to apply national laws that pursue predominantly different objectives to Article 102 TFEU, such as unfair competition laws. Finally, Article 102 TFEU is often applied in the context of arbitration and the interaction between this method of dispute resolution and Article 102 TFEU raises a number of legal and practical issues. Guidelines On The Method Of Setting Fines Imposed Pursuant To Article 23(2)(a) of Regulation No 1/2003, OJ 2006 C 210/2, point 30. 183

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1.4.1

Article 102 TFEU And General Principles Of EU Law

General principles of EU law. Article 102 TFEU must be interpreted in light of the general principles of EU law since the general principles are a superior norm to the TFEU Articles themselves. These principles have been developed through the case law of the EU Courts and include, for example, the guarantee of proportionality, subsidiarity, equality, legal certainty, rights of defence, and the duty of good administration in the application of EU competition law. 184 These principles have been applied in numerous EU competition cases. For example, in France v Commission, the Court of Justice held that even if the EU Merger Regulation contained no express power for third parties to be heard in the event that they would be considered as being in a collectively dominant position with the merging parties, 185 “observance of the right to be heard was nonetheless, in all proceedings liable to culminate in a measure adversely affecting a particular person, a fundamental principle of [EU] law which must be guaranteed even in the absence of any rules governing the procedure.” Thus, general principles of law can imply superior substantive and procedural rules even where none are provided in primary or secondary EU legislation or case law. In KME, the Court of Justice held that the duty of good administration means that the Commission must conduct “… a diligent and impartial examination of the evidence at its disposal…” 186 Fundamental rights and EU competition law. By virtue of a series of judgments, 187 it is also “well settled that fundamental rights form an integral part of the general principles of law whose observance the Court ensures.” 188 To this end, the EU Courts rely on the constitutions of Member States and the international treaties to which Member States are party, with specific reference to the European Convention of Human 184 See generally T Tridimas, The General Principles Of EC Law, Oxford University Press (2006) (2nd edn.); and K Lenaerts and P Van Nuffel, R Bray (eds.), Constitutional Law Of The European Union, Sweet and Maxwell (2005). 185 Joined Cases C-68/94 and C-30/95, France and Société commerciale des potasses et de l’azote (SCPA) and Entreprise minière et chimique (EMC) v Commission [1998] ECR I-1375, para. 174. 186 Case C-272/09 P KME Germany v Commission, [2011] ECR I-810, paras. 106-107. 187 In Internationale Handelsgesellschaft, the Court of Justice held that fundamental rights formed part of the general principles of EU law that it was obliged to uphold, and that it should be guided by the constitutional traditions of the Member States in safeguarding those rights. See Case 11/70, Internationale Handelsgesellschaft mbH v Einfuhr und Vorratsstelle für Getreide und Futtermittel [1970] ECR 1125. The Nold ruling reinforced Internationale Handelsgesellschaft and also referred specifically to international treaties (though not to the ECHR itself) which Member States had ratified as guidelines to be followed within the framework of EU law. No measure could have the force of law unless it was compatible with the fundamental rights recognised and protected by the Member States’ constitutions. See Case 4/73, J. Nold, Kohlen und Baustoffgroßhandlung v Commission [1974] ECR 491. In Rutili, the Court of Justice referred explicitly to the ECHR. See Case 36/75, Roland Rutili v Ministre de l’intérieur [1975] ECR 1219. In Wachauf, the Court of Justice ruled that its review powers extended to the acts of Member States, to the extent that they fell within areas of EU law. See Case 5/88, Hubert Wachauf v Bundesamt für Ernährung und Forstwirtschaft [1989] ECR 2609. The liability of Member States to apply fundamental rights was made clear in the ERT case, in which the Court of Justice ruled that States were obliged by EU law to respect fundamental rights when they implement it or when they rely on derogations from fundamental Treaty rules. See Case 22/70, Commission v Council (European Agreement on Road Transport) [1971] ECR 263. 188 Opinion 2/94, Accession by the Community to the European Convention for the Protection of Human Rights and Fundamental Freedoms [1996] ECR I-1759.

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Rights (ECHR), as sources of interpretation. It is thus accepted that the protection of human rights is guaranteed in EU competition law. In Huls the applicant contested a Commission decision that it had infringed Article 101 TFEU on the basis that the Commission had breached its fundamental right to the presumption of innocence as guaranteed by Article 6(2) of the ECHR. Although the Court held that the presumption of innocence had not been infringed, it stated that the principle is one of the fundamental rights that is protected under EU law. 189 The increased role of fundamental rights in the context of competition law cases has been one of the most significant developments in EU competition law in the last several years. This has been motivated by several factors. First, the EU itself is keen to become a contracting party to the ECHR in its own right, albeit the process has been long and tortuous. A final version of the draft accession agreement was agreed on 5 April 2013. 190 However, in 2014, the Court of Justice rendered a negative opinion on the compatibility of the (draft) accession agreement with EU law. 191 Solutions are currently being considered, including renegotiation of the agreement, which would also depend on ratification, not only by Member States, but also the States party to the Convention, as well as the consent of European Parliament. The latest position is that, on 7 October 2019, the Council reaffirmed its commitment to the accession (after it received a written submission from the Commission addressing the objections raised by the Court of Justice), and agreed to allow for a swift resumption of negotiations with the Council of Europe. Second, irrespective of formal accession, the EU Courts have, relying on the Charter of Fundamental Rights of the European Union adopted in 2000, 192 made clear that various ECHR obligations reflected in the Charter are general principles of EU law, and cited Charter provisions with increasing frequency in competition law and other EU law cases. 193 For example, in KME, 194 the Court of Justice accepted that the principle of effective judicial protection is a general principle of EU law to which expression is

Case C-199/92 P, Hüls AG v Commission [1999] ECR I-4287, para. 149. This principle “applies to the procedures relating to infringements of the competition rules applicable to undertakings that may result in the imposition of fines or periodic penalty payments.” (para. 150) Huls was confirmed in the Sumitomo case. See Joined Cases T-22/02 and T-23/02, Sumitomo Chemical Co Ltd and Sumika Fine Chemicals Co Ltd v Commission [2005] ECR II-4065, para. 105. See also Opinion of Advocate General Kokott in Case C-105/04 P, Nederlandse Federatieve Vereniging voor de Groothandel of Elektrotechnisch Gebied and Technische Unie (FEG) v Commission [2006] ECR I-8725. The severity of potential penalties imposed by competition law is therefore sufficient to guarantee that the fundamental rights of the parties concerned will be upheld. The fact that an undertaking constitutes a legal as opposed to a natural person does not preclude it from asserting its fundamental rights. However, the rights of a legal entity will be subject to stricter limitations than those of a human person. See Case C-136/79, National Panasonic (UK) Ltd v Commission [1980] ECR 2033. 190 See http://www.coe.int/t/dghl/standardsetting/hrpolicy/Accession/Meeting_reports_en.asp. 191 Case Opinion 2/13, Opinion pursuant to Article 218(11) TFEU, EU:C:2014:2454. 192 OJ 2007 C 303/1. Under the first subparagraph of Article 6(1) TEU, the Charter has the same legal value as the Treaties. The Charter does not apply as against the United Kingdom and Poland. 193 A search on EUR-lex shows more than 20 judgments of the EU Courts citing the Charter in the context of Article 102 TFEU appeals/preliminary rulings alone. 194 Case C-389/10 P, KME Germany AG, KME France SAS and KME Italy SpA v Commission EU:C:2011:816. 189

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given by Article 47 of the Charter. 195 This applied not only to penalties but also to matters of complex appreciation such as economic assessments. 196 In regard to the latter, the Court held that the existence of a certain margin of discretion for such assessments does not mean that the EU Courts must refrain from reviewing the Commission’s interpretation of information of an economic nature. Not only must the EU Courts establish whether the evidence relied on is factually accurate, reliable, and consistent, but also whether that evidence contains all the information which must be taken into account in order to assess a complex situation, and whether it is capable of substantiating the conclusions drawn from it. The EFTA Court went further in Post Norway. 197 These findings are a response to the criticism of the level and intensity of scrutiny given by the EU Courts, and the General Court in particular, to Commission assessments that are not of a purely factual nature. This issue is discussed in detail in Chapter Two (History, Development, and Reform). 198 The EU Courts have also given similar recognition to the rights of defence. In Knauf Gips the Court of Justice held that although an undertaking’s acknowledgement of matters of fact or of law during the Commission procedure may constitute evidence when determining whether an appeal is well founded, it cannot restrict the actual exercise of a natural or legal person’s right to bring proceedings before the EU Courts. 199 The Court of Justice held that such a restriction would be contrary to the fundamental principles of the rule of law and respect for the rights of the defence, including, in particular, the rights to an effective remedy and of access to an impartial tribunal are guaranteed by Article 47 of the Charter. Third, the case law of the European Court of Human Rights (ECtHR) has itself developed, and has concluded that competition proceedings that may lead to the imposition of a penalty are “criminal” in nature for the purposes of Article 6 ECHR. In Menarini 200 the ECHR rights held that fines imposed under national competition law by the Italian Antitrust Authority (IAA) were “criminal” in nature for purposes of Article 6 ECHR. Menarini further argued that the IAA’s role as prosecutor and judge was incompatible with Article 6. By a 6:1 majority, the ECtHR held that there was no automatic incompatibility in this regard so as long as the decision in question was subject to review by a court having “full jurisdiction” to examine that decision (as opposed to mere control of legality). Because the review in the two Italian courts had 195 See also Case 170/13 Huawei Technologies Co. Ltd v ZTE Corp., ZTE Deutschland GmbH, EU:C:2015:477, para. 59 where the Court of Justice held that “…the irrevocable undertaking to grant licences on FRAND terms given to the standardisation body by the proprietor of an SEP cannot negate the substance of the rights guaranteed to that proprietor by Article 17(2) and Article 47 of the Charter…” 196 KME Germany, ibid., paras. 91 et seq. 197 See Case E-15/10, Posten Norge AS v EFTA Surveillance Authority, judgment of 12 April 2012, paras. 89 et seq. For analysis of the Article 6 ECHR issues in the case, and a comparison with the findings in KME, see J Temple Lang, “Judicial Review Of Competition Decisions Under The European Convention On Human Rights And The Importance Of The EFTA Court: The Norway Post Judgment,” European Law Review (2012), Issue 4, 464-480. 198 See Section 2.4.4. 199 Case C-407/08 P, Knauf Gips KG v Commission [2010] ECR I-6375, para. 91. 200 Case 43509/08, A. Menarini Diagnostics SRL v Italy, judgment of the European Court of Human Rights of 27 September 2011.

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gone beyond mere legality, the ECtHR ruled that no violation has taken place in that particular case. Finally, there has been considerable criticism that the Commission’s competition enforcement procedures are not compliant with the ECHR. This issue is addressed in detail in Chapter 2 (History, Development, and Reform). The basic criticisms are: (1) the Commission acts as judge and jury, with the same officials drafting the Statement of Objections and the ultimate Decision; (2) the decision-making process is arcane, with the actual decision in competition cases being taken by the College of 27 EU Commissioners; (3) the true decision-making process has become diffuse and lacking in transparency; and (4) fines are now enormous and involve the exercise of significant discretion by the Commission. Accordingly, it is argued that the Commission’s procedures do not correspond with Article 6 ECHR. 201

1.4.2

The Relationship Between Articles 101 And 102 TFEU

Basic principles. From the outset, the Court of Justice made clear that Articles 101 and 102 TFEU seek to achieve the same paramount aim: the maintenance of effective competition in the common market, 202 albeit by different means. The common objective of the two provisions also requires that there should be consistency between them. Several principles have therefore been confirmed by the EU institutions in order to ensure consistency between the two provisions and to preserve the integrity of each: 1.

Articles 101 and 102 TFEU can apply in parallel to the same matter, assuming of course the conditions for the application of each Article are satisfied. 203 Indeed, many examples of abuse arising under that provision originate in contractual relations. 204

2.

The fact that conduct complies with Article 101 TFEU does not necessarily immunise it from review under Article 102 TFEU, again assuming the provisions for the application of the latter provision are met. Thus, the mere

201 See J Temple Lang, “Three Possibilities For Reform Of The Procedure Of The European Commission In Competition Cases Under Regulation 1/2003,” CEPS Special Report, November 2011; I Forrester QC, “Due Process In EC Competition Cases: A Distinguished Institution With Flawed Procedures,” 34 European Law Review (2009) 817. 202 See Case 6/72, Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 215; and Case T-51/89, Tetra Pak Rausing SA v Commission [1990] ECR II-309. 203 See, e.g., Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 116. See also Case 66/86, Ahmed Saeed Flugreisen and Silver Line Reisebüro GmbH v Zentrale zur Bekämpfung unlauteren Wettbewerbs eV [1989] ECR 803, para. 37. See also Commission Notice— Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, OJ 2011 C 11/1, para. 16. 204 Ibid. The Commission had historically adopted a broad definition of the notion of an “agreement” under Article 101 TFEU that, on several occasions, included conduct that prima facie seemed unilateral in nature. This aspect of Article 101 TFEU was comprehensively reviewed in Case T-41/96, Bayer AG v Commission [2000] ECR II-3383, confirmed on appeal in Joined Cases C-2/01 P and C-3/01 P, Bundesverband der Arzneimittel-Importeure eV and Commission v Bayer AG [2004] ECR I-23. For subsequent cases applying Bayer see Case C-74/04 P, Volkswagen AG v Commission, [2006] ECR I6585. See generally C Bellamy and G Child, European Union Law Of Competition, Oxford University Press (2018) (8th edn.) (D Bailey and L John eds.), paras. 2.038 et seq.

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fact that an agreement benefits from an EU block exemption does not preclude a challenge to aspects of that agreement under Article 102 TFEU. 205 And there is no need for the benefit of the relevant block exemption to have been formally withdrawn by a court or competition authority for Article 102 TFEU to apply. 3.

A competition authority or court should not allow an undertaking to benefit from Article 101(3) if, in so doing, the agreement would lead to an abuse of a dominant position. This was in essence the outcome in Tetra Pak I. 206

4.

The mere fact that an agreement would create a dominant position does not mean that no exemption under Article 101(3) is possible. In its Guidelines on the application of Article 101(3), the Commission has stated that the condition under Article 101(3) that the agreement should not allow the parties “the possibility of eliminating competition in respect of a substantial part of the products in question” has an autonomous meaning, 207 and, citing Atlantic Container Line, one that is narrower than dominance. 208 In practice, however, the greater the degree of dominance that is created by an agreement, the less likely it is that an exemption would apply (absent compelling efficiencies).

5.

Finally, a rather obvious point, but not all restrictive agreements concluded by a dominant undertaking constitute an abuse of a dominant position. There must of course be an abuse, and not merely dominance. But the fact that a restriction of competition exists under Article 101 TFEU does not mean that an abuse also arises. 209

Case study: CEAHR. The CEAHR case provides an interesting case study into the application of Articles 101 and 102 TFEU to the same conduct/agreement. The case concerned a complaint by a trade association, CEAHR, representing independent watchmakers and other stakeholders who complained about a decision made by several Case T-51/89, Tetra Pak Rausing SA v Commission [1990] ECR II-309, paras. 25–30. See also Joined Cases C–395/96 P and C-396/96P, Compagnie Maritime Belge Transports SA, Compagnie maritime belge SA and Dafra-Lines A/S v Commission [2000] ECR I-1365, para. 133 (“the fact that operators subject to effective competition have a practice which is authorised does not mean that adoption of the same practice by an undertaking in a dominant position can never constitute an abuse of that position.”). See too, Joined Cases T-191/98 and T-212/98 to T-214/98, Atlantic Container Line AB and Others v Commission [2003] ECR II-3275. 206 Tetra Pak, ibid. 207 Commission Notice—Guidelines on Vertical Restraints, OJ 2010 C 130/1, para. 106. 208 Joined Cases T-191/98 and T-212/98 to T-214/98, Atlantic Container Line AB and Others v Commission [2003] ECR II-3275, para. 939 (“As the concept of eliminating competition is narrower than that of the existence or acquisition of a dominant position, an undertaking holding such a position is capable of benefiting from an exemption”). See also Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, para. 113; Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, paras. 39 and 90; and Case T-51/89, Tetra Pak Rausing SA v Commission [1990] ECR II-309, para. 28. 209 The Commission gives the example where a dominant undertaking is party to a non-full function joint venture, which is found to be restrictive of competition but at the same time involves a substantial integration of assets. See Commission Notice—Guidelines on Vertical Restraints, OJ 2010 C 130/1, para. 106. 205

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leading Swiss watch manufacturers suddenly to terminate spare part supplies to independent repairers of watches, and to only supply selected repairers who met certain criteria for admission to a repair network. CEAHR claimed that this conduct infringed both Articles 101 and 102 TFEU. The Commission initially rejected the complaint on the basis of administrative priority, based on a low likelihood of establishing an infringement of EU competition law. 210 This decision was overturned on appeal by the General Court, 211 leading the Commission to adopt a new decision, 212 which was again appealed but the appeal was on this occasion rejected. 213 In the end, CEAHR was unable to appeal further, citing funding issues. CEAHR argued that the Commission erred in concluding that the Swiss watch manufacturers’ selective repair systems, and their refusal to supply spare parts to independent watch repairers, were likely to fall outside the scope of Article 101 TFEU. In particular, CEAHR argued that the Commission failed to consider, in this respect, whether the selective repair systems had the effect of eliminating all competition. 214 This was based inter alia on the Commission’s conclusion that the Swiss manufacturers were most likely monopolists in the aftermarkets for spare parts for their own brands (since there was no real substitution between the spare parts of different brands or between branded spare parts and generic spare parts and customers did not generally take into account total lifecycle costs of ownership (including repairs and maintenance) when purchasing a watch). The General Court’s starting point was to analyse the case through Article 101 TFEU. It first stated that “a finding that conduct is lawful under Article 101 TFEU does not, in principle, mean that that conduct is lawful under Article 102 TFEU; rather, it is necessary to verify whether or not the conditions for the application of that latter provision are fulfilled.” 215 The Court stated that, whilst selective distribution systems necessarily restrict competition: 216 “there are legitimate requirements, such as the maintenance of a specialist trade capable of providing specific services as regards high-quality and high-technology products, which may justify a reduction of price competition in favour of competition relating to factors others than price. Systems of selective distribution, in so far as they aim at the attainment of a legitimate goal capable of improving competition in relation to factors other than price, therefore constitute an element of competition which is in conformity with Article 101(1) TFEU.”

The Court then stated that a selective distribution network falls outside the scope of Article 101 TFEU if: (1) resellers are chosen on the basis of objective criteria of a Case COMP/E-l/39097, Watch Repair, Commission Decision of 10 July 2008. Case T-427/08, Confédération européenne des associations d’horlogers-réparateurs (CEAHR) v Commission [2010] ECR I-5865. 212 Case AT.39097 Watch Repair, Commission Decision of 29 July 2014. 213 Case T-712/14, Confédération européenne des associations d’horlogers-réparateurs (CEAHR) v Commission, EU:T:2017:748. 214 Ibid., para. 44. 215 Ibid., para. 94. 216 Ibid., para. 52. 210 211

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qualitative nature; (2) the criteria are applied uniformly for all potential resellers and are not applied in a discriminatory fashion; (3) the characteristics of the product necessitate such a network in order to preserve its quality and to ensure its proper use; and (4) the criteria do no go beyond what is necessary. 217 The Court held that, for a selective distribution or repair system to fall outside the scope of Article 101 TFEU, it is not necessary “to verify that those distribution networks do not have the effect of eliminating all competition.” 218 The Court indicated that, if the criteria in (1)-(4) above are satisfied, that is sufficient to conclude that the selective distribution or repair network is in conformity with Article 101 TFEU. The General Court then used these findings under Article 101 TFEU to also dismiss the Article 102 TFEU aspects of CEAHR’s appeal. In particular, it held that if, as the Commission suggested, a selective repair or distribution system does not fall within Article 101 TFEU, the Commission, when exercising its broad discretion in respect of dealing with complaints, could consider that the conformity of such systems with that provision was “an indication which, in conjunction with other elements, was capable of establishing that it was unlikely that those systems had the effect of eliminating all competition within the meaning of the case-law relating to Article 102.” 219 The above General Court conclusions are of course provisional, since they only seek to control the exercise of the Commission’s discretion to reject a complaint based on a low likelihood of finding an infringement. But, even leaving aside some of the General Court’s substantive conclusions under Article 101 TFEU, 220 and questionable or incomplete factual findings, 221 these conclusions are surprising. First, as early as Hugin, the Commission confirmed that a manufacturer abuses its dominant position by Ibid., para. 53. Ibid., para. 54. 219 Ibid., para. 96. 220 There is no authority for the proposition that a manufacturer can terminate long-standing supplies with independent repairers in favour of a “selective repair” network, by analogy with selective distribution. Indeed, under Regulation (EU) No 461/2010 of 27 May 2010 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 in the motor vehicle sector (OJ 2010 L 129/52), it would normally be a serious restriction of competition for a manufacturer to exclude independent repairers in this manner. In fact, there are positive duties imposed by this Regulation on manufacturers as respects independent repairers. Moreover, if independent repairers have been successfully repairing the watches in question for decades, it is surely disproportionate to cut them off entirely and not allow some equivalence of repairs under a proportionality test. They had, after all, demonstrated their general competence for decades, and individual issues could be dealt with by applying equivalence criteria. See by analogy Achilles Information Limited v Network Rail Infrastructure Limited [2019] CAT 20, upheld on appeal in Achilles Information Limited v Network Rail Infrastructure Limited [2020] EWCA Civ 323. See also UKRS Training Limited v NSAR Limited, [2017] CAT 17. 221 The General Court considered that not all competition was eliminated because the selected repairers could still compete inter se even if independent repairers were cut off supplies (para. 107). However, there is no real analysis of this question in the Commission Decision. In particular, any such analysis would, at a minimum, have required the Commission to analyse, for each local market in each Member State: (1) how many selected repairers exist in local catchment areas; (2) of these, how many actually offer a full repair service (rather than basic services like changing a battery or watch strap); (3) what proportion of repairs were conducted in-house by the manufacturer’s own in-house repair centre; and (4) a comprehensive understanding of the impact of the switch to selected repair networks on price and quality-based competition. 217 218

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refusing to supply spare parts for its products to independent repairers. 222 Second, apparent conformity of an agreement with Article 101 TFEU is not itself a “defence” to Article 102 TFEU. As the General Court stated in Tetra Pak “[Articles 101 and 102 TFEU] are complementary inasmuch as they pursue a common general objective … But they none the less constitute, in the scheme of the Treaty, two independent legal instruments addressing different situations.” 223 In Tetra Pak itself it was held that the acquisition of an exclusive patent licence by a dominant undertaking infringed Article 102 TFEU, despite the fact that it fell within a block exemption under Article 101 TFEU. 224 Finally, if, as the Commission suggested, each manufacturer was in effect a monopolist in the supply of its own spare parts, it seems extraordinary that that would have essentially no bearing on the application of Article 101 TFEU. The Commission’s own Guidelines on Vertical Restraints state when discussing selective distribution systems that: 225 “The market position of the supplier and its competitors is of central importance in assessing possible anti-competitive effects, as the loss of inter-brand competition can only be problematic if inter-brand competition is limited. The stronger the position of the supplier, the more problematic is the loss of intra-brand competition.”

In Leclerc, the General Court also noted that one of the requirements for a selective distribution system to fall outside Article 101(1) TFEU is that “the system seeks to achieve a result which enhances competition and thus counterbalances the restriction of competition in selective distribution systems, in particular as regards price.” 226 It is very difficult to see how that requirement can be fulfilled where the supplier has an effective monopoly in the relevant market. Circumstances in which Article 102 TFEU is applied to agreements. Beyond the rather obvious point that Articles 101 and 102 TFEU can only apply in parallel where, at a minimum, there is an agreement or other form of understanding falling within Article 101 TFEU, the Commission and EU Courts have not developed any systematic Case C-22/78 Hugin v Commission [1979] ECR 138. Although the Court of Justice annulled the decision on the basis that the Commission did not show why trade between Member States was affected, the finding on abuse was not found to be wrong. 223 Case T-51/89 Tetra Pak v Commission [1990] ECR II-41, para. 22. 224 In Case T-191/98 Atlantic Container Line v Commission [2003] ECR-II 245 the General Court stated that “where the Commission grants an individual exemption pursuant to [Article 101(3)] of the Treaty in respect of agreements notified by undertakings holding a dominant position it indirectly bars itself, in the absence of a change in the facts or the law, from considering that the same agreements constitute abuses contrary to [Article 102] of the Treaty” (para. 1456). However, individual exemptions under Article 101(3) TFEU are no longer granted. This also supports the argument that one cannot exempt an abuse (assuming that the conditions for abuse are otherwise met). 225 Commission Notice Guidelines on Vertical Restraints, C(2010) 2365, para. 177. A leading textbook on EU competition law notes: “the possible effects of selective distribution system are a reduction in intra-brand competition and the foreclosure of distributors. These adverse effects are unlikely to be appreciable in markets characterised by strong inter-brand competition. However, the foreclosure of other distributors is more likely to have anti-competitive effects when the number of authorised distributors is very small, or when most major suppliers use selective distribution.” See Bellamy & Child, European Union Law of Competition (7th ed, 2013) para. 7.094. 226 Case T-88/92 Groupement d'achat Édouard Leclerc v Commission, [1996] ECR II-1961, para. 106. 222

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principles on when they are to be applied in parallel. Just because Article 102 TFEU could in theory be applied to agreements falling under Article 101 TFEU does not mean that it should. Absent some limiting principles or conditions, the application of Article 102 TFEU could simply become reflexive. In Tetra Pak I, Tetra Pak argued that the fact that a dominant firm becomes party to an agreement cannot constitute an abuse within the meaning of Article 102 TFEU unless a supplementary element, extrinsic to the agreement and attributable to the undertaking, is present. 227 The Court of Justice rejected this argument. While it accepted that in Ahmed Saeed the concurrent application of Articles 101 and 102 TFEU was justified by the existence of a “supplementary element” (in casu pressure brought to bear by the undertaking on its competitors), an “additional element” was also present in the case at hand, namely that Tetra Pak’s acquisition of an exclusive licence “had the practical effect of precluding all competition in the relevant market.” But this reasoning appears, in essence, to involve no additional element other than the fact that the effects of the agreement would be very significant. In particular, there appears to be no connection with the operative conditions in Article 102 TFEU, namely the exercise of market power in a manner that is not normal competition. Such a view places few limiting principles on when Articles 101 and 102 TFEU can or should be applied in parallel. Equally, it is often unclear why competition authorities apply both Articles 101 and 102 TFEU in parallel to the same conduct when the application of Article 101 TFEU alone would be sufficient or more apposite. For example, in Perindopril 228 and Paroxetine, 229 Article 102 TFEU was applied to so-called pay for delay agreements which had already been found contrary to Article 101 TFEU. No express reasoning is contained in the decisions as to why this was done. One reason may be that, even if Article 101 TFEU applies generally in a particular case, it did not apply to all agreements. For example, in Paroxetine, a third agreement between GSK and IVAX could only be assessed under Article 102 TFEU, since the competition authority determined that the agreement was (lawfully) excluded from the rules on anticompetitive agreements under domestic legislation. There may also be rare cases where the competition authority feels that the patent owner is so responsible for driving the settlement agreement that only the patent owner should be found liable under Article 102 TFEU (assuming dominance is established). But it would always be open to the Commission under Article 101 TFEU only to fine one “main” party to an agreement. While it is now settled law that Article 102 TFEU does not always require an abuse of a

Case T-51/89, Tetra Pak Rausing SA v Commission [1990] ECR II-309, paras. 24 et seq. Case AT.39612 Perindopril (Servier), Commission decision of 9 July 2014. On appeal the General Court annulled the abuse part of the decision due to legal errors on market definition/dominance. The Commission has appealed this aspect of the judgment, which remains on appeal. 229 Case CE-9531/11 Paroxetine, CMA Decision of 12 February 2016. 227 228

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dominant position 230—in the sense that it is not a pre-condition that the abuse could only be committed due to the existence of dominance—it is submitted that this should not justify the application of Article 102 TFEU to agreements as a matter of course. The obvious situations in which Article 102 TFEU should apply to agreements are where the existence of dominance provides scope for abuse that would not arise, or arise as easily, absent dominance. This would include for example cases where a dominant firm foists a highly restrictive or exploitative contractual clause on a customer. 231 The other principal situation in which Article 102 TFEU should be applied to agreements is a situation in which the application of Article 101 TFEU may be in doubt, and there would otherwise be a lacuna. For example, an acquisition of a licence may not fall under either Article 101 TFEU or EU or national merger control laws. Outside of these situations, the application of Article 102 TFEU should be limited, or at least justified by some “additional element” that is not merely the corollary of the agreement in question. A final interesting question is why the Commission sometimes prefers to apply Article 102 TFEU to matters also covered by Article 101 TFEU. Several reasons may be offered. 232 First, it is sometimes argued that a dominant firm can impose an “agreement” that in reality only benefits the dominant firm, so the action is more unilateral than consensual in nature. But this is not generally correct: even if exclusive dealing would harm the customer, he/she may accept it because of the dominant firm’s implicit promise to share some of the (anticompetitively obtained) profits with the customer. Moreover, even if this argument is wrong, the Commission has usually reserved the right in Article 101 TFEU cases (e.g., parallel trade restrictions) to fine only the “beneficiary” of an agreement. Second, where a firm is dominant, the lex specialis of Article 102 TFEU should arguably be applied in preference to the lex generalis of Article 101 TFEU. Third, in many cases, complaints may be brought only on the basis of Article 102 TFEU. This may be because the complainant alleges a mixture of acts, some of which fall under Article 101 TFEU and some of which do not. It may be more convenient for the Commission to apply Article 102 TFEU to all the practices than to separately analyse unilateral conduct and agreements. The same might be said of a network of similar agreements. Although Article 101 TFEU can apply to a series of agreements, it may be more convenient for the Commission to assess the cumulative effect of the agreements under Article 102 TFEU. 233 Finally, the assessment of exclusive agreements under Article 102 TFEU has historically been much less rigorous than the analysis under Article 101 TFEU. The interventionist approach sometimes adopted by the Commission in past Article 102 TFEU cases may therefore explain a greater willingness to apply Article 102 TFEU to agreements. Of course, none of this matters unless the outcome would differ depending on which provision happened to apply. Historically, this was the case, but, as discussed in Chapter Eight (Exclusive

230 See, e.g., Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, on appeal Case C457/10 P, AstraZeneca v Commission EU:C:2012:770. 231 Tetra Pak II, OJ 1992 L 72/1, on appeal Case T-83/91, Tetra Pak v Commission [1994] ECR II755. 232 See generally E Rousseva, “Modernising By Eradicating: How The Commission’s New Approach To Article 81 EC Dispenses With The Need To Apply Article 82 EC To Vertical Restraints,” (2005) 42 Common Market Law Review 587. 233 See, e.g., Case 85/76, Hoffmann-La Roche and Co AG v Commission [1979] ECR 461.

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Dealing and Related Practices), the Commission is now applying the same broad type of analysis under both provisions.

1.4.3

Article 102 TFEU And Merger Control Laws

The residual scope for applying Article 102 TFEU to mergers and acquisitions. The adoption of the EU Merger Regulation is a relatively recent innovation, having entered into force in September 1989. For the 30 years prior to this, the Commission had, in exceptional cases, sought to apply Articles 101 and 102 TFEU to mergers and acquisitions. As early as Continental Can, the Court of Justice held that Article 102 TFEU was in principle applicable to concentrations in circumstances where that acquisition would strengthen the existing dominant position of the acquiring party. 234 But, prior to the adoption of the EU Merger Regulation, only one prohibition decision had in fact been upheld on the basis of this theory. 235 Notwithstanding the adoption of the EU Merger Regulation, the question of whether Article 102 TFEU can apply to mergers and acquisitions remains relevant. Two situations should be contrasted. The first is whether Article 102 TFEU can be applied to transactions that are subject to notification under the EU Merger Regulation. The EU Merger Regulation requires mandatory changes in control over an undertaking that meet certain worldwide and EU-wide turnover thresholds and, as a general rule, precludes the parallel application of national merger control rules to the same transaction. A second situation concerns the possible application of Article 102 TFEU to transactions that do not fall under the jurisdiction of the EU Merger Regulation or national merger control laws. Application of Article 102 TFEU to transactions that fall under the EU Merger Regulation. As a piece of secondary legislation, the EU Merger Regulation cannot preclude the application of primary legislation such as Article 102 TFEU. And because Article 102 TFEU is directly effective in application, there is no reason in theory why it could not continue to be applied to transactions falling under the mandatory prior approval regime established by the EU Merger Regulation. At the time of the adoption of the EU Merger Regulation, however, the Commission confirmed that it would not seek to apply Article 102 TFEU to transactions that required notification under the EU Merger Regulation. 236 The same clear statement was made by the Commissioner responsible for competition policy at the time. 237 Taken together, these statements Case 6/72, Europemballage and Continental Can v Commission [1973] ECR 215, para. 24 (“[B]ut if Article 3(f) provides for the institution of a system ensuring that competition in the common market is not distorted, then it requires a fortiori that competition must not be eliminated. This requirement is so essential that without it numerous provisions of the Treaty would be pointless.”). Article 3(f) EEC was replaced by Article 3(g) EC, which was then replaced by Protocol 27 of the TFEU. See Section 1.1 above for discussion. 235 See Warner-Lambert/Gillette and Others, OJ 1993 L 116/21. In Joined Cases 142/84 and 156/84, British American Tobacco Company Ltd and RJ Reynolds Industries Inc v Commission [1987] ECR 4487, the Commission’s decision was overturned due to lack of evidence. 236 See Notes entered in the Minutes of the Council, 21 December 1989. 237 See L Brittan, “The Law And Policy Of Merger Control In The EEC,” (1990) 15(5) European Law Review 351 (“I do not intend to seek the application of the EEC Treaty rules in Articles 81 and 82 by any means.”). 234

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probably create a legitimate expectation on the part of companies that Article 102 TFEU will not be applied by the Commission to transactions falling under the EU Merger Regulation. 238 This position has been (indirectly) fortified by recent EU Court remarks. 239 Procedural considerations also explain the Commission’s policy in this regard. None of the Commission’s powers and procedures under Regulation 1/2003, or the sectorspecific rules, apply to mergers and acquisitions that fall under the EU Merger Regulation. The only option open to the Commission would be to apply its powers under Article 105 TFEU, which permits the Commission to investigate possible infringements of Articles 101 and 102 TFEU upon application by a Member State or on its own initiative. But these powers are limited, since any remedial action remains in the hands of the Member States, acting on a recommendation by the Commission and is not under the direct control of the Commission itself. At national level, competition authorities cannot apply Article 102 TFEU to transactions falling under the EU Merger Regulation, since the provisional regime contained in Article 104 TFEU has been brought to an end for cases under the EU Merger Regulation. National courts can, in theory, apply Article 102 TFEU to transactions falling under the EU Merger Regulation, even in the absence of specific implementing rules. There are a handful of examples of complainants seeking to avail of this opportunity before national courts. 240 But these cases concerned the period before the entry into force of the EU Merger Regulation. A national court today would very likely defer to the Commission’s jurisdiction, in particular because of the automatic prohibition on the implementation of transactions subject to the EU Merger Regulation (no such prohibition would apply under Article 102 TFEU absent injunctive relief). Application of Article 102 TFEU to transactions falling outside merger control laws. Article 102 TFEU can in principle apply to transactions that fall outside the EU 238 A different issue of course is when the Commission clears a merger transaction falling under the EU Merger Control Regulation based on a behavioural commitment from the merging parties. Such conduct may be subject to Article 102 TFEU, assuming its constituent elements are satisfied. For example, it is reasonably commonplace for the Commission to deal with concerns over post-merger licensing or other access arrangements by way of the merging parties accepting obligations to grant fair, reasonable, and non-discriminatory (FRAND) terms post-merger. See, e.g., Case M.7873 Worldline/Equens/Paysquare, Commission Decision of 20 April 2016. See generally N Levy and C Cook, European Merger Control Law: A Guide to the Merger Regulation, Matthew Bender Elite Products, Chapter 18. 239 See Case C-248/16, Austria Asphalt GmbH & Co OG v Bundeskartellanwalt, EU:C:2017:643, paras. 31-33 (“As follows from Article 21(1) of Regulation No 139/2004, that regulation alone is to apply to concentrations as defined in Article 3 of the regulation, to which Regulation No 1/2003 is not, in principle, applicable. By contrast, Regulation No 1/2003 continues to apply to the actions of undertakings which, without constituting a concentration within the meaning of Regulation No 139/2004, are nevertheless capable of leading to coordination between undertakings in breach of Article 101 TFEU and which, for that reason, are subject to the control of the Commission or of the national competition authorities.”). 240 See, e.g., Carnaud/Sofreb, XVIIth Report on Competition Policy (1987), para. 70 (contested bid suspended by national court until after a Commission ruling under Article 102 TFEU); and GEC-Siemens/Plessey, OJ 1990 C 239/2 (target of hostile takeover sought interim relief on grounds that takeover would infringe, inter alia, Article 102 TFEU).

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Merger Regulation and national merger control laws. At the time of the adoption of the EU Merger Regulation, however, the Commission indicated that it would not seek to apply Article 102 TFEU to transactions falling outside the scope of the EU Merger Regulation that were de minimis in nature. 241 Admittedly, the Commission on one occasion sought to apply Article 102 TFEU to acquisitions of a minority interest in a competitor. 242 But this transaction took place before the entry into force of the EU Merger Regulation and it is very unlikely that the Commission would take similar action today. Practical reasons also explain why the Commission is highly unlikely to apply Article 102 TFEU to transactions falling outside the EU Merger Regulation. First, most meaningful transactions falling outside the EU Merger Regulation will be subject to review under national merger control laws, which exist in all but one Member State (i.e., Luxembourg). Second, Article 102 TFEU is not a particularly effective tool for reviewing mergers and acquisitions falling outside the EU Merger Regulation. It can only be applied in situations where the purchaser is already dominant on the relevant market(s) at the date of the acquisition and cannot therefore challenge the most common Third, the concern in merger control—transactions that create dominance. 243 introduction of the EU Merger Regulation has also allowed the Commission to remove or reduce interlocking shareholdings or minority interests as a remedy in problematic transactions. Finally, the legal basis for intervention—the Continental Can judgment— is regarded as a striking piece of judicial activism based on a clear gap, at the time, in EU competition law. Now that the EU and its Member States have detailed merger control regimes, there are strong policy reasons why the basis for earlier interventions is much less compelling. There may also be arguments based on legal certainty, as well as the lex specialis created by the EU Merger Regulation, why reliance on Article 102 TFEU in these circumstances would now be unattractive. Taken together, these considerations help explain why, in the period following the introduction of the EU Merger Regulation, the Commission has not made use of its prerogatives under Article 102 TFEU to investigate a transaction that escaped its mandatory jurisdiction.

241 The Commission defined de minimis as transactions involving less than €2 billion of worldwide turnover and €100 million of Community-wide turnover. See Notes entered in the Minutes of the Council, 21 December 1989. 242 In Gillette, the Commission considered that a leveraged buyout of the Wilkinson Sword wetshaving business by Eemland, a company in which Gillette held a 22% equity stake, was contrary to Article 101 TFEU and/or Article 102 TFEU as it would have restricted competition between Wilkinson Sword and Gillette in the Community wet-shaving market. See Warner-Lambert/Gillette and Others, OJ 1993 L 116/21. 243 In Rambus, the Commission apparently dealt with the fact that Rambus was not dominant at the time it committed the alleged abuse (non-disclosure of key patents) by fashioning an abuse relating to the licence fee or terms on the basis that the dominant firm would not have been in a position to set its fees or terms without intentionally suppressing its patents. In other words, the Commission characterised the abuse not as intentional non-disclosure but Rambus’ ability to claim royalties at a level which absent its allegedly intentional deceptive conduct it would not have been able to charge. This theory is not without controversy—and the decision is only an Article 9 Commitment Decision— and it is even more difficult to see how it would be easy to apply to a merger situation. See Rambus, OJ 2010 C 30/17. For discussion see Ch. 13 (Abusive Conduct and Standards).

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National authorities and courts also remain competent in principle to apply Article 102 TFEU to transactions falling outside the EU Merger Regulation. But, as indicated, for the overwhelming majority of transactions, this need does not arise, since all Member States but one have merger control laws. 244 Nonetheless, it is not true to say that the Continental Can doctrine is a dead letter. 245 On rare occasions, Member States have sought, largely unsuccessfully, to challenge non-notifiable transactions on this basis. 246 Most recently, in 2016, the Luxembourg Competition Council sought to apply the laws on abuse of dominance to a merger: 247 Luxembourg does not yet have a separate merger control law. It found that in principle Article 102 TFEU could apply if post-merger the dominant position of the merged entity is of such magnitude to substantially restrain competition. But it applied the “failing firm defence” under merger control law in a decision ultimately not to find an infringement. Interestingly, the defence applied under the decision was essentially the same as the three-limb test for the failing firm defence under the Commission’s Horizontal Merger Guidelines. 248 Accordingly, it seems likely that even in the truly rare cases where either EU or national merger control laws do not apply to a merger, the substantive rules on mergers would be applied by analogy.

1.4.4

Article 102 TFEU And The Rules On State Action

General principles on State action. EU competition law on State action is not limited to the State action defence whereby abusive conduct by private undertakings that is required by national measures cannot be imputed to the undertakings concerned. In addition, a number of affirmative obligations apply to the State that, in essence, seek to prevent State measures that directly restrict competition. A number of basic principles are clear, although their precise ambit in individual cases may be complex. The overriding principle is that national authorities, which includes State organs other than competition authorities, should not take action that would render EU competition law ineffective. 249 This broad principle has been repeated in a number of cases, but might The exception is Luxembourg. See, Case T-210/01, General Electric Company v Commission [2005] ECR II-5575, para. 83 (“The strengthening of a dominant position [e.g., through an acquisition] may in itself significantly impede competition and do so to such an extent that it amounts, on its own, to an abuse of that position.”). 246 In E.ON/Ruhrgas, the German Federal Cartel Office prohibited the merger of energy companies E.ON and Ruhrgas. The parties then applied for clearance of the merger by the German Minister of the Economy, based on public interest considerations (a possibility that exists under German law). The German Monopoly Commission, an advisory body for competition issues, delivered an opinion advising the Minister not to clear the merger since, inter alia, clearance would violate Article 102 TFEU under the Continental Can doctrine. The Minster did not follow this advice and cleared the merger. See the German Monopoly Commission’s opinion in EON/Gelsenberg AG and EON Bergmann GmbH, Sondergutachten der Monopolkommission, No. 34, 21 May 2002. In France, a similar attempt was made by the Conseil de la concurrence when it asked the French Minister of the Economy to prohibit, ex post, a merger between Compagnie Générale des Eaux and Lyonnaise des eaux. See Decision n° 02-D-44, Conseil de la concurrence, 11 July 2002. 247 Decision 2016 FO-04 Utopia, Luxembourg Competition Council decision of 17 June 2016. 248 Guidelines On The Assessment Of Horizontal Mergers Under The Council Regulation On The Control Of Concentrations Between Undertakings, OJ 2004 C 31/5, Section VIII. 249 See generally R Wainwright and A Bouquet, “State Intervention And Action In EC Competition Law,” in BE Hawk (ed.), 2003 Fordham Corporate Law, Juris Publications, (2004), Ch. 23. 244 245

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be summarised as saying that Member States are required to ensure that EU competition law, and the Community institutions’ application of it, are not rendered ineffective. 250 The basis for this principle is Article 4(3) TEU—which requires Member States not to frustrate EU objectives—and Protocol 27—which requires a system of effective competition. 251 The broad principle that Member States should not take action that would render EU competition law ineffective has given rise to a number of more specific principles. 252 These principles do not concern the application of Article 102 TFEU as such, and are mainly mentioned here for sake of completeness. First, Member States should not order companies to infringe EU competition law or approve infringements through administrative action or other decisions. The most obvious cases concern price-fixing or prices that are contrary to Article 102 TFEU for some other reason, such as excessive prices, discriminatory tariffs, predatory prices, or a margin squeeze. Second, national authorities should disregard rules of national law, including non-competition laws, that lessen the effective enforcement of EU competition law. 253 A final, related principle is that the power to disregard national law that is contrary to EU competition law also implies that national authorities, including non-judicial authorities, have the power and the duty to declare that national legislation is contrary to EU competition law. 254 A second broad set of principles concern the rules on the grant of special or exclusive rights by Member States. This mainly involves the application of Article 106 TFEU, which limits the extent to which Member States may intervene in the market through public undertakings. Three basic rules apply. First, Article 106(1) provides that in the case of public undertakings or undertakings to which Member States grant special or exclusive rights, Member States should not enact or maintain in force any measure contrary to the rules contained in the TFEU, including, but not limited to the competition provisions. It bears emphasis that Article 106(1) TFEU has no independent application, and can apply only in combination with other provisions of the TFEU. See, e.g., Joined Cases 46/87 and 227/88, Hoechst AG v Commission [1989] ECR 2859, para. 33. See, e.g., Case 311/85, ASBL Vereniging van Vlaamse Reisbureaus v ASBL Sociale Dienst van de Plaatselijke en Gewestelijke Overheidsdiensten [1987] ECR 3801 (Belgian law granting a permanent and general effect to an agreement concluded between certain private undertakings in violation of Article 101 TFEU struck down). See also Case 267/86, Pascal Van Eycke v ASPA NV [1988] ECR 4769, para. 16; Case C-185/91, Bundesanstalt für den Güterfernverkehr v Gebrüder Reiff GmbH & Co KG [1993] ECR I-5801, para. 14; Case C-153/93, Bundesrepublik Deutschland (Germany) v Delta Schiffahrts- und Speditionsgesellschaft mbH [1994] ECR I-2517, para. 14; Case C-96/94, Centro Servizi Spediporto Srl v Spedizioni Marittima del Golfo Srl [1995] ECR I-2883, para. 20; Case C-35/99, Manuele Arduino [2002] ECR I-1529, para. 34; and Case C-198/01, Consorzio Industrie Fiammiferi (CIF) v Autorità Garante della Concorrenza e del Mercato [2003] ECR I-8055, para. 45. 252 See generally J Temple Lang, “General Report, The Duties Of Cooperation Of National Authorities And Courts And The Community Institutions Under Article 10 EC,” in XIX FIDE Congress, (2000) Volume I, pp. 373–426 and Volume IV, pp. 65–72; J Temple Lang, “The Duties Of Cooperation Of National Authorities And Courts Under Article 10 EC: Two More Reflections”, (2001) 26(1) European Law Review 84–93. 253 See Case C-453/99, Courage Ltd v Bernard Crehan and Bernard Crehan v Courage Ltd and Others [2001] ECR I-6297 (Member States required to disapply a rule of national law that prevented a party to an anticompetitive agreement from recovering damages against the other party). 254 See Case C-198/01, Consorzio Industrie Fiammiferi (CIF) v Autorità Garante della Concorrenza e del Mercato [2003] ECR I-8055. 250 251

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Second, under Article 106(2) TFEU, Member States may, exceptionally, entrust an enterprise with the operation of services of general economic interest, in which case it may be relieved from the rules contained in the TFEU, and in particular the rules on competition, insofar as the application of these rules would obstruct the performance of the particular tasks given to them. This exception is far-reaching—it would allow for example a Member State to grant State aid to fund the public service obligations, 255 which would otherwise be unlawful—and has therefore been interpreted restrictively. Thus, it has been applied only to natural monopolies and/or universal service obligations. 256 Finally, under Article 106(3), the Commission has special supervisory powers to ensure compliance with the provisions of Article 106 TFEU. Under this provision, the Commission has sole authority to adopt decisions declaring that a Member State has infringed Article 106(1) and obliging the Member State to terminate the infringement. The Commission may also adopt directives in order to specify the obligations contained in Article 106(1). This provision has mainly been used as a tool for eliminating unjustified monopolies in utility markets through the adoption of legislation and individual decisions. State action that creates or extends monopolies or leads to abuses. Two principles concerning State action are, however, more directly relevant to the application of Article 102 TFEU. The first—which is relatively clear—is that Member States should not take action that would facilitate abuses of dominance contrary to Article 102 TFEU. This rule is not limited to the situation outlined in the previous section, i.e., when the State orders an undertaking to commit an abuse, or approves such action by a decision. It also includes Member State action that encourages, facilitates, or makes it very likely that violations of Article 102 TFEU will occur. The case law has adopted a range of different formulations, including that the State should not take actions that: (1) are “liable to create a situation in which that undertaking is led to infringe” Article 102 TFEU; 257 (2) “induce” firms to commit an infringement of

255 See Case C-280/00, Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH, and Oberbundesanwalt beim Bundesverwaltungsgericht [2003] ECR I-7747. Strict conditions were laid down in the judgment to ensure that any State funding is purely limited to the relevant public service obligation and does not spill over into competitive areas. 256 See, e.g., Case 10/71, Ministère public luxembourgeois v Madeleine Muller, Veuve J.P. Hein and others [1971] ECR 723; Case C-266/96, Corsica Ferries France SA v Gruppo Antichi Ormeggiatori del porto di Genova Coop arl, and others [1998] ECR I-3949; Case 41/83, Italian Republic v Commission [1985] ECR 873; Case C-18/88, Régie des télégraphes et des téléphones v GB-Inno-BM SA [1991] ECR I-5941; Case 155/73, Giuseppe Sacchi [1974] ECR 409; Case C-260/89, Elliniki Radiophonia Tiléorassi AE and Panellinia Omospondia Syllogon Prossopikou v Dimotiki Etairia Pliroforissis and others [1991] ECR I-2925; Commission Decision On The Exclusive Right To Broadcast Television Advertising In Flanders, OJ 1997 L 244/18, on appeal Case T-266/97, Vlaamse Televisie Maatschapij NV v Commission [1999] ECR II-2329 (advertising monopoly struck down). 257 See Case C-260/89, Elliniki Radiophonia Tiléorassi AE and Panellinia Omospondia Syllogon Prossopikou v Dimotiki Etairia Pliroforissis and others [1991] ECR I-2925, para. 38; Case C-462/99, Connect Austria Gesellschaft für Telekommunikation GmbH v Telekom-Control-Kommission, and Mobilkom Austria AG [2003] ECR I-5197, para. 80.

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Article 102 TFEU; 258 (3) create situations in which a dominant firm “cannot avoid infringing” Article 102 TFEU; 259 or (4) create situations in which “the provision of a service is limited” contrary to Article 102 TFEU, i.e., that the dominant firm cannot meet demand. 260 The above formulations gave rise to some confusion as to whether and to what extent it was necessary, under Article 106(1), to identify an abuse other than that which results from the situation brought about by the State measure at issue. In Greek Lignite, the Court of Justice held that it is sufficient to show that a potential or actual anticompetitive consequence is liable to result from the State measure at issue. It therefore held that the General Court erred in law in suggesting that the Commission had neither identified nor established to a sufficient legal standard the abuse to which, within the meaning of Article 102 TFEU, the State measure in question had led or could have led DEI to commit. 261 In this context, the Court of Justice clarified that Article 106(1) (applied in conjunction with Article 102 TFEU) covers situations where: 262 (1) where a State measure creates a situation in which a public undertaking or an undertaking on which it has conferred special or exclusive rights, merely by exercising the preferential rights conferred upon it, is led to abuse its dominant position; (2) where a State measure is liable to create a situation in which the undertaking benefitting from exclusive or special rights is led to commit such abuses; (3) where a measure imputable to a Member State gives rise to a risk of an abuse of a dominant position; and (4) inequality of opportunity is created between economic operators, and thus distorted competition, is the result of a State measure. Accordingly, it is clear that no actual abuse is required. This is clearly correct, since, if this were a requirement, the application of Article 106(1) (applied in conjunction with Article 102 TFEU) would merely duplicate the position under Article 102 TFEU when applied on a standalone basis. It is also clear that proof of even a likely abuse is not essential. All that is necessary is to identify at least a potential anti-competitive consequence liable to result from the State measure at issue. Such an infringement may thus be established where the State measures at issue affect the structure of the market by creating unequal conditions of competition between companies, by allowing the public undertaking or the undertaking which was granted special or exclusive rights to maintain (for example by hindering new entrants to the market), strengthen, or extend Case C-179/90, Merci convenzionali porto di Genova SpA v Siderurgica Gabrielli SpA [1991] ECR I-5889, paras. 17–19. 259 See Case C-41/90, Klaus Höfner and Fritz Elser v Macrotron GmbH [1991] ECR I-1979, para. 27; Case C-55/96, Job Centre coop. arl [1997] ECR I-7119, at paras. 29, 31, 35, 38; Case C-179/90, Merci convenzionali porto di Genova SpA v Siderurgica Gabrielli SpA [1991] ECR I-5889, para. 17; Case C-323/93, Société Civile Agricole du Centre d’Insémination de la Crespelle v Coopérative d’Elevage et d’Insémination Artificielle du Département de la Mayenne [1994] ECR I-5077. 260 Höfner and Elser, ibid; Case C-258/98, Giovanni Carra and Others [2000] ECR I-4217; and Job Centre, ibid., paras. 31–36. 261 Case C-553/12P, Commission v Dimosia Epicheirisi Ilektrismou AE and others EU:C:2014:2083, para. 46. 262 Ibid., paras. 41-44. See also Case T-68/08 Fédération internationale de football association (FIFA) v Commission, [2011] ECR II-349. 258

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its dominant position over another market, thereby restricting competition, without it being necessary to prove the existence of actual abuse. 263 For example, in a case where a dominant firm is granted, via a State measure, a “regulatory” role over competitors’ access to the market—such as the right to certify their equipment’s conformity with standards 264—it is not necessary to show that the undertaken given such right via a State measure had actually taken advantage of this conflict of interest or even that it likely would do. The gravamen is that the State measure should not place the undertaking in such a position in the first place, since such a measure does not guarantee the equality of opportunity that is the hallmark of undistorted competition. The second principle—which was less clear—concerns the circumstances in which the State is acting unlawfully when it creates or extends a dominant position without justification. This concerns the scope of Article 106(1) and the justification for derogations from the prohibition contained therein under Article 106(2). The main source of confusion was whether: (1) the creation or strengthening of a dominant position automatically makes it possible that an abuse of dominance will occur, and so is unlawful; 265 or (2) the enterprise, merely by exercising the exclusive rights granted to it, is led to abuse its dominant position. 266 The first interpretation assumes that distortions of competition inevitably follow from exclusive or special rights that lack a proper justification. The second is narrower in that it also requires some proof that abuses of dominance are likely to follow from the grant of an exclusive or special right. In Greek Lignite, the Court of Justice clarified, however, that: 267 (1) the extension of a dominant position, without any objective justification, is prohibited as such by Article 106(1) in conjunction with Article 102 TFEU, where that extension results from a State measure; (2) it is not necessary to show, in every case, that the undertaking concerned enjoys a monopoly or that the State measure at issue awards it exclusive or special rights over a neighbouring and separate market, or that it has any regulatory powers; and (3) nor is there an obligation to show the impact of the infringement of the combined provisions of Articles 106(1) and 102 TFEU on the interests of consumers: it is sufficient if there is an impact on an effective competition structure.

Dimosia Epicheirisi Ilektrismou, ibid., para. 46. See, e.g., Case C-18/88, Régie des télégraphes et des téléphones v GB-Inno-BM SA [1991] ECR I-5941. See also Case C-49/07, Motosykletistiki Omospondia Ellados NPID (MOTOE) v Elliniko Dimosio [2008] ECR I-48 where the Court of Justice held that Articles 106(1)/102 TFEU preclude a national rule which confers on a legal person, which organises motorcycling competitions and enters, in that connection, into sponsorship, advertising and insurance contracts, the power to give consent to applications for authorisation to organise such competitions, without that power being made subject to restrictions, obligations and review. 265 See, e.g., Case C-18/88, Régie des télégraphes et des téléphones v GB-Inno-BM SA [1991] ECR I-5941, para. 24. 266 See, e.g., Case C-323/93, Société Civile Agricole du Centre d’Insémination de la Crespelle v Coopérative d’Elevage et d’Insémination Artificielle du Département de la Mayenne [1994] ECR I5077, paras. 21 et seq. 267 Case C-553/12P, Commission v Dimosia Epicheirisi Ilektrismou AE and others EU:C:2014:2083, paras. 66-68. 263 264

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1.4.5

Article 102 TFEU And Regulation

Scope for parallel application of competition law and regulatory principles. Governments sometimes regulate markets in order to deal with structural or other features that limit effective competition. The expectation is that regulating aspects of former monopolies—such as price caps, rate-of-return, and cost-based access to key inputs—will smooth out market imperfections and allow a transition towards full competition over time. 268 There is some debate among commentators whether regulation is, on the whole, a good thing, 269 and whether ex post control under competition law is preferable. 270 Issues such as inadequate information, reduced incentives for incumbents to invest, regulatory capture (where regulators are lobbied or pressurised into adopting industry-friendly rules), and regulatory lag (where changes in the incumbent’s actual costs are not quickly reflected in regulatory decisions) may limit the effectiveness of regulation. But there is also a good deal of evidence in Europe and elsewhere that regulation in the telecommunications sector has produced enormous benefits for consumers. As noted, competition law and regulatory principles may apply in parallel unless regulation is so detailed and prescriptive as to eliminate the scope for independent competitive action. 271 In the area of telecommunications for example, the Commission and national competition authorities (NCAs) may apply EU competition law in an environment where regulation also exists. National regulatory authorities (NRAs) too will often apply regulatory principles in areas in which competition law applies. And many NRAs have parallel powers to apply competition law and regulation to the same industry (e.g., Ofcom in the United Kingdom, ComReg in Ireland). Parallel application is most likely to occur in the case of Article 102 TFEU and regulation, since the addressees of the principal obligations are essentially the same, i.e., firms with significant market power. It is clearly important therefore to clarify the main differences between the two regimes. EU law contains certain rules providing for cooperation between regulatory agencies and competition authorities, but these are mainly procedural in nature. 272 The substantive differences have not yet been clarified. Below, the principal differences 268 See D Geradin, “The Opening Of State Monopolies To Competition: Main Issues Of The Liberalisation Process,” in D Geradin (ed.), The Liberalisation Of State Monopolies In The European Union And Beyond, Kluwer Law International, (1999). 269 See, e.g., D Carlton & J Perloff, Modern Industrial Organisation, Pearson Addison Wesley, (2005) (4th edn.), p. 682 (“Government regulation of firms may increase welfare in markets that are not perfectly competitive. Unfortunately, actual regulation often deviates considerably from optimal regulation and exacerbates market efficiencies … Optimal regulation can force a monopoly to set the competitive price. However, if the monopoly is badly regulated, shortages occur or the monopoly is encouraged to produce inefficiently. Even where regulations are properly applied, the cost of administering them may exceed the benefits.”) and p. 706 (“[T]here is considerable doubt that regulatory bodies do lower prices.”). 270 See D Geradin and M Kerf, Controlling Market Power In Telecommunications: Antitrust Vs. Sector-Specific Regulation, Oxford University Press (2000). 271 See section 1.3.2. above. 272 See, e.g., Communication from the Commission: Guidelines on market analysis and the assessment of significant market power under the EU regulatory framework for electronic communications networks and services, C (2018) 2374, Final.

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between the two sets of rules are noted in the context of the telecommunications sector, since this is the most developed form of regulation under EU law. But much the same analysis would apply to other regulated sectors, such as post and energy. The precise differences between ex post competition laws and ex ante sectoral regulation is a detailed and complex topic that would easily merit a book in its own right. There are also limits to such analysis, since the extent of similarities and differences will obviously depend on what the legislation empowers the regulating body or court to do. In principle one could have a wide spectrum of differences between light-touch regulation and extremely detailed price controls. But a number of general points at a high level of abstraction can be made. The basic differences between competition law and regulation. At first sight, the objectives of regulation and competition law would seem to converge: both in essence seek to identify conditions in which effective downstream competition can function. 273 On closer inspection, however, the objectives of regulation and competition law may not only diverge, but may in fact be flatly at odds with each other. A first basic difference is that competition law applies ex post, a largely backward-looking assessment of conduct that has already taken place. A specific feature of most sectorspecific regimes is that they apply “asymmetrically” in that the most demanding obligations will be imposed ex ante on one or a limited number of firms. 274 While Article 102 TFEU imposes a “special responsibility” on dominant firms, specific remedies will only be imposed when an abusive conduct has been established. 275 By contrast, where significant market power exists, the national regulatory authority is generally required to impose one or more remedies, subject to proportionality principles. 276 Second, regulatory obligations are generally much more extensive and can specify more precise obligations. Under regulation, the incumbent firm may have affirmative duties that could not be imposed under competition law. The regulatory framework on electronic communications seems to allow a NRA to mandate the incumbent to grant access to its network infrastructure in circumstances that would not be covered under the so-called “essential facilities” doctrine under Article 102 TFEU. 277 For example, in

273 See in this regard Opinion No. 04/A-17, of the Conseil de la Concurrence, 14 October 2004 (extensive discussion of the relationship between antitrust and sectoral regulations). 274 For instance, pursuant to the EU regulatory framework on electronic communications, obligations of access, non-discrimination, etc., will only be imposed on operators that hold significant market power. See A de Streel, “The Integration Of Competition Law Principles In The New European Regulatory Framework For Electronic Communications,” (2003) 26 World Competition 489. 275 R Subiotto, “The Confines Of The Special Responsibility Of Dominant Undertakings Not To Impair Genuine Undistorted Competition,” (1995) 18 World Competition 5. 276 See Directive (EU) 2018/1972 Of The European Parliament And Of The Council of 11 December 2018 establishing the European Electronic Communications Code, OJ 2018, L 321/36, recital 178 (“The imposition of a specific obligation on an undertaking designated as having significant market power does not require an additional market analysis but rather a justification that the obligation in question is appropriate and proportionate in relation to the nature of the problem identified on the market in question, and on the related retail market.”). 277 See generally D Geradin and JG Sidak, “European And American Approaches To Antitrust Remedies And The Institutional Design Of Regulation In Telecommunications,” in M Cave, S

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the area of local loop unbundling, ex ante regulation under EU law requires that where an undertaking has significant market power is respect of wholesale local loop access, it should give access to competitors based on principles of cost-orientation. 278 This would not be possible under Article 102 TFEU, unless, perhaps, the dominant firm was already providing access to third parties or its own downstream operations at such a level. Moreover, in an Article 102 TFEU case, it would be necessary but not sufficient in ordering an access obligation if the firm concerned was dominant in a wholesale local loop access market. It would also be necessary to conduct a market analysis at the level of the retail market, and ascertain whether rivals had their own access technologies (e.g., fibre, wireless access). Even if those alternative access possibilities were “less advantageous,” access could not be ordered under Article 102 TFEU. 279 Third, competition law is a set of principles which protects competition from anticompetitive conduct. It does not give a competition authority power to impose any new obligations (except as part of a remedy, based on existing competition law rules, for a breach of existing rules). Nor does it give a competition authority power to pursue any policy objectives, however legitimate, other than the protection of competition. In particular, it does not empower a competition authority to offset or compensate rivals for any lawfully acquired competitive advantages of a dominant company. This is particularly important in margin squeeze and duty-to-contract cases in which the authority may need to fix the terms of contracts. If the authority is acting under competition law, it may fix the price or the terms of the contract only on the basis of competition law considerations. Terms cannot be set merely to encourage new entry or a particular type or size of entry. By contrast, ex ante regulatory powers may impose new types of obligations on the addressees of the particular regulatory framework. For instance, sector-specific regimes contain universal service obligations that impose operators to serve certain categories of customers, which a normal profit-making firm would not necessarily serve. 280 Moreover, retail price controls will not only seek to prevent exploitative abuses on the part of the incumbent, but also be based on social considerations. This may in some cases force incumbents to price below costs on some market segments, a situation which could never occur through the application of competition rules. Finally, sector-specific regimes can in some cases take pro-active measures to effectively create competition on downstream markets. Incumbents may be, for instance, forced to divest their upstream operations even in the absence of any proven abuse of dominance. In the case of margin squeeze, a NRA may also be tempted to adopt wholesale rates that are favourable to the incumbent’s competitors to stimulate entry.

Majumdar, and I Vogelsang (eds.), Handbook Of Telecommunications Economics, Elsevier (2005) (Vol. 2). 278 Regulation (EC) No 2887/2000 Of The European Parliament And Of The Council Of 18 December 2000 On Unbundled Access To The Local Loop, OJ 2000 L 336/4, Article 3(3). 279 Case C-418/01, IMS Health GmbH & Co OHG v NDC Health GmbH & Co KG [2004] ECR I5039, para. 28. 280 See P Larouche, “Telecommunications,” in D Geradin (ed.), The Liberalisation Of State Monopolies In The European Union And Beyond, Kluwer Law International (2000), pp. 42–44.

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The final comment is that specific competition law duties should be imposed only if, on balance, more competition is promoted than discouraged. In considering access obligations or pricing terms to rivals under Article 102 TFEU, for example, a competition authority, or regulatory authority relying on competition law powers, should consider if the downstream market is easy to enter and so relatively unprofitable for objective and unavoidable reasons. If so, to impose an access requirement could dampen competition than increase it because that it might discourage investment in the only, or most, profitable level in the industry. By contrast, regulatory authorities are empowered to take action under regulatory powers even if it reduces the ability and incentives of the incumbent to compete. For instance, a regulator can, if authorised by legislation to do so, impose a duty on a dominant incumbent to give access on more favourable terms to competitors which are investing in their own networks (e.g., if the regulatory framework favours network competition over service competition in the long-run). This may affect the ability and incentives of the incumbent to invest in its own infrastructure. Putative breaches of ex ante regulation as breaches of Article 102 TFEU. Section 1.3.3 above discussed the situation of whether conduct considered as lawful under ex ante regulation can be reviewed under Article 102 TFEU. In particular, in Deutsche Telekom the EU Courts considered that, provided the dominant firm had the scope to adjust its prices, the fact that those prices were considered or approved under ex ante regulation would not be a defence to the application of Article 102 TFEU. 281 In short, unless the regulator mandates a particular price, over which the dominant firm has no choice, Article 102 TFEU can apply. In Telekomunikacja Polska 282 and Slovak Telekom, 283 the Commission has developed a new principle in this area. In both cases, there was an ex ante regulatory obligation to give wholesale access to the defendant’s local loops, set out in legislation or administrative decisions rendered by the NRA under national law but based on EU law. 284 The defendants were found to have engaged in a series of acts—such as delays and adding unnecessary conditions for supply—that amounted to a “constructive” refusal to give access to their local loops, and this conduct was found by the Commission to have violated Article 102 TFEU. One issue raised by these decisions is that the Commission suggested that the Bronner/“exceptional circumstances” legal conditions for a duty to deal can be

Deutsche Telekom AG, OJ 2003 L 263/9, upheld on appeal in both Case T-271/03, Deutsche Telekom AG v Commission [2008] ECR II-447 and Case C-280/08 P, Deutsche Telekom AG v Commission [2010] ECR I-9555. 282 Telekomunikacja Polska, Commission Decision of 22 June 2011, on appeal Case T-486/11 Orange Polska S.A. v Commission EU:T:2015:1002 and Case C-123/16 P Orange Polska S.A. v Commission, EU:C:2018:590. 283 Case AT.39523, Slovak Telekom, Commission Decision of 16 October 2014, on appeal Case T851/14, Slovak Telekom a.s. v Commission, EU:T:2018:929. The case is currently on a further appeal to the Court of Justice. 284 Regulation (EC) No 2887/2000 of the European Parliament and of the Council of 18 December 2000 on unbundled access to the local loop, OJ 2000 L 336/4. 281

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dispensed with in favour of other conditions treating a refusal to deal as unlawful. This is discussed in detail in Chapter Ten (Refusal To Deal). Another issue, discussed here, is whether and in what circumstances a breach of an ex ante regulatory obligation can amount to a breach of Article 102 TFEU. The Commission’s position was straightforward: it reasoned that the duty to supply the upstream inputs was imposed by the NRAs in consideration inter alia of the fact that a denial of access to the upstream products or access on unreasonable terms and conditions would hinder the emergence and/or continuation of sustainable competition at retail level. 285 The Commission found that delays and other dilatory acts intended to frustrate rivals’ access infringed Article 102 TFEU. Slovak Telekom (ST) challenged these findings on appeal. The starting point of its argument is the point discussed above that ex ante regulation and ex post obligations under Article 102 TFEU pursue different objectives. Article 102 TFEU aims at stopping and remedying abusive conduct by dominant firms (which is why breach of that provision can lead to the imposition of quasi-criminal penalties). By contrast, ex ante regulation is aimed at fostering specific forms of competition by requiring operators with significant market power (SMP) to share inputs and/or impose wholesale price controls. The General Court accepted that ex ante regulation “may have objectives which differ from those of EU competition policy.” 286 However, it held that, since the legislation relating to the telecommunications sector defines the legal framework applicable to it and, in so doing, contributes to the determination of the competitive conditions under which a telecommunications undertaking carries on its business in the relevant markets, that legislation is a relevant factor in assessing the abusive nature of conduct under Article 102 TFEU. 287 This superficial finding does not grapple with the key issues. First, the General Court does not analyse the nature of the ex ante obligation in question to see whether it involves something that is capable of also being an obligation of a dominant firm under Article 102 TFEU. The case concerned local loop unbundling (LLU). In the area of LLU, the EU legislature considered that, as a policy matter, wholesale access to the SMP operators’ copper local loops was needed to intensify competition and investment on the local access market. 288 Access prices had to be cost oriented—something which could not normally be required under Article 102 TFEU (unless the dominant firm had routinely offered such terms in the past)—since the objective was to create a particular form of de novo competition. 289 The SMP operators were also required to publish a complex contractual template that had to include certain mandatory terms. 290 Such an

Case AT.39523, Slovak Telekom, Commission Decision of 16 October 2014, para. 374. Case T-851/14, Slovak Telekom a.s. v Commission, EU:T:2018:929, para. 152. 287 Ibid., para. 139. A further appeal on this issue is pending before the Court of Justice. 288 See Article 1(1) of Regulation (EC) No 2887/2000 of the European Parliament and of the Council of 18 December 2000 on unbundled access to the local loop, OJ 2000 L 336/4. 289 Ibid., recital 11. 290 The ST unbundled reference offer, which it was required under regulation to publish, contained 19 annexes. 285 286

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unusual, specific, and detailed public contractual offer obligation does not exist under Article 102 TFEU. 291 Second, because of the differences between ex ante regulation and Article 102 TFEU, the issues being considered by the NRA and Commission were quite different. Under regulation, if a firm has SMP, the NRA is generally required to impose a remedy, which, in the LLU sphere, will normally be cost-based access and various nondiscrimination conditions. By contrast, merely being dominant under Article 102 TFEU is not itself a recrimination and it does not immediately require the imposition of access and other related obligations. 292 An abuse is also required. In this regard, even a dominant firm can, in general, refuse to deal under Article 102 TFEU. 293 Finally, even if it could be established that ex ante access obligation pursued identical objectives to a duty to deal under Article 102 TFEU, it does not follow that, merely because a duty was imposed under ex ante regulation, the conditions for an equivalent duty under Article 102 TFEU would be satisfied. The question under ex ante regulation considered by Slovak NRA was whether wholesale access to ST’s local loops was “indispensable” for a retail competitor of ST’s wishing to offer LLU-based services. Since ST was the only provider of copper local loops in Slovakia, wholesale access to its local loops was considered by the NRA to be necessary for an LLU-based operator. However, the question of indispensability under Article 102 TFEU is a different one. This question concerned whether access to ST’s wholesale LLU is “indispensable” for rivals to be able compete in the retail market defined by the Commission in the decision. This market was much broader than LLU-based services, since it “comprises all the mass market fixed broadband services, whether provided through xDSL or any other fixed access technology (fibre-, cable- or fixed wireless access (FWA)-based).” 294 Thus, in the retail market, ST’s rivals could use a range of alternative access technologies, most of which were not owned or controlled by ST at all. Even if these alternative infrastructures were less advantageous than access to ST’s wholesale LLU, the Bronner test would not be satisfied, since “alternative solutions, even if they are less advantageous” rule of out indispensability. 295 Accordingly, the fact that the Slovak NRA considered that, as a matter of ex ante regulation, access to ST’s wholesale copper LLU was necessary for alternative operators seeking to offer LLU-based services, was not a reason why the Commission Members of standard bodies are sometimes obliged by contract to offer each other fair, reasonable, and non-discriminatory licences for their intellectual property but this is simply the “price” of participation in standard-setting preventing the other members from being held to ransom from undisclosed patents or disclosed patents and excessive royalties or other unfair terms. But this is a contractual assumption of a voluntary obligation. 292 See Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission [1983] ECR 3461, para. 10 293 See Ch. 10 (Refusal To Deal). 294 Case AT.39523, Slovak Telekom, Commission Decision of 16 October 2014, para. 87. 295 Case C-418/01, IMS Health GmbH & Co OHG v NDC Health GmbH & Co KG [2004] ECR I5039, para. 28. Indeed, in Bronner itself other methods of distributing daily newspapers, such as by post and through sale in shops and at kiosks, existed, even if they were “less advantageous” (para. 43), and the Court of Justice found that the refusal to deal was not abusive. 291

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could, in examining the much broader retail market it had defined in the Slovak Telekom decision, conclude, under Article 102 TFEU, that there was no need to examine the “indispensability” condition under Bronner.

1.4.6

Article 102 TFEU And National Abuse Of Dominance Laws

Legal scope for Member States to apply stricter national abuse of dominance laws. Prior to the adoption of the Commission’s modernisation reforms in 2004, national authorities and courts were competent to apply their national abuse of dominance laws in parallel with Article 102 TFEU. Rules intended to avoid the conflicts that might result from the parallel application of national law and Article 102 TFEU were limited. The principal limitations were that: (1) a national court ruling on a practice, the compatibility of which with Article 102 TFEU is already the subject of a Commission decision, could not take a decision running counter to that of the Commission; 296 (2) a national court should stay its proceedings if the prior Commission decision was subject to an action for annulment, or, alternatively, seek a preliminary ruling; 297 and (3) national law could not impose sanctions on undertakings for behaviour that had already been subject of action at the Community level. 298 Two Notices dealing with cooperation between the Commission and NCAs and courts also tried to ensure consistency of approach, but these were rarely applied in practice and were non-binding in any event. The modernisation reforms did not change much in this regard. Article 3(1) of Regulation 1/2003 requires that where the competition authorities of the Member States or national courts apply national competition law to any abuse prohibited by Article 102 TFEU, they shall also apply Article 102 TFEU. However, Article 3(2) goes on to provide that, in so doing, Member States are not precluded from adopting and applying on their territory stricter national competition laws which prohibit or sanction unilateral conduct engaged in by undertakings. Recital 8 states: “Member States should not under this Regulation be precluded from adopting and applying on their territory stricter national competition laws which prohibit or impose sanctions on unilateral conduct engaged in by undertakings. These stricter national laws may include provisions which prohibit or impose sanctions on abusive behaviour toward economically dependent undertakings.”

This represents an important change in the Commission’s position. Under the draft proposal, the application of national abuse of dominance laws could not lead to the prohibition of practices that would be permitted under Article 102 TFEU. In the final version, this obligation was retained only for Article 101 TFEU. The exception under Article 3 is also potentially broad, since it did not require Member States to state from the outset whether they intended to apply stricter laws. Further, Member States remain entitled under this provision to adopt new laws on unilateral conduct. The change from the draft proposal reflects certain Member States’ desire to continue to apply national abuse of dominance laws aimed at protecting small and medium-sized Case C-344/98, Masterfoods Ltd v HB Ice Cream Ltd [2000] ECR I-11369. Ibid. 298 Case 14-68, Walt Wilhelm and others v Bundeskartellamt [1969] ECR 1. 296 297

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enterprises. The scope for Member States applying stricter national abuse of dominance laws is clearly regrettable from the perspective of legal certainty and consistency. 299 In its 2009 report on Regulation 1/2003 the Commission noted that “the business and legal communities have called for an extension of the convergence rule to national laws covering unilateral conduct” and that “feedback from stakeholders suggests that diverging standards fragment business strategies that are typically formulated on a panEuropean or global basis.” 300 The Commission therefore seemed keen on further convergence in this area. The scope for divergence in practice. It is difficult to get a comprehensive handle on whether and to what extent Member States are in practice applying stricter national abuse of dominance laws. One obvious problem is that Member States are often not explicit that they are, formally, availing of Article 3(2) of Regulation 1/2003. Another issue is that even if Member States are in theory applying the same substantive rules on unilateral conduct, it is inevitable in practice that there would be potentially significant divergence across Member States as to whether and to what extent (and how) such rules are applied. Harmonisation of procedural and substantive rules can only go so far in ensuring that Member States interpret and apply the law in the same way. There will always be some differences in approach, rules of evidence, differing interpretations on subtle points, and variations in expertise and sophistication between authorities and courts, not to mention funding issues. It seems inevitable that, in a system of parallel competence shared between twenty seven Member States and the EU, divergence will, to a greater or lesser extent, always be a feature. For example, some Member States have applied innovative and aggressive enforcement in the area of abuse of dominance whereas others have little or no track record. 301 The scope for divergence should also be seen in perspective. A first point to note is that more or less the same situation existed prior to modernisation for over forty years. Indeed, the obligation contained in the draft proposal—that Member States could not apply stricter standards than those applicable under Article 102 TFEU—was widely trumpeted at the time as a key component to preserve the overall integrity of the modernisation reforms. The then DirectorGeneral of DG Competition, Dr. Alexander Schaub, explained the importance of ensuring that a single set of common rules applied in the following terms. See A Schaub, “Efficient Protection Of Competition In An Enlarged Community Through Full Association Of National Competition Authorities And National Courts,” Reform of European Competition Law, conference held at Freiburg, November 9, 2000. See also White paper on modernisation of the rules implementing Articles 85 and 86 of the EC Treaty, 28 April 1999. (“[The draft] Article 3 ensures that agreements and practices capable of affecting cross-border trade are scrutinised under a single set of rules, thereby promoting a level playing field throughout the Community, and removing the costs attached to the parallel application of Community law and national laws for both competition authorities and business.”). See too G Marenco, “Consistent Application Of EC Competition Law In A System Of Parallel Competencies,” Reform of European Competition Law, conference held at Freiburg, 10 November 2000 (“The adoption of this provision would boost consistency to a marked degree.”). 300 Commission Staff Working Paper Accompanying The Communication From The Commission To The European Parliament And Council Report on the functioning of Regulation 1/2003, COM (2009) 206 final, para. 177. 301 Italy for example has developed several novel abuses. For a discussion see M Siragusa, “Italy– New Forms Of Abuse Of Dominance And Abuse Of Law,” in L Parcu, G Monti, and M Botta Abuse of Dominance In EU Competition Law: Emerging Trends, (2017) (Edward Elgar), Chapter 7. 299

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Member States were free to apply different laws on unilateral conduct and had no general obligation to take the position under Article 102 TFEU into account unless it would directly conflict with a prior Commission decision on the same matter or result in the approval of a practice that would be prohibited under Article 102 TFEU. Second, there is a good argument that, even allowing for Article 3 of Regulation 1/2003 (which is only secondary legislation), Member States cannot adopt any decision that would run contrary to the objectives of the TFEU (assuming there is an effect on EU trade). As a general rule, the combined application of Articles 106 TFEU, 4(3) TEU, and Protocol 27 of the TFEU prevents Member States, which includes their NCAs and courts, from adopting any measure that would deprive the competition rules of their effectiveness. Under Article 4(3) TEU, Member States must take any appropriate measure to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the EU institutions, as well as refrain from any measure which could jeopardise the attainment of the EU’s objectives. The scope of Article 4(3) TEU is potentially very wide-ranging indeed. 302 One of these objectives, codified in Protocol 27 of the TFEU, is the maintenance of “a system ensuring that competition is not distorted.” One could, for example, envisage situations in which national laws on “economic dependence” prevent an undertaking in a dominant position from offering lower prices to one customer. Where the effect of applying a non-discrimination obligation in this scenario would be to prevent the dominant firm from offering a lower price to another customer, national law would be applied in a manner contrary to EU competition law. Other scenarios could doubtless also be imagined. Third, there have been developments since 2004 in those Member States that had stricter rules in place. The Commission’s 2009 report on Regulation 1/2003 notes that several Member States have removed their rules concerning resale below cost or at loss, including Ireland and Italy (and a former Member State, the United Kingdom). 303 Even where the rules technically remain on the statute book, they may in practice be rarely applied. In France for example, Article L.420-5198 of the Code de Commerce contains a prohibition on offers or “abusively low” pricing practices. But the Competition

302 For example, even a Commission proposal can be deemed sufficient for a duty of abstention on the part of the Member States: see Case 804/79 Commission v United Kingdom (Sea Fisheries) [1981] ECR 93. It can also require Member States to abstain from concluding bilateral agreements where there is an EU decision authorising the Commission to start negotiating a multilateral agreement, on the basis that this “marks the start of a concerted Community action at international level and requires, for that purpose, if not a duty of abstention on the part of the Member States, at the very least a duty of close cooperation between the latter and the Community institutions in order to facilitate the achievement of the Community tasks and to ensure the coherence and consistency of the action and its international representation:” see Case C-266/03 Commission v Luxembourg (Inland Waterway) [2005] ECR I-341, para. 60. It can even apply to a “strategy” for EU action: see Case C-246/07 Commission v Sweden (PFOS) [2010] ECR I-203. 303 Commission Staff Working Paper Accompanying The Communication From The Commission To The European Parliament And Council Report on the functioning of Regulation 1/2003, COM (2009) 206 final, para. 171.

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Council has never imposed sanctions for the infringement of this provision and, since 2004, has rejected allegations regarding abusively low prices. 304 Finally, some Member States have express provisions in domestic laws that require national law to be interpreted in a manner consistent with EU competition law (e.g., Ireland). Divergence in applying abuse of dominance to digital platform markets. As discussed in detail in Chapter Seventeen (Abuses in Digital Platform Markets), one area where there is emerging “regulatory competition” between Member State and EU enforcement is the application of abuse of dominance laws to the activities of digital platforms. This has led to calls for new legislation in this sphere and, in some cases, actual legislative action. Most notably, in Germany, following a report in 2019, a new Act on Digitalisation of German Competition Law is expected to enter into force in the second half of 2020. Among other things the new law would apply new conduct rules under domestic competition law for digital platforms. 305 Applying national laws that are predominantly different to Article 102 TFEU. The second principal exception to the obligation to apply national law in a manner consistent with EU competition law is Article 3(3) of Regulation 1/2003. This concerns Member States’ ability to apply national laws that “predominantly pursue an objective different from that pursued by Articles [101] and [102] [TFEU].” 306 Recital 9 gives the example of “legislation that prohibits or imposes sanctions on acts of unfair trading practice, be they unilateral or contractual.” This provision is intended to allow Member States to continue to apply laws that are concerned with tortious acts committed against rival firms and consumer protection laws. For example, the German Act Against Unfair Practices (Gesetz gegen den unlauteren Wettbewerb (UWG)) sets forth a number of “ethical” standards for the conduct of a trade or business. Firms are obliged for example to advertise their products and services truthfully to consumers and to refrain from certain forms of comparative advertising or terms (e.g., “the best” or “the largest”) that cannot be clearly verified. Measures also exist to protect competitors, such as unfairly disparaging rivals’ offerings. 307 Similar laws exist in other Member States.

304 Ibid., para. 172. In Germany, however, Section 29 of the German Competition Act was amended to include a specific provision against the abuse of market power in the energy sector, due to concerns over the energy price levels. Ibid., para. 176. 305 See summary “Competition 4.0,” 9 September 2019, available at https://www.dkart.de/en/blog/2019/09/09/competition-4-0/. The law is available in German at https://www.dkart.de/wp-content/uploads/2019/10/GWB-Digitalisierungsgesetz-Fassung-Ressortabstimmung.pdf 306 See Article 3(3), Regulation 1/2003. 307 Under Article 20(1) of the German Act against Restraints of Competition, dominant firms are required not to “directly hinder in an unfair manner other undertakings engaged in business activities open to similar undertakings, nor directly or indirectly treat them differently from similar undertakings, nor … grant them preferential terms without any objective justification” (translation from original). This obligation is not limited to dominant firms, but also applies to undertakings with a so-called “superior” market position. Where small or medium-sized enterprises depend on undertakings in a “superior” market position—in the sense that insufficient alternative sources of supply do not exist— German law has imposed wide-ranging obligations vis-à-vis distributors and retailers, including obligations to deal. See, e.g., Lotterievertrieb, Bundesgerichtshof, judgment of 7 March 1989, WuW/E

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In 2009, the Commission published a report on the implementation of Regulation 1/2003 at a national level. 308 The report finds that Member States with specific provisions concerning the abuse of economic dependence or superior bargaining power included France, Germany, Italy, Portugal and Spain, as well as Ireland and Slovakia which had measures with a more limited scope covering groceries and retail trade. 309 It notes that, since 2004, some Member States have chosen to withdraw their regulation concerning economic dependence and similar forms of unequal bargaining power, others have introduced such regulation. Furthermore, several Member States have, since 2004, removed their rules concerning resale below cost or at loss, including Ireland and Italy. The Member States currently prohibiting resale below cost include France, Germany, Spain, and Portugal. As with Article 3(2) of Regulation 1/2003, there are clear signs that the competition law interest in digital platforms has led, and will lead, to specific legislation applying predominantly pursue an objective different to Article 102 TFEU in this sphere. For example, in 2019, Belgium introduced a new law on abuse of economic dependence and stated that one of the main drivers of this legislation was concerns over digital platforms. 310 Leading French policy makers have also strongly recommended changes to EU competition law as respects digital platforms, and most notably increased use of interim measures through modified precautionary principles, the clear implication being that if EU law does not change, national law will. 311

1.4.7

Article 102 TFEU And Arbitration

Arbitration and competition law claims generally. Arbitration involves the private resolution of disputes (including disputes involving States and public bodies), usually pursuant to a contractual agreement between the parties that the dispute is to be resolved in this way. Arbitration is a growing method of resolving international disputes, including disputes raising competition law issues. 312 It has the advantage of being private and confidential, and may also be quicker than the normal civil courts in many jurisdictions, since there are typically no or truncated rights of appeal against an arbitral award. It also has the advantage of detaching a dispute from a particular legal system, BGH 2535; Bahnhofsbuchhandel, Bundesgerichtshof, judgment of 17 March 1998, WuW/E DE-R 134; Depotkosmetik, Bundesgerichtshof, judgment of 12 May 1998, WUW/E DE-R 206 (RIW 1998, 962). 308 Commission Staff Working Paper Accompanying The Communication From The Commission To The European Parliament And Council Report on the functioning of Regulation 1/2003, COM (2009) 206 final. 309 For a further report on national laws on abuses of bargaining power, see ICN Report on Abuse of Superior Bargaining Position Prepared by the Task Force for Abuse of Superior Bargaining Position (2008), available at http://www.jftc.go.jp/en/int_relations/kyoto_materials. files/ASBP_1.pdf. See also F Jenny, “The ‘Coming Out’ Of Abuse Of Superior Bargaining Power In The Antitrust World,” available at http://www.unctad.org/sections/ditc_ccpb/ docs/ditc_ccpb0008_en.pdf. 310 See M Richards, “Belgium Looks To Ease Claims Of Antitrust Abuse,” Global Competition Review, 15 March 2019. 311 See S Jean, A Perrot, and T Philippon “Concurrence Et Commerce: Quelles Politiques Pour L’Europe?,” Conseil D’Analyse Économique, Note No. 51, May 2019. 312 See generally OECD, Arbitration And Competition, 11 December 2011, DAF/COMP(2010)40; A Komninos, Arbitration And EU Competition Law, in J Badow, S Francq, and L Idot, International Antitrust Litigation: Conflict Of Laws And Coordination, Hart Publishing (2011); G Blanke and P Landolt (eds), EU And US Antitrust Arbitration: A Handbook For Practitioners, Kluwer (2010).

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which may be important in the case of disputes with public bodies. Arbitration allows the parties to choose the procedural rules that govern their dispute by opting for a particular set of rules, e.g., International Chamber of Commerce. This is often important when it comes to the disclosure of documents relevant to the issues in dispute, where the expectations between parties from common law systems and civil law systems may differ widely. Arbitration may therefore allow a “middle ground” for parties with diverse legal traditions. Arbitration may also have disadvantages. Depending on the membership of the arbitral body or tribunal, it may not have the same perceived authority and rigour as public enforcement of competition law. The investigatory powers involved in arbitration are also clearly less than public enforcement options and, as noted, document disclosure will typically be less in arbitrations than common law systems. The great benefit of arbitration—confidentiality—may also be its greatest weakness in competition law cases where transparency is usually important. There is also a concern that, as between competition authorities and the ordinary civil courts, arbitral bodies are the least well equipped to deal with complex competition law claims. 313 In particular, as discussed in more detail below, arbitral bodies cannot make an Article 267 TFEU preliminary reference to the Court of Justice on issues of EU law. Nor are they subject to the obligations of NCAs under Regulation 1/2003 or the obligations on national courts under Article 4(3) TEU. But these apparent disadvantages of arbitration should not be overstated, or at least are not axiomatic. As a starting point, the quality and authority of the arbitral process will depend on the membership and expertise of the arbitrator or arbitral panel. Leading global antitrust practitioners and former antitrust judges routinely sit on arbitral panels. The parties can also usually agree to include one or more competition law members as a panel member. Furthermore, the rules of arbitration are sufficiently flexible to accommodate competition law cases, including those requiring more intensive document production. Arbitral panels usually have flexibility on disclosure. The tribunal may also draw negative inferences from the unjustified failure to respond to a document production request, such as may occur under Article 9(5) of the IBA Rules on the Taking of Evidence in arbitrations. Finally, there is growing anecdotal evidence that arbitral bodies cooperate increasingly with competition authorities, at least where doing so it consistent with the rules and confidentiality of the dispute concerned. 314 Comprehensive up-to-date public information on how frequently competition law issues arise in arbitration is not easily available, which reflects the fact that most arbitral awards are not made public and that possible competition law violations are also likely to be a good reason for non-publication. But it is reasonable to assume that the application of Article 102 TFEU in the context of arbitration proceedings is of considerable, and growing, importance. 315 In particular, there has been extensive recent 313 See D Mamame and JU Menz, “Practical Challenges In Arbitrating Antitrust Claims,” Competition Law International (November 2011) p. 16. 314 Ibid., p. 17. 315 See, e.g., H Verbist, “The Application Of European Community Law In ICC Arbitrations, A Presentation Of Arbitral Awards,” ICC International Court Of Arbitration Bulletin, Special Supplement (December 1994) 33; Litigation and Arbitration in EU Competition Law, edited by M Marquis,

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use of arbitration in setting royalties in patent disputes concerning fair, reasonable, and non-discriminatory (FRAND) obligations (particularly in smart phone technology), where Article 102 TFEU plays a prominent role. 316 Notable arbitral bodies in this area include the International Court of Arbitration of the International Chamber of Commerce and the World Intellectual Property Organisation. And it is also likely that this will grow in future given the widespread increase in competition law enforcement generally and its greater use in contractual and other disputes between private parties. The application of Article 102 TFEU by arbitral bodies. A number of principles apply to arbitral awards in which issues of Article 102 TFEU are, or may be, relevant. 317 First, where a national court is asked to annul an arbitral award, it must refuse to uphold the award if to do so would contravene EU competition law. 318 This is based on the notion that EU competition law is a mandatory rule of public policy. 319 While this does not oblige Member States to create new procedural rules to this effect, they are bound by the EU law principles of equivalence and effectiveness in giving effect to EU law rights. 320 These principles may run into conflict with international law and other Treaty obligations assumed by Member States which provide for speedy enforcement and exclude public policy review at the enforcement stage. 321 Further, the extent of review European University Institute and Roberto Cisotta, LUMSA Free University, Italy (2015), Part III; and L Ilie and A Seow, “International Arbitration and EU Competition Law Complement Rather than Contradict One Another,” Journal of International Arbitration, Volume 34, Issue 6 (2017) pp.10071038. 316 For a discussion see PG Picht and G Loderer, “Arbitration in SEP/FRAND Disputes: Overview and Core Issues,” Journal of International Arbitration 36, No. 5 (2019): 575-594. 317 See M Dolmans and J Grierson, “Arbitration And The Modernisation Of Antitrust Laws: New Opportunities And New Responsibilities,” (2003) 14(2) ICC International Court Of Arbitration Bulletin 37. 318 See Case C-126/97, Eco Swiss China Time Ltd v Benetton International NV [1999] ECR I-3055. See also Case C-168/05 Mostaza Claro [2006] ECR I-675, paras. 34 to 39. 319 Ibid. However, this does not mean that any error of EU competition law necessarily affects the enforcement of the award. As Idot notes “The erroneous application, and even the non-application, of competition law by the arbitrators, and even a mere departure from a decision of a competition authority, are not in and of themselves sufficient to lead to a breach of public policy. The only breaches of competition law capable of qualifying as violations of public policy, and thereby of entailing the setting aside or refusal of enforcement of an award, are therefore those which seriously jeopardize the goals of competition policy. From the requirement that the violation of public policy must be serious it follows that the arbitrators’ decision cannot be chastised for errors or omissions which do not entail severe consequences for competition policy.” He adds, however, that “at least certain types of abuses of dominant position could under given circumstances be considered as typifying serious violations of competition law entailing a breach of policy.” See L Idot in OECD, Arbitration And Competition, 11 December 2011, at pp. 40-41. 320 These principles originate from Case 33/76, Rewe-Zentralfinanz eG v Landwirtschaftskammer fur das Saarland [1976] ECR 1989. Equivalence means that the procedures for asserting EU law rights must be no less favourable than the assertion of an analogous domestic law right. Effectiveness means that the procedures must not render the exercise of the EU law right excessively difficult. 321 For example, the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) provides that once the authenticity of an award is established, a domestic court before which recognition is sought may not re-examine the award on its merits. Similarly, a domestic court may not refuse to enforce an authenticated ICSID award on grounds of national or international public policy. In this respect, the ICSID Convention differs from the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. See CH

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of an award with compatibility with Article 102 TFEU is more akin to a “quick look” than a rehearing on the merits since “it is in the interest of efficient arbitration proceedings that review of arbitration awards should be limited in scope and that annulment of or refusal to recognise an award should be possible only in exceptional circumstances.” 322 Second, although a national court hearing an appeal from an arbitral award can refer questions concerning EU competition law to the Court of Justice under Article 267 TFEU, an arbitral body cannot, since it is not a “court or tribunal” for purposes of this provision. 323 This point can have far-reaching consequences. In Achmea the Court of Justice held that it was incompatible with EU law for Member States to include within a bilateral investment treaty (BIT) a provision that disputes under the BIT shall be resolved by arbitral proceedings. A key reason in this regard is that, for there to be effective judicial protection of EU law in arbitral proceedings in which EU law is interpreted or applied, either: (1) the tribunal in question must have the power to make a reference for a preliminary ruling to the Court of Justice; or (2) its decision must be subject to a full review by a court that has such a power. 324 The Court held that the preliminary ruling procedure is the “keystone” of the EU judicial system, by which national courts are “to ensure the full application of EU law in all Member States and to ensure judicial protection of the rights of individuals under that law.” 325 Importantly, the Court was quick to clarify that the same did not hold true of commercial arbitration where, as noted, the Court accepted that the efficiency of arbitration proceedings justifies the review of arbitral awards by national courts being limited in scope (provided that the fundamental provisions of EU law can be examined in the course of that review and, if necessary, be the subject of a reference to the Court of Justice for a preliminary ruling). This was predicated on the not entirely convincing distinction between commercial arbitration being based on the freely expressed wishes of the parties and inter-State arbitration deriving from a treaty by which Member States agree to remove from the jurisdiction of their own courts (and hence from the system of judicial remedies Article 19(1) TEU). Third, although it is not entirely clear whether arbitrators should raise issues of EU competition law of their own motion, the consensus is that they must, 326 unless the particular arbitration rules prevent them from doing so. This is based on the fact that, Schreuer, The ICSID Convention: A Commentary, 2nd ed (2009), p 1139, para 81. For a discussion see Micula and others v Romania [2020] UKSC 5. The Commission’s view is that Article 351(1) TFEU does not permit EU Member States to rely on ICSID to defeat mandatory provisions of EU law, such as State aid, in relations between Member States: see Case SA.38517 Romania: Arbitral award Micula v Romania of 11 December 2013, OJ 2015 L 232, Section 7.2. The case is currently on appeal to the EU Courts. 322 Eco Swiss, ibid., para. 35. 323 See Case 102/81, Nordsee Deutsche Hochseefischerei GmbH v Reederei Mond Hochseefischerei Nordstern AG & Co KG and Reederei Friedrich Busse Hochseefischerei Nordstern AG & Co KG [1982] ECR 1095. 324 Case C-284/16 Slovak Republic v Achmea BV, EU:C:2018:158. 325 Ibid., paras. 36-37. 326 See M Dolmans and J Grierson, “Arbitration And The Modernisation Of Antitrust Laws: New Opportunities And New Responsibilities,” (2003) 14(2) ICC International Court Of Arbitration Bulletin 44.

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under Article 1(3) of Regulation 1/2003, which can be relied upon between private parties, “the abuse of a dominant position referred to in Article [102 TFEU] shall be prohibited, no prior decision to that effect being required,” as well as arbitrators’ overriding obligation to ensure that their award is enforceable at law. 327 A more difficult issue is whether non-EEA arbitrators must also apply Article 102 TFEU, assuming that the basic conditions for the application of this provision are satisfied. Some commentators argue that they must do so where the award: (1) concerns EEA-based parties; (2) is to be implemented in whole or in part in the EEA; or (3) though less clear, is likely to have foreseeable effects on competition within the EEA for some other reason. 328 But this view is not universally held. There may also be practical limitations since antitrust law does not form part of substantive public policy for purposes of setting-aside proceedings in a number of jurisdictions. 329 There may also be difficult in-between situations where competition laws other than EU competition law may be relevant due to the seat of the arbitral body or domicile of the parties or where the place of enforcement of the award cannot be easily predicted in advance. In such situations it has been suggested that: 330 “[I]t is reasonable that some consideration be given also to what would be the most likely alternative fora to the arbitration, given the parties’ places of business and other relevant jurisdictional connecting factors, and to what competition law would have applied in such fora. For instance, in the case of a contract between an English and a US party having an anticompetitive effect in either the EU or the US, or in both, EU and US antitrust laws would consider themselves applicable. An arbitrator, even if sitting in a third country, should arguably apply such rules, regardless of the prospect of enforcement of the award in the UK or in the US, since those rules would be applied in the most likely alternative fora to arbitration, were the latter not available. Simply put, by failing to apply competition law in such a situation the arbitrator could be regarded as an accomplice of a circumvention of the applicable competition laws. The situation would be different if the contract between the same parties were to affect competition in the market of a third country before whose courts the dispute between the parties would be unlikely ever to be brought, even absent the arbitration agreement. Although that country’s competition law would certainly claim to be applied in principle, because its courts would lack jurisdiction over the dispute, it would difficult to view the recourse to arbitration as determined by the intent to evade the competition law of that country. The case for the application of that competition law by the arbitrators is thus less compelling.”

Finally, while arbitral bodies are not subject to the binding effect of Commission decisions under Article 16 of Regulation 1/2003—because they are not “national

327 See, e.g., Article 35 of the International Chamber of Commerce Arbitration Rules (arbitral bodies to make “every effort” to ensure that the award is “enforceable at law”). 328 See M Dolmans and J Grierson, “Arbitration And The Modernisation Of Antitrust Laws: New Opportunities And New Responsibilities,” (2003) 14(2) ICC International Court Of Arbitration Bulletin 45–46. 329 Such as in Switzerland: see D Mamame and JU Menz, “Practical Challenges In Arbitrating Antitrust Claims,” Competition Law International, November 2011, p. 16. However, the authors indicate that this does not apply to EU competition law. 330 See L Idot in OECD, Arbitration And Competition, 11 December 2011, DAF/COMP(2010)40, at p. 47.

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courts” for purposes of Regulation 1/2003 331—it has been suggested that a Commission decision that would be binding in the context of a national court would at least be important if not conclusive evidence in an analogous arbitral context. 332 This is based on the argument that: (1) an arbitral tribunal is obliged to render an award that is enforceable at law; and (2) that it would be an abuse of process for a party who had not challenged the Commission decision before the appropriate appellate bodies to then seek to deny its validity in subsequent arbitration proceedings. 333

This does not mean, however, that the Commission would not be receptive to requests for assistance from arbitral bodies on competition matters in individual cases, as has occurred in the past. See in this regard C Nisser and G Blanke, “Draft Best Practice Note On The European Commission Acting As Amicus Curiae In International Arbitration Proceedings,” ICC Task Force for Arbitrating Competition Law Issues, October 2005. The Commission may also of course seek to intervene of its own motion in arbitral proceedings, as it did in the well-known Micula ICSID proceedings and numerous other proceedings involving bilateral investment treaties entered into by Member States. For a discussion, see note by Volterra Fietta, “Further Attempts By The European Commission To Eradicate Intra-EU BITs,” (2015) available at https://www.volterrafietta.com/further-attempts-by-theeuropean-commission-to-eradicate-intra-eu-bits/. 332 R Nazzini, “International Arbitration And Competition Law,” 25 ECLR 153 (2004), pp. 155-156, at 162. 333 See, by analogy, Iberian UK Ltd v BPB Industries Plc [1996] 2 CMLR 601. 331

Chapter 2 HISTORY, DEVELOPMENT, AND REFORM 2.1

INTRODUCTION

Viewing Article 102 TFEU in context. Article 102 TFEU forms part of the Treaty of Rome (or the EC Treaty), signed in 1957 between the six original founding Member States. The EC Treaty did not merely create legal rights and obligations: the Court of Justice confirmed from the outset that it also created a “new legal order of international law.” 1 Article 102 TFEU therefore reflects a number of the underlying political, legal, economic, and social objectives of the EC Treaty. These objectives—and the new legal order that they formed part of—did not of course arise in a vacuum but were heavily influenced by the historical and political context and legislative intent of the drafters. Understanding the genesis of Article 102 TFEU, and its historical influences, is therefore a potentially important component of its application and interpretation today, as well as its evolution and reform. But Article 102 TFEU has not stayed rooted in its historical origins: it is a living instrument. As the Community (and now EU) has developed and grown in confidence and scope, so too have its competition law provisions, and in particular Article 102 TFEU. Charting the development of Article 102 TFEU is a critical component to seeing Article 102 TFEU in its modern-day setting. Further, perhaps the most critical phase of all—the reform of Article 102 TFEU—has been underway for the last decade or so. This reform was intended to remove certain perceived excesses or gaps in the enforcement of Article 102 TFEU. It was also intended to replace legal assertion or formal categorisation with coherent theories of harm and evidence of anticompetitive effects reflecting greater economic rigour. This chapter addresses these various influences on Article 102 TFU and its development and reform.

2.2

HISTORY OF ARTICLE 102 TFEU

The various influences on Article 102 TFEU. Perhaps surprisingly, the origins of the wording of Article 102 TFEU, and what its author(s) intended it to mean, are not particularly well researched. 2 But there is a good deal of consensus that at least five different sources had a significant impact on the drafting and intended meaning of the 1 See Case 26/62, NV Algemene Transport en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration [1963] ECR 95. 2 Two notable exceptions are P Akman, “Searching For The Long-Lost Soul Of Article 82 EC,” SRC Centre for Competition Policy and School of Law, University of East Anglia, CCP Working Paper 07-5 and H Schweitzer, “The History, Interpretation And Underlying Principles Of Section 2 Sherman Act And Article 82 EC,” in CD Ehlermann and M Marquis (eds.), European Competition Law Annual 2007: A Reformed Approach To Article 82 EC, pp. 119-163. Their research covered documents on the Rome Treaties’ negotiations held at the Historical Archives of the EU in Florence (called “Special Council of Ministers of the ECSC–The Rome Treaties Negotiations 1955-1957”), most of which are in German and French. See http://wwwarc.eui.eu/invpdf/invcm3.

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competition provisions. The first was the so-called “ordoliberal” school of thought that gained prominence in post-war thinking in Germany, as well as under German competition law. A second influence was the European Coal and Steel Community (ECSC) Treaty, which pre-dated the EC Treaty and contained a number of competition provisions that were transplanted, with modifications, to the EC Treaty. A third influence is the particular economic and political situation faced by Europe in the 1950s. A fourth influence—that in a sense straddles all other influences—is the legislative intent of the drafters of the competition law provisions of the EC Treaty. A final, and underestimated, influence was United States antitrust law, which reflected the involvement of several US lawyers, including antitrust lawyers, in the establishment of the Community and the drafting of its competition provisions. a. Ordoliberal thinking. Establishing themselves in the 1930s, a small group of German economists and lawyers belonging to the so-called “Freiburg School” espoused a new form of liberal thought which concluded that the lack of an effective, dependable legal framework had led to the economic and political disintegration of Germany, particularly evident from the collaboration between the Nazi government and private cartels as vehicles for totalitarian control. 3 They considered that a competitive economic system was necessary for a prosperous, free, and equitable society. Central to this was the establishment of a legal system to prevent the creation and misuse of private economic power. Post-war, several intellectual groups developed out of the Freiburg School such as ordoliberals, who believed, in particular, that social well-being was achievable only through an economic order based on competition where law would have the specific role of creating and maintaining the conditions under which competition could function properly. Ordoliberal thinking on the goal of competition law was based on notions of “fairness” and that firms with market power should behave “as if” there was effective competition.4 This reflected a view that small and medium sized enterprises were important to consumer welfare and that they should receive some protection from the excesses of market power. Ordoliberal thought therefore considered that certain restrictions on dominant firm 3 For a discussion of the Freiburg School and Ordoliberal thinking and its effects on European and German competition law see DJ Gerber, Law And Competition In Twentieth Century Europe: Protecting Prometheus, Clarendon Press (1998). See also W Möschel, “Competition Policy From An Ordo Point Of View,” in A Peacock and H Willgerodt (eds.), German Neo-Liberals And The Social Market Economy, Macmillan (1989) p. 145; G Amato, Antitrust And The Bounds Of Power, Hart Publishing, (1997) p. 41; and W Eucken, Grundsätze Der Wirtschaftspolitik, Mohr Siebeck (1990) p. 254. For a shorter synthesis, see J Kallaugher and B Sher, “Rebates Revisited: Anticompetitive Effects And Exclusionary Abuse Under Article 82,” (2004) 25(5) European Competition Law Review 263. 4 See DJ Gerber, Law And Competition In Twentieth Century Europe: Protecting Prometheus, Clarendon Press (1998) p. 241. For an updated assessment see DJ Gerber, Global Competition Law: Law, Markets, And Globalisation, Oxford University Press (2010), 167-168. However, Gerber’s views of ordoliberalism are not universally accepted. For criticism see EJ Mestmäcker, “The Development Of German And European Competition Law With Special Reference To The EU Commission’s Article 82 Guidance Of 2008,” in European Competition Law: The Impact Of The Commission’s Guidance On Article 102,” LF Pace (ed.), Edward Elgar Publishing (2011), pp. 25-63. See also H Schweitzer, “The History, Interpretation And Underlying Principles Of Section 2 Sherman Act And Article 82 EC,” in CD Ehlermann and M Marquis (eds.), European Competition Law Annual 2007: A Reformed Approach To Article 82 EC, pp. 119-163.

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behaviour were necessary and appropriate. The basic notion was that firms with economic power should not engage in conduct that unfairly limited rivals’ access to markets or production. Of course, dominant firms had to be allowed the commercial freedom to compete on the merits. In this regard, ordoliberal thinking developed a notion of performance-based competition (Leistungswettbewerb). For example, non-predatory lower prices, better quality products, or better service were all considered as legitimate ways of excluding rival firms and should be permitted, whereas conduct that was not performance-based competition (e.g., below-cost prices) should be prohibited. Perhaps the best-known ordoliberal scholar was Walter Eucken. In a seminal 1949 article he argued for a “third way” between the two extremes of central State control of markets (Zentralverwaltungswirschaft) and a laissez faire attitude of non-intervention (Verkehrswirtschaft). 5 Ahlborn and Grave (quoting Eucken) describe Eucken’s “third way” as follows: 6 “The conclusion which Eucken and other ordoliberals drew from these insights was that the competitive order needed to be protected through a political and legal framework which would safeguard the efficient functioning of the competitive order and which would protect from any self-destructive tendencies. Here, Eucken foresaw a clear separation of roles for the state and the private sector: ‘The policy of competitive order does not leave the choice of market forms and monetary systems to the economy itself because the experience of the era of laissez-faire policy speaks for itself. The development of the framework in which businesses and households can plan and act freely is governed by the economic policy under which the framework is supervised. Businesses are free to choose what they produce, what technology they use, what raw materials they purchase and what markets they wish to sell on. . . Freedom of the consumer exists, but not the freedom to choose how to define the rules of the game or the forms which the economic process takes. This particularly falls within the field of Ordnungspolitik (orderbased policy).’”

In addition to the influence of scholars such as Eucken, it also happened that many of the key figures involved in the foundation of the European Community were associated with the ordoliberal school of thought. 7 Some commentators have therefore argued that the abuse concept contained in Article 102 TFEU originates from a distinctly German doctrine of economic philosophy that had developed separately from the American notion of economic efficiency that underpinned the Sherman Act 1890. 8 It is argued for example 5 The article was W Eucken, “Die Wettbewerbsordnung Und Ihre Verwirklichung,” 2 ORDO, Jahrbuch Fur Die Ordnung Von Wirtschaft Und Gesellschaft 1-99 (1949). C Ahlborn and C Grave produced an abridged translation in Vol. 2(2) Competition Policy International 219 (2006) and an accompanying detailed analysis: see C Ahlborn and C Grave, “Walter Eucken And Ordoliberalism: An Introduction From A Consumer Welfare Perspective,” Competition Policy International, Vol. 2(2) Autumn 2006, 197. 6 Ahlborn and Grave, ibid., at 200-201. 7 These included Walter Hallstein, who became the first president of the European Commission, and Hans von der Groben, one of the two principal drafters of the Spaak Report—the document from which the EC Treaty was fashioned. See W Hallstein, Europe In The Making, George Allen and Unwin (1972); and Hans-Jürgen Küsters, Die Gründung Der Europäischen Wirtschaftsgemeinschaft, NomosVerlagsgesellschaft (1982) pp. 135–60. 8 DJ Gerber, “Law And The Abuse Of Economic Power In Europe,” (1987) 62 Tulane Law Review 85. Schweitzer also makes the practical point that at the same time the influential German delegation were involved in the drafting of the Treaty of Rome’s competition provisions, they were also involved in the elaboration of a new national competition law. So the latter fed into the former. See H Schweitzer,

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that: (1) the importance of markets shares for dominance (and relatively low thresholds applied) under Article 102 TFEU; (2) the “special responsibility” of dominant firms; 9 (3) the formalistic approach to many abuses; and (4) the control of exploitative abuses reflect the strong influence of ordoliberal thinking on Article 102 TFEU. 10 But this is not universally accepted, and in any event, there is a danger of overstating the influence of ordoliberal thinking on Article 102 TFEU, at least today. 11 First, even within ordoliberalism, there was not necessarily a unity of views. 12 Second, an approach rooted in history would wholly or largely exclude the impact of antitrust economic thinking post1960, which would be an extraordinary omission given, for example, the volte faces that have occurred in the legal treatment of tying abuses and many forms of vertical restraints in the intervening period. Third, there is consensus that competition law is generally focused on loss or damage to consumer welfare, albeit it is accepted that this may not require a direct demonstration of such effects via price increases or output reductions. 13 It is difficult, albeit not impossible, 14 to align a rather abstract notion of competition in ordoliberalism—which is not, directly anyway, rooted in practices that harm consumers but involves wider notions of “economic freedom”—with a modern-day consumer welfare standard. Fourth, it appears unsatisfactory—and arbitrary in the case of abuses involving agreements—that the ordoliberal approach should materially influence Article 102 TFEU but have little or no analogue in the application of Article 101 TFEU. These two instruments should be consistent where possible. 15 Finally, while there is debate about the extent of the Commission’s and the EU Courts’ transition towards an “The History, Interpretation And Underlying Principles Of Section 2 Sherman Act And Article 82 EC,” in CD Ehlermann and M Marquis (eds.), European Competition Law Annual 2007: A Reformed Approach To Article 82 EC, pp. 119-163 at 134. 9 Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission [1983] ECR 3461, para. 10. See generally Ch. 5 (The General Concept of an Abuse). 10 C Ahlborn and C Grave, “Walter Eucken And Ordoliberalism: An Introduction From A Consumer Welfare Perspective,” Competition Policy International, Vol. 2(2) Autumn 2006, 197, at 207-209. 11 Thus, Schweitzer notes: “In fact, the degree of congruence between Article [102] and ordoliberal positions is difficult to determine. No fully developed ordoliberal position on the treatment of market dominance existed at the time the EC Treaty was negotiated.” See H Schweitzer, “The History, Interpretation And Underlying Principles Of Section 2 Sherman Act And Article 82 EC,” in CD Ehlermann and M Marquis (eds.), European Competition Law Annual 2007: A Reformed Approach To Article 82 EC, pp. 119-163 at 133. 12 Schweitzer (ibid., at 134) notes that the conventional view of ordoliberal competition stating that dominant firms should behave “as if” there were competitive constraints “was not a proposition uniformly accepted by ordoliberals.” She adds that “certain scholars associated with the ordoliberal school...were among the most outspoken critics of the concept of ‘as if’ competition, and they were influential in ensuring that it never became part of German competition law.” See also EJ Mestmäcker, “The Development Of German And European Competition Law With Special Reference To The EU Commission’s Article 82 Guidance Of 2008,” in LF Pace (ed.), European Competition Law: The Impact Of The Commission’s Guidance On Article 102, Edward Elgar Publishing (2011), pp. 25-63. 13 See, most recently, under Article 102 TFEU, Case C-209/10, Post Danmark A/S v Konkurrencerådet EU:C:2012:172 and Case C-413/14 P Intel v Commission, EU:C:2017:632. 14 See C Ahlborn and C Grave, “Walter Eucken And Ordoliberalism: An Introduction From A Consumer Welfare Perspective,” Competition Policy International, Vol. 2(2) Autumn 2006, 197, 210211 and L Lovdahl Gormsen, “The Conflict Between Economic Freedom And Consumer Welfare In The Modernisation Of Article 82 EC,” (2007) 3(2) European Competition Journal 329. 15 See Joined Cases C-395/96 P and C-396/96 P, Compagnie maritime belge transports SA, Compagnie maritime belge SA and Dafra-Lines A/S v Commission [2000] ECR I-1365, para. 33.

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effects-based approach to Article 102 TFEU that is more firmly grounded in sound economic thinking, it appears undeniable that this process has begun. To that extent, the role of ordoliberal thinking is also likely to be further diminished. b. Experience with the ECSC Treaty. The ECSC Treaty, created by the Treaty of Paris in 1951, was one of the principal developments that led to the Treaty of Rome in 1957. 16 The idea was to pool the coal and steel industries of the signatories in an effort to place the essential factors of production under the control of a supranational organisation, which, it was thought, would reduce the prospects of another war in Europe. The ECSC was the institutional model for the European Community established by the Treaty of Rome, and included a Council of Ministers (representing national governments), a High Authority (equivalent to the Commission), an Assembly of national parliamentarians, and a Court of Justice. The drafting of the ECSC Treaty was charged to Jean Monnet, the leading architect of the various EC treaties. Various objectives were set under the ECSC Treaty: to ensure that all comparably placed consumers in the market have equal access to sources of production; to ensure the establishment of the lowest prices without this resulting in higher prices being charged by the same undertakings in other transactions or in a higher general price level at another time; to promote expansion and modernisation of production; and to promote the growth of international trade. 17 Monnet also called for a strong competition law on the grounds that this was necessary to achieve the broader integrative Community goals. Two competition law provisions, one prohibiting cartels and anticompetitive agreements and another dealing with concentrations and misuses of economic power, provided legislative support for these objectives. At the time of the founding Community treaties, no European country—with the possible exception of Germany 18—had any significant competition laws. Because there was no other relevant comparator, the competition provisions of the ECSC Treaty inevitably had an impact on those contained in the EC Treaty. Article 102 TFEU therefore contains similar wording to Article 66(7) ECSC. 19 c. The political and economic context in post-war Europe. It can also be argued with some force that an important influence on the competition law provisions of the EC Treaty was the particular political and social context in which Europe and the founding EU Member States found themselves in at the time. For example, given the preponderance, at the time, of undertakings that had received exclusive or special rights from their 16 The ECSC Treaty was signed by the governments of France, the West German Federal Republic, Italy, Belgium, the Netherlands and Luxemburg on 18 April 1951 in Paris, entered into force on 23 July 1952 and expired on 23 July 2002. For discussion of the ECSC Treaty see G Bebr, “The European Coal and Steel Community: A Political and Legal Innovation,” (1953) 63 Yale Law Review 1. 17 Article 3 ECSC. 18 The German competition law, the Gesetz gegen Wettbewerbsbeschränkungen (GWB), was adopted in 1957 but its essential components were already in place by 1956. 19 Article 66(7) ECSC provided that, “if the High Authority finds that public or private undertakings which, in law or in fact, hold or acquire in the market for one of the products within its jurisdiction a dominant position shielding them against effective competition in a substantial part of the common market are using that position for purposes contrary to the objectives of this Treaty, it shall make to them such recommendations as may be appropriate to prevent the position from being so used.”

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national governments, there was widespread fear that discrimination against foreign undertakings would be rife. 20 This was most likely one of the reasons why Article 102(c) included a specific non-discrimination clause. The result was of course very anticompetitive, but made some sense in the 1950s. The Spaak Report for example mentions the issue of price and non-price discrimination (e.g., delays, refusals to deal) as a key concern of the competition rules. 21 Discrimination was said to be a particular problem in the context of monopolies. 22 But of note is the Spaak Report’s statement that the competition rules could not be expected to address all issues from day one and that they would necessarily have a dynamic or evolutionary aspect. 23 It therefore warned against rigidity. d. Legislative intent. Research by Akman and Schweitzer sheds some interesting light on the post Spaak Report discussions that led to the eventual wording in what is now Article 102 TFEU and, therefore, the legislative intent of the provision. 24 Among the more notable points are: (1) the question whether to prohibit a dominant position itself or its abuse of it appears to have arisen, with the latter option ultimately having been taken; (2) perhaps most surprisingly, there is a suggestion that exclusionary abuse was not originally intended to be covered at all: only exploitation (or discrimination); (3) the drafters were well aware of the difference between protecting competitors and protecting competition; (4) the final provisions appear to be a compromise between the six delegations, with the German delegation having its way perhaps more than any other delegation; and (5) while the intention was to build up the strength of European industry, the concern that Europe should not insulate itself and build up barriers to entry was also noted. e. Influence of US thinking and lawyers. A perhaps underestimated influence on the wording and meaning of Article 102 TFEU was the prominent role played by several US lawyers, including antitrust lawyers, in the establishment of the various Community treaties and the drafting of the competition provisions in particular. The reasons for this were both political and intellectual. Politically, at the time the ECSC Treaty was being negotiated, the United States was an occupying power in what was then West Germany. It was also a major influence in other European countries through the Marshall Plan, 20 The ECSC Treaty thus obliged steel and coal companies to publish and stick to their price lists, precisely to prevent discrimination. See J Temple Lang, “Anticompetitive Non-Pricing Abuses Under European And National Antitrust Law,” in BE Hawk (ed.), 2003 Fordham Corporate Law Institute, Juris Publishing, Inc. (2004), Ch. 14. Indeed, in practice, most cases arising under Article 102(c) have concerned direct and indirect nationality discrimination: see Ch. 15 (Abusive Discrimination). 21 See Rapport Des Chefs Délégation Aux Ministres Des Affaires Etrangères, 21 April 1956 (hereinafter, the “Spaak Report”), p. 53. The Spaak Report was the basis for a treaty-drafting meeting that took place in Brussels on 26 June 1956. An English summary is available, although it is rather condensed and misses important nuances: see The Brussels Report on the General Common Market, available at http://aei.pitt.edu/995/1/Spaak_report.pdf. 22 Spaak Report, ibid., p. 55. 23 Spaak Report, ibid., pp. 56-57. 24 See P Akman, “Searching For The Long-Lost Soul Of Article 82 EC,” SRC Centre for Competition Policy and School of Law, University of East Anglia, CCP Working Paper 07-5, at pp. 22-28. See also H Schweitzer, “The History, Interpretation And Underlying Principles Of Section 2 Sherman Act And Article 82 EC,” in CD Ehlermann and M Marquis (eds.), European Competition Law Annual 2007: A Reformed Approach To Article 82 EC, pp. 119-163.

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which was conditional, inter alia, on European countries dismantling trade barriers and creating conditions under which their own recovery could take place. The various Community treaties were a central part of this recovery. US influence on the background and drafting of the Community treaties was therefore significant. 25 At the same time, it is important to appreciate that there were and are differences between Article 102 TFEU and its analogue under US antitrust law, Section 2 of the Sherman Act. 26 Some of the reasons are historical and may therefore be less important today. US antitrust law was borne of the desire to dismantle a number of cartels and conglomerates, 25 See DL McLachlan and D Swann, Competition Policy In The European Community, Oxford University Press (1967) p. 196. In terms of intellectual inspiration, it so happened that Robert Bowie, a professor of antitrust law at Harvard University, who then worked in the office of the US High Commissioner for Germany, was given the task of drafting the competition provisions of the ECSC Treaty, which in turn had an impact on the wording of Articles 101 and 102 TFEU. According to Jean Monnet, these provisions, “drafted with great care by Robert Bowie, represented a fundamental innovation in Europe.” See J Monnet, Mémoires, Paris (1976) p. 413. In formulating the wording of these provisions, Bowie was “building unmistakably on American antitrust tradition.” See ML Djelic, “Exporting The American Model–Historical Roots Of Globalisation,” in JR Hollingsworth, KH Mueller, and EJ Hollingsworth (eds.), Advancing Socio-Economics: An Institutional Perspective, Rowman and Littlefield (2002). See also W Diebold, The Schuman Plan, Praiger (1959) p. 352, cited in DJ Gerber, Law And Competition In Twentieth Century Europe: Protecting Prometheus, Clarendon Press (1998) p. 339. According to Diebold, Bowie’s draft was rewritten in a European idiom, emerging as a “blend [of] several European approaches to cartel questions with elements drawn from American practice and experience” before being adopted. Other US lawyers were equally prominent at the time in elaborating the founding Community treaties. A number deserve specific mention. George Ball, an American lawyer and diplomat, was asked by the French government to help Jean Monnet think through the general direction and approach of the French recovery plan. Together with another lawyer, Eugene Rostow, he played a significant role in helping Monnet identify the key features of the American economic model for incorporation in the French plan. Ball and Rostow remained involved with Monnet and the strategic thinking that took place around the ECSC Treaty and Treaty of Rome. Robert Bowie acted as General Counsel to the American High Commissioner in Germany, John McCloy. As a personal friend of Monnet, McCloy agreed to lend Bowie to Monnet for a few months in 1950, during which time Bowie drafted the competition provisions of the ECSC Treaty. It is also notable that works describing and analysing US antitrust became increasingly common around this period, while groups of practising lawyers, bureaucrats and academics visiting the United States were impressed by how the antitrust laws operated. These broadly positive experiences provided a basis for the inclusion of analogous competition law provisions in the ECSC and Community Treaties. 26 For more discussion of the differences between Article 102 TFEU and Section 2, see R Joliet, Monopolisation And Abuse Of Dominant Position: A Comparative Study Of The American And European Approaches To The Control Of Economic Power, Nijhoff (1970); BE Hawk, “Antitrust In The EEC— The First Decade,” (1972–1973) 41 Fordham Law Review 282; SM James, “The Concept Of Abuse In EEC Competition Law: An American View,” (1976) 92 The Law Quarterly Review 242; RE Bloch, HG Kamann, JS Brown, and JP Schmidt, “A Comparative Analysis Of Article 82 And Section 2 Of The Sherman Act,” paper submitted to the International Bar Association 9th Annual Competition Conference, 21–22 October 2005; H Schweitzer, “The History, Interpretation And Underlying Principles Of Section 2 Sherman Act And Article 82 EC,” in CD Ehlermann and M Marquis (eds.), European Competition Law Annual 2007: A Reformed Approach To Article 82 EC, pp. 119-163; E Fox, “The Market Power Element Of Abuse Of Dominance—Parallels And Differences In Attitudes—US and EU,” in CD Ehlermann and M Marquis (eds.), European Competition Law Annual 2007: A Reformed Approach To Article 82 EC, pp. 109-118; and BE Hawk, “Article 82 and Section 2: Abuse and Monopolising Conduct,” in Issues In Competition Law And Policy 871 (ABA Section of Antitrust Law 2008). For an economic perspective, see FM Fisher, “Monopolisation Versus Abuse Of Dominant Position: An Economist’s View,” in BE Hawk (ed.), 2003 Fordham Corporate Law Institute, Juris Publishing, Inc. (2004), Ch. 9.

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or “trusts” as they were known, that had come to dominate late nineteenth century economic life in the United States, with adverse effects for consumers. The genesis of competition law in Europe was very different and reflected a desire to break down trade barriers and promote economic integration, in the hope that this would lead to a period of stability and peace in the post-war European environment. A second set of differences could broadly be described as philosophical. Section 2 adopts a more minimalist, or less interventionist, approach to enforcement than Article 102 TFEU. In other words, rightly or wrongly, the EU institutions appear to have greater confidence in their predictive assessments of markets. By contrast, the US agencies and courts appear to have less confidence in their predictive abilities, 27 and believe, probably correctly, that market forces are better overall at correcting inefficiencies than government or court interventions. The overriding fear is that excessive intervention could chill desirable market activity. Finally, the substantive conditions of Article 102 TFEU and Section 2 of the Sherman Act also differ in certain respects. In particular, the difference in the language of the provisions show that the laws were conceived to allow government intervention in somewhat different circumstances. Article 102 TFEU aims to prevent powerful firms from using their power abusively, but the mere existence of dominance is not unlawful. Section 2, on the other hand, does not require a prior formal finding of a dominant position, but seeks to identify anticompetitive conduct that creates or threatens to create a monopoly. Another important difference is that Section 2 contained no corresponding provision to Article 102(a) on excessive pricing. Article 102 TFEU is also thought to diverge from Section 2 in the areas of predatory pricing (unlike Section 2, there is no need to show an ability to recoup losses under Article 102 TFEU), loyalty rebates (these are generally treated as lawful under Section 2, whereas under Article 102 TFEU they have in some cases been subject to a presumption of illegality), and refusals to deal (the duty to deal doctrine is more vibrant in Europe than in the United States).

2.3

DEVELOPMENT OF ARTICLE 102 TFEU

Overview of the various stages of development of Article 102 TFEU. Any synthesis of the development of Article 102 TFEU that seeks to identify distinct stages runs the risk 27 See, e.g., Brooke Group Ltd v Brown & Williamson Tobacco Corp, 509 US 209, (1993), where the US Supreme Court’s reluctance to treat price cuts as predatory was based, inter alia, on the concern that a strict rule could chill legitimate price competition. A more practical, and often overlooked, reason for a less interventionist approach under Section 2 is that the financial consequences of competition-law violations for defendants are generally much more serious than in Europe. Civil damages for Section 2 violations are three times the actual damage—so-called treble damages—whereas, in Europe, only single damages are, for now, the norm. Private antitrust litigation is also much more pervasive in the United States, which, again, helps explain a certain reluctance on the part of the government agencies to enunciate some of the broad principles established under Article 102 TFEU. It may also be that the more interventionist approach to competition law in Europe is justified by a greater incidence of State monopolies and other exclusive rights. Europe remains unique among global economic and political concentrations in that it is not composed of a single nation state, but several sovereign Member States. Sovereign nation states had, and continue to have, reasons of national interest that help explain a relatively high incidence of State measures that distort competition. Indeed, eliminating national restrictions of competition continues to be very important in Europe given the residual effects of former Communist control on the economies of several more recently-acceded States.

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of being arbitrary. Nonetheless, it is possible to make a meaningful distinction between different stages in the development of Article 102 TFEU. The first stage, lasting from the period of the adoption of EC Treaty in 1957 throughout most of the 1960s, was characterised by non-enforcement. The second phase, lasting from the late 1960s until the late 1970s, saw a more active enforcement policy and, significantly, a series of judgments that elaborated on the basic elements of abuse that still form the cornerstone of policy and practice today. A final phase lasting from the 1980s throughout most of the 1990s was characterised by a more interventionist approach by the Commission in which it developed several operational rules for specific abuses, building on the general principles established by the Court of Justice. Phase #1: the early years of non-enforcement. The Commission’s enforcement of Article 102 TFEU was practically non-existent in the years following the adoption of the EC Treaty. This is generally thought to have reflected two considerations. First, the practical application of Article 102 TFEU was unclear: the concept of abuse of a dominant position was not defined in the text of the EC Treaty; nor did any national competition law system explain how the concept should be interpreted or applied. While several European countries, such as France, Belgium, and Germany, had established national legislation based on the abuse principle, enforcement was extremely limited. Likewise, at the time Article 102 TFEU was enacted, Article 66(7) ECSC had never been applied either. The absence of defined criteria led some commentators to fear that Article 102 TFEU would ultimately become a dead letter. 28 A second obstacle to Article 102 TFEU enforcement was politically motivated. During the early period of European unification, many saw economic integration as the only means of dealing with the combined economic and political strength of the United States. European policy was focused on creating an integrated market in which European businesses, often “national champions,” could grow to a sufficient size to compete with foreign companies. Accordingly, there was, in the early years, a lack of willingness to enforce Article 102 TFEU. Strict application meant that dominant European firms who were well-placed to compete against their US rivals could have been hampered in their ability to grow or compete internationally. 29 Phase #2: developing the framework for the application of Article 102 TFEU. Beginning in the late 1960s, the Commission sought to develop a basic framework for the application of Article 102 TFEU. The Commission’s first statement concerning the interpretation of the concept of an abuse—the 1966 Memorandum on Concentration— signalled that its reticence to apply Article 102 TFEU was on the wane. 30 Not long after See I Samkalden and IE Druker, “Legal Problems Relating To Article 86 Of The Rome Treaty,” (1966) 3 Common Market Law Review 158–183. 29 This policy can also be seen in the Commission’s earlier permissive stance toward many horizontal agreements involving small and medium-sized companies. See BE Hawk, “Antitrust In The EEC—The First Decade,” (1972–1973) 41 Fordham Law Review 234 and 268. 30 The Memorandum on Concentration contained two basic principles aimed at answering the question: what constituted an abuse? According to the Memorandum, an abuse could only occur where there was a direct causal link between the firm’s market power and its effect on the market, meaning that a dominant firm could use its position of dominance to obtain benefits that it could not obtain if it were exposed to effective competition. The second principle of interpretation is even broader—and less helpful—than the first, claiming that an abuse occurred when a dominant firm’s conduct is incompatible 28

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the Memorandum on Concentration was published, the Commission and the Court of Justice sought to develop the concept of an abuse in several decisions and cases. 31 In a series of cases relating to purported misuse of intellectual property rights the Court of Justice had its first opportunity to interpret Article 102 TFEU. 32 The Court stated that, although the existence of these rights was not affected by the EC Treaty, their exercise may nevertheless fall under the prohibitions laid down in Articles 101 and 102 TFEU. The 1970s saw a number of seminal judgments in which the principal elements of Article 102 TFEU were elaborated. 33 In Continental Can, 34 the Court of Justice held, somewhat controversially, that mergers and acquisitions could, in certain circumstances fall under the prohibition in Article 102 TFEU. This ruling is generally regarded as a striking example of judicial legislation intended to compensate for the fact that there were no Community rules on merger control at the time. But the Court also established two other important general principles: first, that the examples of abuses in Article 102 TFEU were not necessarily exhaustive and, second, that the concept of an abuse covered not only direct harm to competition, but also indirect harm in the form of conduct that adversely affects the structure of competition. 35 The following year, in Commercial Solvents, 36 the Court held that a dominant supplier of an essential raw material may have a duty to deal with a downstream customer that depended on it and that the dominant firm’s self-interest in dealing only with its downstream subsidiary was not necessarily a defence. This case forms the basis of the current principles on refusal to deal under Article 102 TFEU. Three subsequent cases in the 1970s laid the foundation for many of the basic principles under Article 102 TFEU. In Suiker Unie, the Court of Justice dealt with a wide range of abusive practices, including exclusive contracts, payments in return for not dealing with rival firms, discrimination under Article 102(c), and “limiting production” under Article 102(b). 37 The latter concept in particular had significant implications for the with the objectives of the EC Treaty (para. 676). See Mémorandum sur le Problème de la Concentration dans le Marché Commun (December 1, 1965), reprinted in (1966) Revue Trimestrielle de Droit Européen 651–77, p. 670 (reprinted in (1966) 26 Common Market Law Review 1–30). 31 See also First Report on Competition Policy (1971), p. 74 (“In 1971 the European Commission’s competition policy which, during the first decade had concentrated on the application of rules concerning agreements, entered the phase of application of Article [102]. As a result of considerable efforts made to define the interpretation and application of this important provision, and following a constant supervision of the market with a view to finding out whether there were threats of abuse of dominant positions, the Commission took its first two decisions in the Gema and Continental Can cases.”). 32 See Case 24/67, Parke, Davis and Co v Probel, Reese, Beintema-Interpharm and Centrafarm [1968] ECR 55; Case 40/70, Sirena Srl v Eda Srl and others [1971] ECR 69; and Case 78/70, Deutsche Grammophon Gesellschaft mbH v Metro-SB-Großmärkte GmbH & Co KG [1971] ECR 487. 33 See H Schweitzer. “The History, Interpretation And Underlying Principles Of Section 2 Sherman Act And Article 82 EC,” in CD Ehlermann and M Marquis (eds.), European Competition Law Annual 2007: A Reformed Approach To Article 82 EC, pp. 119-163, at p. 138. 34 See Case 6/72, Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 215. 35 Ibid., para. 26. 36 Joined Cases 6-7/73, Istituto Chemioterapico Italiano SpA and Commercial Solvents Corporation v Commission [1974] ECR 223. 37 Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114-73, Coöperatieve Vereniging “Suiker Unie” UA and others v Commission [1975] ECR 1663, paras. 399, 482–483, and in particular paras. 523–527.

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definition of exclusionary abuses. In United Brands, 38 the Court dealt with its first major case of abuse that affected market integration. United Brands was found guilty of a series of measures aimed at limiting competition between its distributors and retailers, including export bans, price discrimination, and threats to de-list distributors who dealt with rival firms. The case is also notable for its treatment of excessive pricing because the Court struck down the Commission’s finding due to inadequate proof. The final case, Hoffmann-La Roche, is among the more important cases under Article 102 TFEU, since it laid out the Court’s basic definition of an exclusionary abuse: 39 “The concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened and which, through recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.”

The case also laid out the most comprehensive framework for exclusive dealing obligations, so-called fidelity rebates, loyalty rebates, and analogous practices such as English clauses under Article 102 TFEU. 40 Phase #3: significant intervention through elaboration of the general principles. Although the basic concept of an abuse had been articulated by the Court of Justice in a series of cases in the 1970s, very few operational rules had been laid down by the Commission as a result. Throughout the 1980s and 1990s, the Commission, backed by the EU Courts, developed a number of rules for specific examples of abusive conduct. An important early case was Michelin I, 41 where the Court of Justice laid down the detailed conditions for abusive loyalty discounts. The case is also notable for the Court’s formulation that, while “a finding that an undertaking has a dominant position is not in itself a recrimination but simply means that, irrespective of the reasons for which it has such a position, the undertaking concerned has a special responsibility not to allow its conduct to impair genuine undistorted competition on the common market.” 42 In AKZO, 43 the Commission first laid down the conditions for predatory pricing. It concluded that prices below a firm’s average variable costs—costs that vary with output—were presumptively abusive and that prices above average variable cost, but below average total cost—the sum of average variable and average fixed costs—could also be regarded as abusive if they were part of a plan to eliminate a competitor. A related rule concerning price squeeze abuses was laid down in Napier Brown/British Sugar. 44 38 Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207. 39 Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 6. 40 See generally Ch. 8 (Exclusive Dealing and Related Practices) and Ch. 9 (Loyalty Rebates and Related Practices). 41 Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission [1983] ECR 3461. 42 Ibid., para. 10. 43 ECS/AKZO, OJ 1985 L 374/1, upheld on appeal in Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3359, paras. 72-73. 44 Napier Brown/British Sugar, OJ 1988 L 284/41.

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There, the Commission ruled that the vertically-integrated dominant firm would be guilty of a price squeeze abuse against a downstream rival to whom it supplied an important input if the dominant firm’s own business could not make a profit on the basis of the price charged by the dominant firm to the rival. One of the most significant innovations by the Commission during this period was the adoption of an interventionist approach to the circumstances in which a dominant firm can be compelled to deal with rival firms. This doctrine was first developed in a series of cases concerning access to essential port infrastructure, airport facilities, and essential assets owned by a consortium of competing firms. 45 In Bronner, the Court of Justice sought to place clearer limits on the doctrine by insisting on proof that the input was nonreplicable and truly essential for effective competition. 46 A controversial application of this doctrine concerned the case of intellectual property rights. Although the Court of Justice had confirmed in 1988 in Volvo 47 that the exercise of an intellectual property right might involve abusive conduct, the extension of that principle in Magill 48 to require dominant broadcasters to licence their televisions listings information to a publisher that wished to produce a new composite television guide generated enormous controversy. The outcome in that particular case was probably correct, but there was also widespread concern that valuable property rights could also be subject to mandatory sharing. Similar concerns were expressed following the IMS Health interim decision where the Commission, on admittedly unusual facts, concluded that an intellectual property right could be subject to a duty to share where the refusal to do so risked the elimination of competition. 49 The case was seen, with some justification, as running the risk of conflicting with the well-established principles of intellectual property laws. 50

2.4

THE REFORM OF ARTICLE 102 TFEU 2.4.1

The Road To Reform

Impetus for reform. The Commission’s expansion of the concept of an abuse had become increasingly controversial over time. Some of that controversy stemmed from the inherent difficulty of distinguishing the type of exclusion that competition law encourages—legitimate competition—and unlawful exclusion. This is a debate that extends far beyond the EU. 51 Abuse has been variously defined under Article 102 TFEU See Ch. 10 (Refusal to Deal). Case C-7/97, Oscar Bronner GmbH & Co KG v Mediaprint Zeitungs- und Zeitschriftenverlag GmbH & Co KG, Mediaprint Zeitungsvertriebsgesellschaft mbH & Co KG and Mediaprint Anzeigengesellschaft mbH & Co KG [1998] ECR I-7791. 47 Case 238/87, AB Volvo v Erik Veng (UK) Ltd [1988] ECR 6211. 48 Magill TV Guide/ITP, BBC and RTE, OJ 1989 L 78/43, confirmed on appeal in Case T-69/89, Radio Telefis Eireann (RTE) v Commission [1991] ECR II-485, Case T-70/89, British Broadcasting Corporation and BBC Enterprises Ltd (BBC) v Commission [1991] ECR II-535, and Case T-76/89, Independent Television Publications Ltd (ITP) v Commission [1991] ECR II-575, and further confirmed in Joined Cases C-241/91 P and C-242/91 P, Radio Telefis Eireann and Independent Television Publications Ltd (RTE & ITP) v Commission [1995] ECR I-743. 49 NDC Health/IMS Health—Interim Measures, OJ 2002 L 59/18. 50 See Ch. 10 (Refusal to Deal). 51 In the United States, the Antitrust Modernisation Commission published a report on Section 2 of the Sherman Act which strongly advocated in favour of lesser enforcement. Among the more notable features of the report was its strong line on refusals to deal being presumptively legal and articulation of 45 46

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as conduct that does not amount to “competition on the merits”—that is by lower prices and better products, 52 the “special responsibility” of a dominant firm not to restrain any remaining competition, 53 or conduct that is not “normal competition.” 54 Unfortunately, as discussed in Chapter Five (The General Concept of an Abuse), these definitions are largely conclusory and lack clear normative content that would allow a firm to determine a priori when its conduct might run afoul of the law. This lack of clarity surrounding the definition of an abuse stimulated a lively debate on what the standard for assessing exclusionary behaviour is or should be. In particular, the debate focused on the search for a single, unified standard that would define abusive conduct. Several different tests were proposed. 55 The detailed application of the various tests is discussed in Chapter Five, but it is sufficient to note here that a great deal of uncertainty exists regarding the relative merits of each test and how they would work in practice. But the controversy surrounding the application of Article 102 TFEU was not confined to the inherent difficulty of verbalising a unified test that would define abusive conduct. Most of it concerned the Commission’s application of Article 102 TFEU in practice. Several criticisms had been levelled. First, the law was unclear in important respects and certain ill-considered statements by the Commission, particularly on pricing abuses, suggest a broad definition of abusive conduct without clear limiting principles. Another reason for the lack of clarity is that there have been relatively few reported Article 102 TFEU decisions and cases at EU level—around 70 in just over fifty years of enforcement. The case law and practice had also arisen pragmatically, and to some extent haphazardly (largely in response to complaints to the Commission and appeals to the EU Courts against Commission decisions adopted on the basis of such complaints). With the exception of specialised Notices and guidance in the telecommunications and postal sectors, 56 the Commission had not attempted to develop any kind of general or comprehensive statement on abusive behaviour. Instead, the Commission and the EU Courts dealt with individual cases that were said to raise questions of abuse by reference to the facts of the specific case, seemingly without having any clear general analytical or intellectual framework for doing so. As a result, a number of basic questions were not answered or even discussed, because due to the accidents of litigation or otherwise, they a “bright line” predation test for bundled rebates. See US Antitrust Modernisation Report, April 2007, Chapter I.C. One of the first acts of the Obama administration was to withdraw the report. See “Justice Department Withdraws Report On Antitrust Monopoly Law,” 11 May 2009, US Department of Justice press release. 52 See, e.g., Comments by Mario Monti on the speech given by Hew Pate, the (then) Assistant Attorney General, US Department of Justice, at the Conference “Antitrust in a Transatlantic Context,” Brussels, 7 June 2004 (“I think we can both agree that in competition the best should win on the merits, but only on the merits. Whenever dominant companies can use their market power to win in a market for reasons that are not related to the price or quality of their products, then we should consider intervening.”). 53 Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission [1983] ECR 3461, para. 87. 54 Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 91. 55 For a good overview of the main competing theories, see J Vickers, speech to the 31st conference of the European Association for Research in Industrial Economics, Berlin, 3 September 2004. 56 See Notice on the application of the competition rules to access agreements in the telecommunications sector—framework, relevant markets, and principles, OJ 1998 C 265/2; Notice from the Commission on the application of the competition rules to the postal sector and on the assessment of certain State measures relating to postal services, 1998 OJ C 39/2.

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did not arise in any of the cases that had been decided. A second criticism of Commission practice is that it sometimes ran the risk of protecting competitors at the expense of competition. 57 One of the areas most criticised concerns conditional discounts, such as loyalty rebates and similar schemes. 58 Although there is some economic consensus that such schemes can, in certain circumstances, raise competition concerns, the position under Article 102 TFEU is that, following Michelin II 59 and British Airways/Virgin, 60 certain forms of rebates were effectively treated as per se illegal. In this circumstance, concern had been expressed that a strict rule on conditional above-cost discounts denies consumers the benefit of lower prices on the grounds that they would harm competitors. A final criticism was that the influence of economics had not been felt as strongly under Article 102 TFEU as it has been under Article 101 TFEU and EU merger control law. 61 Under Article 101 TFEU, the Commission had published a series of block exemptions and detailed guidelines that dealt with the treatment of vertical restraints, 62 horizontal cooperation agreements, 63 and technology licensing. 64 In the area of merger control, the Commission had also published guidelines outlining the principles applied in its analysis of the most common type of merger cases—mergers between direct competitors. 65 These documents were prepared with extensive consultation, including with leading economists, and they reflected a clear willingness on the part of the Commission to embrace current 57 See, e.g., EM Fox, “We Protect Competition, You Protect Competitors,” (2003) 26(2) World Competition 149–165. 58 See Ch. 9 (Loyalty Rebates and Related Practices). 59 Michelin, OJ 2002 L 143/1, para. 216, and Case T-203/01, Manufacture française des pneumatiques Michelin v Commission [2003] ECR II-4071 60 Case T-219/99, British Airways Plc v Commission [2003] ECR II-5917. 61 See J Vickers, speech to the 31st conference of the European Association for Research in Industrial Economics, Berlin, 3 September 2004; A Fletcher, “Towards A More Economics-Based Approach To Article 82,” initial comments on an initial paper by the Competition Law Forum Review Group: The Reform Of Article 82: Recommendations On Key Policy Objectives, 15 March 2004. 62 See Commission Regulation (EC) No 2790/1999 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices, OJ 1999 L 336/21 and Commission Notice—Guidelines on Vertical Restraints, OJ 2000 C 291/1, replaced by Commission Regulation 330/2010 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, OJ 2010 L 102/1, and Commission Notice— Guidelines on Vertical Restraints, OJ 2010 C 130/1. 63 See Commission Notice—Guidelines on the applicability of Article 81 to horizontal cooperation agreements, OJ 2001 C 3/2 (since replaced by Communication from the Commission — Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal cooperation agreements, OJ 2011 C 11/1). 64 Commission Regulation (EC) No 772/2004 of April 27, 2004 on the application of Article 81(3) of the Treaty to categories of technology transfer agreements, OJ 2004 L 123/11; Commission Notice— Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements, OJ 2004 C 101/2 (since replaced by Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements Text with EEA relevance, OJ 2014 OJ L 93/17; Commission Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements, OJ 2014/C 89/03). 65 Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings, OJ 2004 C 31/5.

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economic thinking in the areas of agreements and mergers. No comparable documents existed under Article 102 TFEU, apart from a couple of older specialised Notices in the telecommunications and postal sectors (which were not generally relied upon outside these specialised areas). Another difficulty is that there was a disconnect between some of the economic thinking that underpinned the Commission’s public documents under Article 101 TFEU and EU merger control on the one hand and its practice under Article 102 TFEU on the other. For example, in the area of vertical restraints, the Commission’s guidelines under Article 101 TFEU recognise that exclusive dealing and analogous arrangements can have important procompetitive features. In essence, they encourage distributors to focus their promotional efforts on a single manufacturer and prevent other firms from “free-riding” on that manufacturer’s success. Exclusive dealing may also have anticompetitive effects, but the guidelines recognise that it is necessary in each case to evaluate the net effects of the agreement. By contrast, under Article 102 TFEU, a strict presumption of illegality had been applied to exclusive dealing arrangements and analogous schemes such as loyalty rebates. 66 Although this presumption has been relaxed somewhat in recent decisions, 67 the Commission has routinely rejected under Article 102 TFEU several procompetitive features of distribution arrangements that it accepted under Article 101 TFEU. 68 While the presence of dominance under Article 102 TFEU clearly affects the analysis, it cannot a priori mean that the procompetitive features of vertical restraints recognised under Article 101 TFEU are absent in an Article 102 TFEU case. At the very least, this dichotomy could give rise to arbitrary results depending on whether the case happened to be pursued under Articles 101 or 102 TFEU, which is obviously unsatisfactory.

2.4.2

The Discussion Paper And Its Antecedents

Tacit acceptance of certain of the criticisms of Article 102 TFEU decisions. The Commission announced in 2003 that it would undertake a review of policy under Article 102 TFEU. The review was said to be prompted by several considerations that reflect many of the criticisms outlined above. 69 First, the Commission accepted that Article 102 TFEU has lagged behind Article 101 TFEU and EU merger control law in that there had been no reassessment and modernisation of policy and practice. In particular, the Commission accepted that, unlike Article 101 TFEU and merger policy, it had “never had a comprehensive reassessment of policy under Article [102] in the light 66 In Hoffmann-La Roche, for example, the Court of Justice stated that the concept of abuse “in principle includes any obligation to obtain exclusively from an undertaking in a dominant position, which benefits that undertaking.” See Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 121 (emphasis added). 67 Notably in Case C-413/14 P Intel v Commission, EU:C:2017:632, the Court of Justice held that the Commission should consider information emanating from the defendant tending to suggest that the exclusivity rebate did not tend to restrict competition, which could be capable of rebutting the presumption in the case law that exclusivity rebates are abusive (Hoffmann-La Roche, ibid.). 68 See Ch. 8 (Exclusive Dealing and Related Practices). 69 See P Lowe, speech at the 30th Annual Conference on International Antitrust Law and Policy, Fordham Corporate Law Institute, 23 October 2003. See also, N Kroes, “Preliminary Thoughts On Policy Review Of Article 82,” speech at the Fordham Corporate Law Institute, New York, 23 September 2005.

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of economic thinking.” 70 Second, Article 102 TFEU was an area in which predictable rules were important and was an area where there was little policy guidance. Certain commentators argued that the Commission should adopt guidelines on the most important practices, in particular pricing. 71 Third, in an environment where national authorities and courts were increasingly responsible for applying Article 102 TFEU, a common set of core principles was important to ensure consistent enforcement. Finally, the Commission recognised that many companies operate on a global scale and that greater convergence with the competition policies of other major jurisdictions—in particular the United States—was desirable where possible. Increasing economic input. The reform of Article 102 TFEU was given further impetus by the creation of the position and office of Chief Economist within DG Competition in 2003. While the office and role were not created specifically for Article 102 TFEU cases—the unit’s work straddles all areas of DG Competition’s activities—it is fair to say that the reform of Article 102 TFEU was one of the more prominent reasons for the creation of the unit. The Chief Economist reports directly to the competition Director General with: (1) guidance on economics and econometrics in the application of competition rules; (2) general guidance in individual competition cases from the early stages; and (3) detailed guidance in the most important competition cases involving complex economic issues, in particular those requiring sophisticated quantitative analysis. Opinions, guidance, or final advice from the Chief Economist are not, however, made public. In order to develop and disseminate economic expertise and knowledge, the Chief Economist also interacts with the antitrust community in various ways. 72 One of the first acts of the Chief Economist was to commission a report by the Economic Advisory Group on Competition Policy (EAGCP)—a group of around fifteen leading academic economists that advises the DG Competition on competition policy issues—to set out the case for an economic approach to Article 102 TFEU. 73 The EAGCP Report involved several notable departures from the decisional practice and case law under Article 102 TFEU: (1) a rejection of a form-based approach to Article 102 TFEU in Lowe, ibid. See J Temple Lang and R O’Donoghue, “Defining Legitimate Competition: How To Clarify Pricing Abuses Under Article 82,” (2002) 26 Fordham International Law Journal 83, 85 (“It is on pricing issues that a clear and comprehensive statement of the legal and economic principles is most urgently needed, not only to guide the thinking of the Commission, companies, and their lawyers, but also for the guidance of national competition authorities which are intended, under the Commission’s proposals for decentralisation of Community competition law, to apply Article [102] more than they have in the past.”). 72 These include: (1) by establishing the Economic Advisory Group on Competition Policy (EAGCP)—a group of academic economists that advises the Commission on selected important policy issues; (2) an annual internal one day event where DG COMP discuss past cases with EAGCP, in particular with regard to the appropriate usage of economic analysis; (3) a monthly public seminar, where external academic speakers present their latest work in the field of competition policy; (4) an internal luncheon, where DG COMP case handlers discuss economic analysis of cases in an informal setting; and (5) bilateral meetings between economists from Commission and the US antitrust agencies to discuss case work, in particular economic methodology. See LH Röller, “Using Economic Analysis To Strengthen Competition Policy Enforcement,” in P Bergeijk and E van Kloosterhuis (eds.), Modelling European Mergers: Theory, Competition Policy And Case Studies, Edward Elgar (2005). 73 Report by the Economic Advisory Group on Competition Policy, “An Economic Approach To Article 82,” (July 2005). 70 71

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favour of an effects-based approach; 74 (2) protecting competition only in so far as doing so would be in the interests of consumer welfare; 75 (3) analysis of the practice in question to see whether there is a consistent and verifiable economic account of significant competitive harm, both based on sound economic analysis and grounded on facts; 76 (4) a fundamental distinction between abuses in horizontal markets and vertical, or leveraging, abuses (with the latter being treated more leniently, all else equal); 77 and (5) an economic framework for specific practices that suggested procompetitive explanations that had hitherto been ignored or assumed away by the Commission (e.g., rebates, price discrimination). 78 The Discussion Paper. Following extensive consultation with the national competition authorities (NCAs), a discussion paper setting out the Competition Directorate’s thinking on exclusionary abuses was published in December 2005. 79 The omission of exploitative abuses and discrimination abuses that did not arise in the context of exclusion was notable. The principal idea behind the modernisation of Article 102 TFEU is to bring it more in line with the type of economic analysis routinely applied under Article 101 TFEU and EU merger control; in other words, to apply “sound economic assessment.” 80 The Discussion Paper received over 100 comments, from diverse sources including law firms, NCAs, academics (including outside the EU), multinational companies, trade and industry associations, and consumer groups. 81 The Discussion Paper was broadly welcomed, albeit it should be appreciated that this was against the backdrop of a low ebb in terms of the decisional practice and case law. There was then a public hearing on 14 June 2006 at which the Commission and other agency officials, and in-house and external lawyers, and economists discussed various aspects of the Discussion Paper. 82 The Discussion Paper extended to some 72 pages and could easily comprise a chapter in its own right. But the key points are: 1.

Dominance. 83 The Discussion Paper placed greater emphasis than the decisional practice and case law on non-market share factors in the assessment of dominance, and in particular barriers to entry and expansion. The Commission thus recognised that high market shares did not signify much in the absence of barriers to entry and expansion and that low market shares did not exclude dominance if material barriers to entry and expansion existed. Buyer power, both as a constraint on seller power and as a possible source of dominance in its own right, were also given greater prominence. Finally, the position on

Ibid., p. 6. Ibid., pp. 8-9. 76 Ibid., p. 13. 77 Ibid., pp. 17-29. 78 Ibid., pp. 30-53. 79 DG Competition discussion paper on the application of Article 82 of the Treaty to exclusionary abuses, Brussels, December 2005 (hereinafter, the “Discussion Paper”). 80 See N Kroes, “Preliminary Thoughts On Policy Review Of Article 82,” speech at the Fordham Corporate Law Institute, New York, 23 September 2005. 81 Comments may be viewed at http://ec.europa.eu/competition/antitrust/art82/contributions.html. 82 The Discussion Paper Public Hearing programme and contributions may be viewed at http://ec.europa.eu/competition/antitrust/art82/hearing.html. 83 Discussion Paper, paras. 20-50. 74 75

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collective dominance was brought more closely in line with the Commission’s assessments under analogous issues under merger control. 2.

General framework for exclusionary abuses. 84 The Discussion Paper clarified an obvious point that was sometimes overlooked in the decisional practice and case law: that superior products or performance can itself “exclude” but that is the essence of competition. Instead, the concern was to prevent exclusionary conduct which was likely to limit the remaining competitive constraints on the dominant firm, including entry of newcomers, so as to prevent consumers being harmed. The Discussion Paper also mentioned that the prohibition was on exclusionary conduct that produced actual or likely anticompetitive effects in the market, which could harm consumers in a direct or indirect way.

3.

The as-efficient competitor test as the cornerstone for pricing abuses. 85 The Discussion Paper puts the as-efficient competitor test front and centre of the analysis for pricing abuses, the idea being that Article 102 TFEU should only protect competitors who are at least as competitive as the dominant firm, using the dominant firm’s costs as a proxy for efficiency. It also suggested using average avoidable costs (AAC) and long-run average incremental cost (LRAIC) instead of the average variable cost (AVC) and average total cost (ATC) benchmarks applied in earlier case law such as AKZO. 86 In a potentially major shift from the decisional practice and case law, the Discussion Paper proposed a modified form of predatory pricing test for rebate practices. Grossly oversimplified, this segregated each customer’s demand into “contestable” and “non-contestable” portions, with a price/cost test being applied to the share of the “contestable” demand required by an equally-efficient rival to remain viable.

4.

Efficiency defence. 87 Perhaps the most significant development in the Discussion Paper, at least conceptually, was express recognition of an efficiency defence under Article 102 TFEU, along the lines of Article 101(3). While past case law suggested that a dominant firm could objectively justify certain conduct on efficiency grounds, the criteria for such an assessment had not been articulated in any detail. The Discussion Paper listed four conditions that essentially mirror those under Article 101 TFEU. Thus the dominant firm had to show that: (1) efficiencies were realised or likely to be realised as a result of the conduct concerned; (2) the conduct concerned was indispensable to realise these efficiencies; (3) the efficiencies benefited consumers; and (4) competition in respect of a substantial part of the products concerned was not eliminated. The defences of meeting competition and objective necessity were also confirmed in the Discussion Paper. 88

Discussion Paper, paras. 54-60. Discussion Paper, paras. 61-68 (pricing abuses generally) and 134-170 (rebates). 86 These cost concepts are discussed in detail in Chapter Six (Predatory Pricing). 87 Discussion Paper, paras. 84-82. 88 Discussion Paper, para. 80 (objective necessity) and paras. 81-83 (meeting competition). 84 85

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2.4.3

The Guidance Paper

Overview. In late 2008 the Commission published the Guidance Paper, or 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, to give its full title. 89 As with the Discussion Paper, only exclusionary abuses were covered and obviously important issues such as discrimination were excluded. The Guidance Paper is the culmination of a lengthy process of reform of Article 102 TFEU and the Commission deserves considerable credit in bringing it to fruition. The following sections deal with various aspects of the Guidance Paper. The first is to put in context the challenges faced by the Commission in elaborating the Guidance Paper, since these help inform the inevitable compromises that the Commission had to make. Second, an important point is the legal status, if any, of the Guidance Paper. Third, a high-level overview of the content of the main changes effected by the Guidance Paper is presented. Finally, some reaction to the Guidance Paper is set out. The challenges faced by the Commission. The challenges faced by the Commission in elaborating the Guidance Paper should not be underestimated, and they also assist in understanding why and how compromises were made in the document. First, the Commission’s success rate in Article 102 TFEU cases was staggering—and asymmetrically better than other areas of Commission enforcement under EU competition law—with virtually no infringement decision having been overturned by the EU Courts on substantive grounds. Such overwhelming, and asymmetric, success risks undermining faith in the rule of law and the role of administrative decision-making and judicial review in this regard. As Judge Forrester said in his retirement remarks: 90 “Especially when Brexit represents a manifestation of anger and hostility on the part of the unfortunate, and suspicions of privileged EU bureaucrats, our role is crucial. The legitimacy of the enforcement activity of the institution depends on the existence of effective, genuine, visible judicial review. That is elementary, fundamental, crucial. Without the court, the Commission's activity, no matter how skilled or well intentioned, risks being called arbitrary, illegitimate, unjust. Our critical contribution enhances, not damages. In a democracy the public authority must sometimes lose in its own courts. We do not respect electoral or judicial systems which record success for the government 99% of the time. I absolutely reject the notion that finding against the Commission lowers public respect for the institution. To the contrary, the public is likely to be comforted by the fact that the institutional system involves robust quality control. Merely checking formal legality may not be enough. The traditional verification of the absence of procedural irregularity may not be adequate for modern times in light of the Menarini judgment.”

Those few victories gained by appellants tended to concern procedural violations or factual questions. 91 In imposing self-restraint via the Guidance Paper, the Commission

An official copy was published in the Official Journal at OJ 2009 C 45/02. See IS Forrester QC, “A Valediction, Forbidding Mourning,” Luxembourg, 6 February 2020. 91 See, e.g., Soda-Ash/Solvay, OJ 1991 L 152/21, overturned on procedural grounds in Case T-32/91, Solvay SA v Commission [1995] ECR II-1825 (see also, similarly, and Case C-109/10 P, Solvay SA v Commission [2011] ECR I-686; Trans-Atlantic Conference Agreement, OJ 1999 L 95/1, on appeal Joined Cases T-191/98 and T-212/98 to T-214/98, Atlantic Container Line AB and Others v Commission [2003] ECR II-3275; and AstraZeneca, OJ 2006 L 332/24, largely upheld on appeal in Case T-321/05, 89 90

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was thus limiting a freedom it had hitherto enjoyed under the decisional practice and case law. Most obviously, for the many practices under Article 102 TFEU that had previously been treated as unlawful on formalistic grounds or with little or no meaningful analysis of anticompetitive effects, the Commission had made it more difficult for itself. Second, as the Guidance Paper itself necessarily accepts, the Commission cannot overrule, ignore, or reinterpret the case law of the EU Courts under Article 102 TFEU. 92 At the same time, a Commission document that did nothing more than summarise the preexisting case law would have been self-defeating given that the main impetus for change was the unsatisfactory nature of the decisional practice and case law to begin with. The Commission thus faced the difficult challenge of needing to effect material change to the past approach while appearing to do so within the confines of the existing case law. As will be discussed in more detail below, the Commission has done this quite deftly by peppering the Guidance Paper with references to the case law and using this as a platform for proposing a significant shift in both enforcement policy and substantive standards. 93 Third, perhaps the single greatest challenge for the Commission was the tension between greater emphasis on an effects-based analysis in individual cases and legal certainty. Proponents of effects-based analysis often overlook that it comes at the price of legal certainty. In fact, the situation is more complex since the choice is not simply between rules and discretion but in many cases also involves standards. For example, the asefficient competitor test may be a standard for pricing abuses but it will need to be fleshed out into rules for, say, predatory pricing, rebates, and margin squeeze. Given that the Commission and NCAs (and courts) can only ever enforce a fraction of the law—with the result that most “enforcement” therefore occurs through counselling in firms’ day-today business activities—it can be argued with some force that legal certainty is more important than a counsel of perfection in effects or economics. Article 102 TFEU is, after all, a rule of law, not a principle of economics. Embedded within this debate is the difficulty that the Guidance Paper was clearly also intended to guide the NCAs of the (then) 28 Member States in their enforcement of Article 102 TFEU. Many of these have quite different legal traditions in terms of administrative enforcement of competition and related laws, ranging from dirigiste views that place emphasis on centrist control to a more laissez faire approach. Recent political and economic history also differs markedly between older Member States and more recently-acceded Member States from former Communist regimes. Member States also differ in size and resources and the powers of their NCAs to gather information are not harmonised. The same applies to national courts: an effects-based approach is highly fact-intensive and many legal systems provide for very limited disclosure of contemporaneous documents between litigants. All of these challenges affected the AstraZeneca v Commission [2010] ECR II-2805 and Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. 92 Guidance Paper, para. 3. 93 More often than not, however, the footnotes adding references to the case law of the EU Courts do not appear to have a clear connection between the principle stated in the Guidance Paper and the case law said to support it. Indeed, given that the Guidance Paper is in large part a reaction to perceived gaps or excesses, it is difficult to see how the case law can easily be relied upon as support. But it was no doubt important, at least facially, that the Commission should be seen to embrace the current case law (or at least not expressly disavow it).

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Commission’s task and undoubtedly placed limits on it and led to compromises. Finally, there were challenges in that the wording and scheme of Article 102 TFEU and the EU legislation that affects its enforcement places potential limits on the extent to which it can be modernised. Most obviously, there is no equivalent wording in Article 102 TFEU that remotely corresponds with Article 101(3). Fashioning the equivalent of Article 101(3) for Article 102 TFEU is not obviously easy in such circumstances. 94 In a similar vein, Article 102 TFEU does give reasonably clear express examples of abuses in its four clauses, and they cannot simply be ignored in favour of the most fashionable economics. In short, the Commission did not have, and should not have, carte blanche. Legal status of the Guidance Paper. The Guidance Paper is a novel instrument: it is not said to be guidelines in the manner the Commission has done extensively under Article 101 TFEU and EU Merger Control. 95 Instead it is a Commission Communication which contains “guidance”—a concept not recognised in any of the legislative acts as set out in the EU Treaties. Superficially, it appears that the Guidance Paper has no particular status since it states as follows: 96 “This document sets out the enforcement priorities that will guide the Commission’s action in applying Article [102] to exclusionary conduct by dominant undertakings. Alongside the Commission’s specific enforcement decisions, it is intended to provide greater clarity and predictability as regards the general framework of analysis which the Commission employs in determining whether it should pursue cases concerning various forms of exclusionary conduct and to help undertakings better assess whether certain behaviour is likely to result in intervention by the Commission under Article [102]. This document is not intended to constitute a statement of the law and is without prejudice to the interpretation of Article [102] by the Court of Justice or the [General Court] ... In addition, the general framework set out in this document applies without prejudice to the possibility for the Commission to reject a complaint when it considers that a case lacks priority on grounds of lack of Community interest.”

This tentative and non-substantive language contrasts with Commission guidelines under Article 101 TFEU. For example the equivalent introductory passages to the Commission’s Article 101(3) guidelines are much more forthright on the binding effect and the substantive content of the guidelines: 97 “The purpose of those guidelines is to set out the Commission’s view of the substantive assessment criteria applied to the various types of agreements and practices. The present guidelines set out the Commission’s interpretation of the conditions for exception contained in There are also issues as to the extent to which imposing some burden on a dominant firm to objectively justify its practices is consistent with Article 3 of Council Regulation 1/2003 which places the burden of proof on the Commission. 95 The choice of instrument has been criticised. See LF Pace, “The Italian Way Of Tackling The Abuse Of A Dominant Position And The Inconsistencies Of The Commission’s Guidance: Not A Notice/Bekanntmachung But A Communication/Mitteilung,” in LF Pace (ed.), European Competition Law: The Impact Of The Commission’s Guidance On Article 102,” Edward Elgar Publishing (2011), Ch. 5. 96 Guidance Papers, paras. 2-3. 97 Communication from the Commission-Notice-Guidelines on the application of Article 81(3) of the Treaty, OJ 2004 C 101/97, paras. 3-5. 94

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Article [101](3). It thereby provides guidance on how it will apply Article [101] in individual cases. Although not binding on them, these guidelines also intend to give guidance to the courts and authorities of the Member States in their application of Article [101](1) and (3) of the Treaty. The guidelines establish an analytical framework for the application of Article [101](3). The purpose is to develop a methodology for the application of this Treaty provision. This methodology is based on the economic approach already introduced and developed in the guidelines on vertical restraints, horizontal co-operation agreements and technology transfer agreements. The Commission will follow the present guidelines, which provide more detailed guidance on the application of the four conditions of Article [101](3) than the guidelines on vertical restraints, horizontal co-operation agreements and technology transfer agreements, also with regard to agreements covered by those guidelines.”

Thus, the Guidance Paper does not purport to be normative, and in so far as it sets out a framework, it is said to be in the context of guiding the Commission’s enforcement priorities and actions. It might therefore be suggested that the Guidance Paper simply tells one what types of issues the Commission might be interested in pursuing as a matter of setting administrative priorities (and why), but not more. But this view of the Guidance Paper is over-simplistic and incorrect. The Guidance Paper is not merely policy- or enforcement-based: it has clear substantive and normative content. It is plainly a considered effort to effect substantive change to a number of areas of Article 102 TFEU and cannot therefore be dismissed merely as a projection of Commission enforcement priorities and action. 98 The most obvious way in which the Guidance Paper ought to bite is that in several places it sets out an exercise in self-restraint by the Commission that may create expectations vis-à-vis the Commission for how it will approach Article 102 TFEU. Where the Commission sets out a clear and unambiguous position—for example that conditional rebates that exceed the LRAIC of the relevant output in question do not have an anticompetitive foreclosure effect 99—and the other conditions for legitimate expectations are satisfied, 100 it can be argued that the dominant firm should have a defence against the Commission treating its conduct as an abuse (or, equivalently, the Commission’s taking enforcement action against such conduct). There are numerous examples of such “voluntary self-restraint” being upheld against the Commission, in both competition 101 and other areas. 102 Thus, despite the Commission 98 See EJ Mestmäcker, “The Development Of German And European Competition Law With Special Reference To The EU Commission’s Article 82 Guidance Of 2008,” in LF Pace (ed.), European Competition Law: The Impact Of The Commission’s Guidance On Article 102,” Edward Elgar Publishing (2011), pp. 25-63 99 Guidance Paper, para. 43. However, the Commission adds the word “normally” which qualifies the statement. But presumably it would then be up to the Commission to at least explain why exceptional circumstances arose. 100 See Case C-177/90, Kühn v Landwirtschaftskammer Weser-Ems [1992] ECR I-35, paras. 13-14; and Case C-63/93, Duff and Others v Minister for Agriculture and Food, Ireland, and the Attorney General [1996] ECR I-569, para. 20. 101 It is settled law for example, that the Commission’s Fining Guidelines create legitimate expectations as the modalities that the Commission should follow in calculating fines: see, e.g., Joined cases C-189/02 P, C-202/02 P, C-205/02 P-C-208/02 P and C-213/02 P, ABB and others v Commission [2005] ECR I-5425. 102 See, e.g., Case T-105/95, WWF UK (World Wide Fund for Nature) v Commission [1997] ECR II313, para. 55. The context is quite specific, however. The Council and the Commission formulated and

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deliberately using the term Guidance Paper, it arguably ought to have a status akin to Commission guidelines in other areas. 103 There are two important caveats to the above view. First, as discussed in more detail in Section 2.5 below, the Commission appears to consider that the Guidance Paper does not impose any mandatory legal constraint on it. If the Commission considers its own Guidance Paper to be facultative, then its binding effect would clearly be extremely limited in practice: at best confined to situations in which the Guidance Paper created a legitimate expectation that would grant a dominant firm a clear defence. Such examples will in practice be rare given the lack of precision in much of the Guidance Paper. A second related point is how the EU Courts will view the Guidance Paper, and in particular where it involves a degree of tension with the EU Courts’ own case law. This is discussed in Section 2.5 below. High-level overview of the Guidance Paper. Virtually each chapter in this work deals with aspects of the Guidance Paper, often at some length. To avoid prolixity, only a very high-level overview of the content of the Guidance Paper is provided here and the reader is referred to chapters on specific practices for more detail: 104 1.

Reorientation of objectives? Perhaps the single most important issue raised by the Guidance Paper is whether it has sought to reorient the core objectives of Article 102 TFEU. The clear focus is now said to be on those practices that

agreed a Code of Conduct on public access to Commission and Council documents. In furtherance of this, the Commission then adopted Decision 94/90 on public access to Commission documents, under Article 1 of which the Code of Conduct was formally adopted. The text of the Code of Conduct was then set out in an Annex to the Decision. The legal basis for the decision was former Article 162 EC, which concerned the Commission’s rules of procedure. 103 This raises an interesting question about the binding effect of the Guidance Paper on NCAs and national courts. Even if the Commission has undertaken an exercise in voluntary self-restraint, the NCAs clearly have not done so and national courts arguably cannot do so (since Article 102 TFEU is directly enforceable in national courts and national courts must decide the cases before them and have no general discretion to set enforcement priorities). But if the Guidance Paper has a status akin to Commission guidelines in other areas, then it can be argued that NCAs and national courts must, under their duties of “sincere cooperation” under Article 4(3) TEU, take the Guidance Paper into account, at least where there is no contrary rule of the EU Treaties or case law of the EU Courts preventing them from doing so. An analogy might be made with Commission recommendations and comments letters in the context of the EU Common Regulatory Framework for telecommunications, which, while not formally binding, are subject to the duty to take the “utmost account” of the Commission’s position (essentially meaning that a departure from the Commission’s position must be explained). Thus, while a Commission recommendation may not have binding legal effect, the Court of Justice has held that this does not mean that it has no legal effect. In particular, national courts and authorities are bound to take them into account “where they cast light on the interpretation of national measures adopted in order to implement them or where they are designed to supplement binding Community provisions.” See Case C-322/88, Grimaldi v Fonds des maladies professionnelles [1989] ECR 4407, para. 18. Interestingly, in its comments to the Commission on the reform, the Bundeskartellamt stated that it was “aware that the Article [102 TFEU] guidelines will have a practical impact on the application of Article [102 TFEU] in the ECN and the Member States of the European Union, and the Bundeskartellamt will consider the guidelines in its Article [102 TFEU] cases. Against this background we would prefer to state in the paper or future guidelines that the discussion paper or guidelines as such do not bind national competition authorities and national courts.” The Guidance Paper did not take up this invitation. 104 For a detailed treatment of each section of the Guidance Paper, see E Rousseva, Rethinking Exclusionary Abuses In EU Competition Law, Hart Publishing (2010), Ch. 10.

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cause most harm to consumers. 105 The important corollary of this is that competitors should not be protected from abusive conduct merely because they are competitors but only because their exit or marginalisation harms the competitive process. 106 Thus, it seems that, directly or indirectly, the focus has reoriented around consumers (including of course intermediate consumers).107 This appears to be a subtle but important shift from the EU Courts’ case law which has tended to place emphasis on harm to the structure of competition under Article 102 TFEU in a way that appeared analytically decoupled from observable harm to consumers. 108 Under the Guidance Paper, however, it appears that efficiency and consumer benefits/harm are assuming greater importance than market structure. 109 This issue is addressed in more detail in Chapter 5 (The General Concept of an Abuse). 2.

Dominance. 110 The Guidance Paper indicates a more nuanced assessment of dominance than the case law suggests. Market shares are considered a useful “first indicator” rather than the beginning and end of the analysis. The paper also gives a more generous safe harbour than the case law, suggesting that below a 40% market share, dominance is unlikely. This ought to have a non-trivial practical impact since case law such as BA/Virgin gave the impression that dominance concerns are a distinct possibility at market shares below 40%. 111 The issue of persistence of market shares is also rightly mentioned. But the most important clarification on dominance is the primary importance of barriers to entry and expansion. Buyer power is also given more prominence as a counterweight to seller power. Interestingly, collective dominance is not addressed whereas it was in the Discussion Paper.

3.

General framework for exclusionary abuses. 112 The Guidance Paper introduced a new concept for exclusionary abuses generally, namely “anticompetitive foreclosure.” This is said to describe a situation where effective access of actual or potential competitors to supplies or markets is hampered or eliminated as a result of the conduct of the dominant firm whereby the dominant firm is likely to be in a position to profitably increase prices to the detriment of consumers. Evidence of such harm to consumers may be qualitative or quantitative. The Guidance Paper then added various “plus” factors that build on this basic definition: 113 (1) the strength of the dominant position; (2) the nature and extent

105 Guidance Paper, para. 5. See in this regard Case C-209/10, Post Danmark A/S v Konkurrencerådet, EU:C:2012:172, paras. 20, 22, and 24. 106 Guidance Paper, para. 6. 107 See to this effect 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] ECR I-9291, para. 63. 108 See, e.g., Case T-201/04, Microsoft Corp. v Commission [2007] ECR II-3601, para. 664. 109 See L Ortiz Blanco and P Ibáñez Colomo, “Evolving Priorities And Rising Standards: Spanish Law On Abuses Of Market Power In The Light Of The 2008 Guidance Paper On Article 82 EC,” in LF Pace (ed.), European Competition Law: The Impact Of The Commission’s Guidance On Article 102,” Edward Elgar Publishing (2011), Ch. 4. 110 Guidance Paper, paras. 9-18. 111 BA’s share towards the end of the period of the abuse had dropped to 39%. 112 Guidance Paper, paras. 19-22. 113 Guidance Paper, para. 20.

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of barriers to entry or expansion; (3) the relative strength of rivals and whether a strategically important rival is being singled out; (4) selectivity of the practice; (5) the extent of market coverage of the practice in question; (6) any evidence of actual foreclosure caused by the abusive conduct; and (7) direct evidence of exclusionary strategy via internal documents. 4.

The as-efficient competitor test as the cornerstone for pricing abuses. 114 The Guidance Paper retained the as-efficient competitor test as the general test for exclusionary pricing abuses. Like the Discussion Paper, the Guidance Paper expressed a preference for AAC/LRAIC over the AVC/ATC standards mentioned in the case law. In practice, the difference between the two sets of costs standards may be limited unless fixed, sunk, or common costs are significant. Advocating an equally-efficient competitor test is not, however, a major change in policy. First, this is the test which has been applied for some time in respect of predatory pricing and margin squeeze. Even before the Guidance Paper was published, the General Court had expressly ruled out looking at anything other than the dominant firm’s costs for reasons of legal certainty. 115 Second, for rebates, the Guidance Paper test is not really an equallyefficient competitor test, at least for the most important and controversial category of rebates—so-called all unit, or retroactive, rebates. In simple terms, what the Commission proposes doing is to separate the dominant firm’s demand into a “contestable” and “non-contestable” portion, and to apply a type of price/cost test to the contestable part. The underlying logic is to estimate what share of a customer’s demand the dominant firm’s rival(s) might realistically be able to capture, and to apply a price/cost test for that relevant range, using the dominant firm’s effective price (including the rebate) and its costs. If the contestable share is less than 100%, then the Guidance Paper test for rebates is clearly not one based on competitors who are actually as efficient as the dominant firm. Indeed, the whole point of the test in such a setting is to take into account economies of scale that the dominant firm has but rivals do not (or to the same extent). This is a regulatory-type approach.

5.

Defences. 116 The Guidance Paper essentially followed the approach in the Discussion Paper on defences. It distinguished a defence based on objective necessity of a practice (e.g., health and safety) and those based on efficiencies. For the latter, essentially the conditions of Article 101(3) have been transposed into Article 102 TFEU. The dominant firm bears at least the evidential burden of asserting the relevant efficiency and providing some initial evidence of it. A major omission in the defences section is the defence of meeting competition in the context of pricing abuses. This area of law remains unacceptably unclear

Guidance Paper, paras. 61-68 and 134-170 (rebates). Case T-271/03, Deutsche Telekom AG v Commission [2008] ECR II-447, para. 188. The Guidance Paper (para. 25) indicates that the Commission may use competitors’ costs or other costs if the dominant firm’s costs are not available. This must be of questionable correctness following Deutsche Telekom. 116 Guidance Paper, paras. 28-31. 114 115

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following Wanadoo. 117 Reaction to the Guidance Paper. The Guidance Paper has been broadly welcomed. But this was against the backdrop of a decisional practice and case law that was considered formalistic and lacking in any meaningful analysis of economic principles or a robust and forensic demonstration of anticompetitive effects. So in a sense anything other than the status quo ante would have been welcomed. That said, the strides taken by the Commission in the Guidance Paper, given the challenges outlined earlier in this section, should not be underestimated. The Commission is clearly therefore to be commended. A number of criticisms have nonetheless been made. 118 The first, and probably most fundamental, is that the concept of anticompetitive foreclosure advanced in the Guidance Paper is both uninformative and potentially over-inclusive. 119 “Anticompetitive foreclosure” is said to “describe a situation where effective access of actual or potential competitors to supplies or markets is hampered or eliminated as a result of the conduct of the dominant undertaking whereby the dominant undertaking is likely to be in a position to profitably increase prices to the detriment of consumers.” 120 This appears to have few limiting principles and, read literally, might even include situations where rivals exit the market or are marginalised simply because the dominant firm’s product is so obviously superior to theirs that consumers buy it exclusively or almost exclusively. This would be “foreclosure” in a broad sense but it is conduct that is the very essence of competition. There is very little articulation in the Guidance Paper of what is anticompetitive, and what distinguishes competition on the merits, or normal competition, from abusive conduct. The “plus factors” that the Commission lists in paragraph 20 of the Guidance Paper may or may not be caused by abusive conduct. For example, market exit by rivals may be due to the fact that consumers do not value its products or services. A second criticism is that the Guidance Paper shifts away from strict, and relatively precise, language and categorisation in the case law in favour of a much more fluid set of principles expressed at a very high level of aggregation. A good example is refusal to deal. This is perhaps the most exceptional application of Article 102 TFEU, and has been applied in only a small number of cases in over 50 years of enforcement, most of which have specific and unusual facts. The case law is generally based on an exceptional circumstances test—either expressly (in the case of intellectual property) or implicitly

117 Wanadoo Interactive, Commission Decision of 16 July 2003, upheld on appeal in Case T-340/03, France Télécom SA v Commission [2007] ECR II-107 and Case C-202/07 P, France Télécom SA v Commission [2009] ECR I-2369. See further Ch. 6 (Predatory Pricing). 118 The literature is vast on this topic. The two most prominent publications are: J Temple Lang and A Renda (eds.), Treatment Of Exclusionary Abuses Under Article 82 Of The EC Treaty Comments On The European Commission’s Guidance Paper, Final Report Of A CEPS Task Force, (2009) and European Competition Law: The Impact Of The Commission’s Guidance On Article 102, LF Pace (ed.), Edward Elgar Publishing (2011). For articles see J Temple Lang, “Article 82 EC: The Problems And The Solutions,” paper presented at the conference “Ten Years Of Mercato Concorrenza Regole,” Milan, 30 June 2009; J Temple Lang, “Commission’s New Guidance On Article 82 Is Flawed,” Competition Law Insight, 10 February 2009; and J Temple Lang, “Rebates, Price Discrimination And Refusal To Contract—The Commission’s Guidance Paper On Article 82,” Europaraettslig Tidskrift (2010) 47-78. 119 See J Temple Lang, “Article 82 EC: The Problems And The Solutions,” paper presented at the conference “Ten Years of Mercato Concorrenza Regole,” Milan, 30 June 2009. 120 Guidance Paper, para. 19.

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(for other types of property)—coupled with various stringent factors attached. In the Guidance Paper, however, the Commission suggests that a duty to deal is justified on a more generalised basis, where: (1) the refusal relates to a product or service that is objectively necessary to be able to compete effectively on a downstream market; (2) the refusal is likely to lead to the elimination of effective competition on the downstream market, and (3) the refusal is likely to lead to consumer harm. 121 While the Commission acknowledged the importance of property rights and preserving innovation incentives, 122 the actual test it proposed is quite open-ended and lacking in precision or limiting principles. It suggested that a duty to deal could be justified simply where the benefit of sharing outweighs the costs. But this is not a correct statement of law since it ignores property rights, the absence of any duty to deal in general, and dynamic incentives. A third related criticism is that the Guidance Paper does not in fact provide much practical guidance, 123 and, worse, reopens many issues that, while perhaps unsatisfactory, were at least clear. (Businesses may actually prefer a rule that is incorrect but clear to one that is correct but highly complex.) For example, the test for conditional rebates is likely to be complex in many cases in practice. It requires an exercise of deciding, hypothetically, how much (if any) of a customer’s demand is “non-contestable” and then, of the “contestable” portion of demand seeing what the “relevant range” is that could be supplied by a rival. A form of price/cost test is then applied to this share, taking into account the dominant firm’s costs and rebates. And this must apparently be done for each affected customer. But it is perfectly possible that the dominant firm has never addressed its mind to these concepts 124 and could only do so with detailed information from customers or even rivals, which is hardly a practice that competition law should be encouraging. The Intel decision devoted over 150 pages just to determine this issue for only a handful of customers. 125 Of course any test for conditional rebates that did not take the formalistic approach to rebates in the decisional practice and case law would inevitably be less certain—this is the inevitable tension between an effects-based approach and legal certainty. But the Commission did not need to put forward the test that it did in the Guidance Paper and that test is likely to create uncertainty in many cases. It involves a highly regulatory approach. Fourth, because of an ambiguous standard applied for anticompetitive foreclosure, the Guidance Paper could have the effect of shunting cases very quickly into an assessment of efficiencies. The prospects of the dominant firm successfully raising such a defence are likely to be limited. As a practical matter, there are virtually no reported cases at EU level where such defences have been successful. This is not a function of the novelty of Guidance Paper, para. 81. Efficiencies are also mentioned, if raised by the dominant firm. The exceptional circumstances test is only mentioned once, and even then only in a footnote. 122 Guidance Paper, para. 75. 123 See L Ortiz Blanco and P Ibáñez Colomo, “Evolving Priorities And Rising Standards: Spanish Law On Abuses Of Market Power In The Light Of The 2008 Guidance Paper On Article 82 EC,” in LF Pace (ed.), European Competition Law: The Impact Of The Commission’s Guidance On Article 102,” Edward Elgar Publishing (2011), Ch. 4. 124 Of course a consequence of the Guidance Paper is that these concepts may not start to appear in internal company assessments. But the fact that these were not concepts generally used by businesses is significant. 125 Intel, Commission Decision of 13 May 2009. 121

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the Guidance Paper on this point since arguments on efficiency were raised in cases before the Guidance Paper was published. 126 The Guidance Paper makes no mention of this fact and gives no indication that the Commission will be genuinely open to permitting efficiency defences in real-world cases. A key difficulty is that the Guidance Paper’s last condition for an efficiency defence—that the conduct does not eliminate all effective competition 127—does not sit well with a prior finding of dominance (which usually means an absence of effective competition). Fifth, an unfortunate aspect of the Guidance Paper is that sections of it appear to have been inserted only or mainly to shore up the Commission’s position in pending or anticipated appeals to the EU Courts. The better course would, clearly, be to allow decisions to stand or fall on their own merits on appeal. The difficulty is that part of the Guidance Paper cannot be amended in the event that the Commission is unsuccessful on appeal, which means that position statements which were considered appropriate by the Commission for a particular case are likely to be over-inclusive if applied more generally. Two notable examples spring to mind. The first is the so-called “Telefónica exceptions.” 128 In Telefónica, the Commission rejected the argument that the conditions of the refusal to deal case law must also be satisfied in the case of margin squeeze, giving two reasons. First, it said that Telefónica had a regulatory duty to supply the upstream inputs under secondary EU telecommunications legislation. The Commission reasoned that the existence of this duty showed that, in imposing an access obligation, a balance had already been struck promoting competition and preserving ex ante incentives to invest and innovate in infrastructure. Second, the Commission stated that Telefónica’s ex ante incentive to invest in its infrastructure was not affected since Telefónica’s infrastructure was to a large extent the fruit of investments that were undertaken well before the advent of broadband in Spain and thus bore no relation to the provision of broadband services, including with the benefit of special or exclusive rights that shielded it from competition. In the Guidance Paper, the Commission added language that effectively replicates the two “Telefónica exceptions.” But neither exception has any clear pedigree in the decisional practice and case law. 129 The second is the concept of a “naked restraint.” In the Guidance Paper, the Commission introduced for the first time the concept of a “naked restriction,” a practice that is so pernicious as to not require any assessment of its effects on competition. This language was intended to pave the way for the Commission’s subsequent Intel decision, 130 where See, Wanadoo Interactive, Commission Decision of 16 July 2003 and Prokent/Tomra, Commission Decision of 29 March 2006. 127 Guidance Paper, para. 30, fourth indent. 128 See E González-Díaz and J Padilla, “The Linkline Judgment - A European Perspective,” Global Competition Policy, April 2009, (1); D Geradin, “Refusal To Supply And Margin Squeeze: A Discussion Of Why The ‘Telefonica Exceptions’ Are Wrong,” Tilburg Law and Economics Center, 28 January 2011. 129 Indeed, the Commission said the opposite in FAG-Flughafen Frankfurt/Main AG, OJ 1998 L 72/30, paras. 97–98. In TeliaSonera, the Advocate General appeared to accept the first “Telefónica exception” but appeared doubtful as to the second. See Opinion of Advocate General Mazák in Case C52/09, Konkurrensverket v TeliaSonera Sverige AB [2011] ECR I-527, paras. 17-21. However, the Court of Justice did not address this issue directly since it looked at the appeal from a different perspective. For a detailed discussion see further Ch. 7 (Margin Squeeze). 130 Intel, Commission Decision of 13 May 2009, paras. 870-873. 126

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the Commission found that Intel restricted the commercialisation of specific AMD-based products by HP, Acer, and Lenovo by making payments to the OEM in question to delay, cancel or in some other way restrict the commercialisation of specific AMD-based products. While it may be one thing to include in a Guidance Paper aspects that reflect the approach taken in a published Commission decision (as in Telefónica) it seems a step too far to use the Guidance Paper to give greater legitimacy to a future decision (as in Intel). This issue remains before the EU Courts in Intel. Finally, the Guidance Paper is more or less silent on new types of abuses. For example, Chapter Thirteen (Abusive Conduct and Standards) outlines a whole series of abuses where the Commission has expressed no view at all in the Guidance Paper. Nor is it the case that the practices in question arose after the publication of the Guidance Paper. Certain of them (e.g., exclusionary royalties) were the subject of complaints before the Commission for some time prior to the Guidance Paper being finalised. Similarly, Chapter Twelve (Exclusionary Non-Price Abuses) addresses a number of important abuses where the Commission’s position has not been articulated. The absence of any guidance on discrimination is also a major lacuna since this abuse can cause unnecessary difficulties in practice.

2.4.4

Criticisms Of “Light Touch” Judicial Review

Background. While the substantive standards and tests that the Commission sets for itself under Article 102 TFEU are clearly important, the extent of rigorous judicial oversight is equally so. To state the obvious, placing greater emphasis on an effectsbased analysis and economic thinking is unlikely to achieve much in the absence of effective judicial review. This ought to mean proper forensic review of primary facts and a level of review of economic assessments that is not merely a “tick-box” analysis. The Commission has enjoyed a staggering success rate in Article 102 TFEU appeals, and one that is asymmetrically better than other areas of competition law appeals. Data gathered in 2006 by the former Chief Economist, Damien Neven, record that the Commission’s success rate in Article 102 TFEU cases was 98%, compared to only 58% under the EU Merger Regulation and 75% in Article 101 TFEU cases. 131 More recent data from Ahlborn and Evans suggest a similar success rate. 132 While Neven attributes this disparity in success rates to the fact that appeals outside the Article 102 TFEU context typically look at the effects of practices and not their form, this is not a fully satisfactory response. The disparity between Article 101 and 102 TFEU appeals is striking, since most Article 101 TFEU cases concern admitted cartel infringements. More to the point, in Article 102 TFEU cases the EU Courts are clearly looking at issues of anticompetitive effects in more detail than before: the concern is that it appears to be making no difference to the outcome in those cases whereas it has in the areas of merger control and Article 101 TFEU. There is also some force in the argument that “whatever the origins of the Court’s

D Neven, “Competition economics and antitrust in Europe,” p. 17, document available at http://ec.europa.eu/dgs/competition/economist/economic_policy.pdf. 132 C Ahlborn and D Evans, “The Microsoft Judgment And Its Implications For Competition Policy Towards Dominant Firms In Europe,” Antitrust Law Journal (2009) (Vol. 75) No. 3, pp. 887-932. 131

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restraint in judicial oversight of the Article [102] cases ... the Commission has currently virtually boundless discretion in shaping policy with respect to dominant firms.” 133 Equally, the Commission’s success rate in cases in the appeal courts in Luxembourg is not matched by the success rates of private litigants in national courts involving Article 102 TFEU or the success rates of NCAs applying Article 102 TFEU or its national law equivalent. This cannot be explained solely by the discretion the Commission enjoys over which cases to pursue. If anything, the incentives of private litigants should be at least as good in this regard, and probably more so in those national legal systems where the loser pays the winning side’s costs. 134 Specific criticisms. Unsurprisingly therefore criticism has been voiced about the robustness of judicial review of Commission decisions under Article 102 TFEU. 135 The EU Courts have developed a self-imposed restraint based on limited oversight of “complex economic assessments.” 136 This is not objectionable in itself—on matters of economic policy of judgment there may not be a single “right” answer—but it has been suggested that the notion of limited deference has been distorted. While the initial notion of deference to Commission assessments had a decidedly narrow context, 137 it has been expanded to comprise all manner of assessments by the Commission, including technical assessments where the Commission does not obviously possess any expertise or superior ability. 138 It has also been suggested that the EU Courts have been too unwilling in recent years to make use of their own rules of procedure on matters such as oral testimony, expert evidence (they can appoint their own expert(s)), and a willingness to inspect places and things that may be of relevance to the issues on appeal. 139 The issue of (limited) oral testimony is particularly important. Experience in litigation shows that documents read in context, with the benefit of oral explanation and testing from different parties, often have a quite different meaning to what one might suppose by merely reading the 133

Ibid. This would make for an interesting area of study and data. On a related issue in the United States, see JD Wright and AM Diveley, “Do Expert Agencies Outperform Generalist Judges? Some Preliminary Evidence From The Federal Trade Commission,” Journal of Antitrust Enforcement (2013) 1(1): 82-103, at 103 (“Many appear to assume that agencies have courts beat on this margin. To our knowledge, while oft-cited as a reason to increase the discretion of agencies and the deference afforded them by reviewing courts, no one has provided empirical support for this claim. We seek to fill that gap, and contrary to the expertise hypothesis, we find the evidence suggests the Commission does not perform as well as generalist judges in its adjudicatory antitrust decision-making role”). 135 See I Forrester QC, “A Bush In Need Of Pruning: The Luxuriant Growth Of Light Judicial Review,” in CD Ehlermann and M. Marquis (eds.), European Competition Law Annual 2009: Evaluation of Evidence And Its Judicial Review In Competition Cases (2010), pp. 407-452. 136 See, e.g., Case 42/84, Remia and others v Commission [1985] 2425, para. 34. For a detailed discussion see the contributions from Panel II in CD Ehlermann and M. Marquis (eds.), European Competition Law Annual 2009: Evaluation of Evidence And Its Judicial Review In Competition Cases (2010), pp. 9-473, and in particular those by Judges Forwood, Wahl, and Ó Caoimh from the EU Courts. 137 Remia, ibid (in casu duration of a non-compete clause and the doctrine of ancillary restraints). 138 I Forrester QC, “A Bush In Need Of Pruning: The Luxuriant Growth Of Light Judicial Review,” in CD Ehlermann and M. Marquis (eds.), European Competition Law Annual 2009: Evaluation of Evidence And Its Judicial Review In Competition Cases (2010), pp. 407-452. 139 Ibid. 134

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document cold. In legal cases, context is everything. It is also suggested that the EU Courts have not been rigorous enough in establishing a clear forensic hierarchy that distinguishes evidence according to its inherent value. 140 The best evidence in any case is clearly contemporaneous evidence. Ex post statements, particularly those made by rivals or customers with a vested interest in the outcome of a decision/appeal and which have not be tested in evidence, are of much less value. 141 The position is a fortiori in relation to anonymous evidence. On Article 102 TFEU decisions specifically, the EU Courts’ evidential review have been quite mixed. In many cases, the EU Courts have engaged in extremely cursory analysis of anticompetitive effects, based largely on assumed, or inferential, effects. For example, in BA/Virgin, the Court of Justice concluded that the Commission had demonstrated a concrete anticompetitive effect of the rebates in question. 142 But there is no reference to what this “concrete” evidence was, and it is difficult to see what it could have been given that the Commission itself did not base its decision on such concrete effects. Similarly, in Tomra, the fact that the Commission’s diagrams in its decision that is said to illustrate the anticompetitive “suction” effect of the Tomra rebates—based on negative prices at the margin—contained multiple admitted errors was considered to be irrelevant by the EU Courts on appeal. 143 But the logical conclusion of those errors was that Tomra’s prices at the margin were not negative, and would therefore allow an equally-efficient rival to survive. For the Commission to posit anticompetitive effects based on rivals’ difficulties to match the prices seems hollow in such circumstances. Even if this did not vitiate all of the Commission’s analysis, it clearly affected, and undermined, some of it. The EU Courts’ approach in appeals against Commission decisions under Article 102 TFEU contrasts with their robust approach in reviewing Commission merger control decisions. 144 On the other hand, the EU Courts plainly have engaged in very detailed and sophisticated review of Commission decisions under Article 102 TFEU on occasion. A good example 140

Ibid. See Yam Seng Pte Limited v International Trade Corporation Limited [2013] EWHC 111 (QB), Leggatt J (para. 8): “I approach the evidence on the basis that, as in almost every case where there is a contemporaneous documentary record, the documents provide the best evidence of what happened. Human memory is notoriously unreliable, and the strong interests and emotions to which disputes resolved through litigation give rise are powerful distorting factors, however honest and well-intentioned the witness. Indeed, the more patently honest and convincing the witness, the greater can often be the risk of placing reliance on their testimony.” The position is surely the same or even a fortiori with complainants before the Commission. 142 Case C-95/04 P, British Airways plc v Commission [2006] ECR I-2331, para. 31. (“the Court further held not only that the bonus schemes at issue were likely to have a restrictive effect on the United Kingdom markets for air travel agency services and air transport, but also that such an effect on those markets had been demonstrated in a concrete way by the Commission.”) (emphasis added). Given that the Commission and EU Courts eschewed any need to demonstrate actual or likely anticompetitive effects with concrete evidence, it is difficult to see how this conclusion was justified. 143 Case T-155/06, Tomra Systems ASA and others v Commission [2011] ECR II-4361, paras. 258 et seq. 144 The best examples are Case T-342/99, Airtours plc v Commission [2002] ECR II-2585 and Case T-5/02, Tetra Laval BV v Commission [2002] ECR II-4381, and Case T-80/02, Tetra Laval BV v Commission [2002] ECR II-4519, on further appeal in Case C-12/03, Commission v Tetra Laval BV [2005] ECR I-987. 141

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is AstraZeneca. 145 The General Court devoted over 260 paragraphs of its judgment dealing with the issues of market definition and dominance, and engaged in a degree of review that was extremely detailed whether or not one necessarily agrees with the outcome. Ordinarily one would think that such assessments were complex economic assessments par excellence. As impressive, the General Court engaged in a rigorous review on the issue of causation in respect of the second abuse of deregistration. While it accepted that AstraZeneca’s deregistration tactics were capable of restricting competition insofar as it related to delaying generic entry, it held that the Commission’s case insofar as it was alleged that deregistration prevented parallel trade had not been made out. The Court held that the Commission had to demonstrate that the public authorities in question were liable to withdraw, or did usually withdraw, parallel import licences following deregistration. 146 In the case at hand, the Commission had established a causal link between deregistration and the revocation of parallel import licences in Sweden, but not in Denmark or Norway. 147 Thus, the Court annulled the decision insofar as it was alleged that AstraZeneca’s deregistration had prevented parallel trade to occur in Denmark and Norway. 148 Overall, however, there was a lack of consistency in approach from the EU Courts under Article 102 TFEU. It was, for example, extremely difficult to reconcile the Court of Justice’s apparent endorsement of the principles underpinning the Guidance Paper in Post Danmark I 149 with its judgment, only two weeks later, in Tomra. 150 Indeed, a striking feature of the Article 102 TFEU case law is inconsistency between Court of Justice judgments in Article 267 TFEU preliminary references and appeals in direct actions. Most of the Article 102 TFEU cases that are generally regarded as progressive arise in the context of Article 267 TFEU preliminary references, and not direct actions. 151 It is equally difficult to reconcile the low intensity of the General Court’s review in cases such as BA/Virgin with its robust approach in AstraZeneca. One sometimes had the impression that much depended on the composition of the individual chamber of the EU Courts that happened to deal with the particular case. There did not appear to be a single overall coherent direction or approach.

2.4.5

Criticisms Of Commission Procedure

Overview. A final challenge that materially affects Article 102 TFEU decisions is the suggestion by highly respected practitioners, including EU Court judges, that the 145 AstraZeneca, OJ 2006 L 332/24, on appeal Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805 and Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. 146 Ibid., paras. 806-808. 147 Ibid., para. 845. 148 The General Court’s findings in this regard were upheld on appeal in Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. 149 Case C-209/10, Post Danmark A/S v Konkurrencerådet, EU:C:2012:172. 150 Case C-549/10 P, Tomra Systems ASA and others v Commission EU:C:2012:221. 151 See, e.g., Case C-7/97, Oscar Bronner GmbH & Co KG v Mediaprint Zeitungs und Zeitschriftenverlag GmbH & Co KG, Mediaprint Zeitungsvertriebsgesellschaft mbH & Co KG and Mediaprint Anzeigengesellschaft mbH & Co KG [1998] ECR I-7791; Case C-418/01, IMS Health GmbH & Co OHG v NDC Health GmbH & Co KG [2004] ECR I-5039; Case C-52/09, Konkurrensverket v TeliaSonera Sverige AB [2011] ECR I-527; and Case C-209/10, Post Danmark A/S v Konkurrencerådet EU:C:2012:172.

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Commission’s procedures lack fitness for purpose in certain respects. 152 The essential elements of the Commission’s procedures have remained in similar form since Regulation 17/62 in 1962. 153 The changes effected by Regulation 1/2003 were relatively minor in this regard. 154 In an attempt to address the concerns expressed, the Commission has made a number of changes to its procedures, such as having internal “peer review” teams in more difficult cases, 155 adding oversight from the Chief Economist Unit, 156 publishing Best Practices guidance on procedure for Article 101 and 102 TFEU cases, 157 some tinkering with the role of the Hearing Officer, 158 and the creation of the post of European Ombudsman. 159 But these changes are relatively minor overlays on a procedure that has remained largely unchanged for decades. They do not address the following fundamental criticisms. 160 Criticism #1: the Commission as judge and jury. The most fundamental criticism of the Commission’s procedure is that it acts as “judge and jury,” with the same officials

152 See J Temple Lang, “Three Possibilities For Reform Of The Procedure Of The European Commission In Competition Cases Under Regulation 1/2003,” CEPS Special Report, November 2011, http://aei.pitt.edu/32989/1/Reform_of_Commission_Procedure_in_Competition_Cases_with cover.pdf; I Forrester QC, “Due Process In EC Competition Cases: A Distinguished Institution With Flawed Procedures,” 34 European Law Review (2009) 817. The two practitioners have a combined total of around 80 years’ experience of EU competition law enforcement, including from within the Commission itself and have acted in many of the leading cases (often on different sides). So their views carry particular weight and signify mature reflection. This debate is not new: see, e.g., F Montag, “The Case For A Radical Reform Of The Infringement Procedure Under Regulation 17,” (1996) 8 European Competition Law Review, 428. 153 EEC Council Regulation No 17: First Regulation implementing Articles 85 and 86 of the Treaty, OJ 1962 L 13/204. 154 Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ 2003 L1/1. 155 This involves selecting an internal “shadow” team to play devil’s advocate on the core aspects of the case, leading to an internal debate. It is sometimes said to be influential. For a discussion see P Marsden, “Checks And Balances: EU Competition Law And The Rule Of Law,” Competition Law International, February 2009. For an interesting comparative perspective, see J Baker, “My Summer Vacation At The European Commission,” The Antitrust Source, September 2005. 156 See LH Röller, “Using Economic Analysis To Strengthen Competition Policy Enforcement” in P Bergeijk and E van Kloosterhuis (eds.), Modelling European Mergers: Theory, Competition Policy And Case Studies, Edward Elgar (2005). 157 See DG Competition, Best Practices On The Conduct Of Proceedings Concerning Articles 101 And 102 TFEU, OJ 2011 C 308/6. The most significant changes were the introduction of (voluntary) state of play meetings between the Commission and defendant(s) to give greater transparency on the stage of the Commission’s proceedings. Three-way meetings between the complainant, Commission, and defendant were also proposed. For an overview see M Glader, “Best Practices In Article 101 And 102 Proceedings: Some Suggestions For Improved Transparency,” Competition Policy International, April 2010 (1). On due process and EU competition law generally, see I Van Bael, Due Process in European Union Competition Proceedings, Wouters Kluwer (2011). 158 See Decision of the President of the European Commission of 13 October 2011 on the function and terms of reference of the hearing officer in certain competition proceedings, OJ 2011 L 275/29. 159 See http://www.ombudsman.europa.eu/en. 160 It bears emphasis that these criticisms are institutional or organisational, and are in no way reflective of DG Competition’s (or the EU Commission’s) officials, who are high calibre, extremely diligent, and of high integrity.

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drafting the Statement of Objections and the ultimate Decision. 161 Most of the officials are lawyers or economists and few if any will have had any training on making judicialtype assessments, including objective, forensic decision-making. The oral hearing before the Commission tends to be window-dressing because the same people presenting the Commission’s case are also the decision-makers. The hearing is not public and involves no cross-examination of witnesses or any other real testing of evidence. The Commission’s recent changes to its procedures, while commendable, do not address this fundamental issue. The “peer review panel” process is private and, while reputedly probing, does not require the panel to read and review all the evidence and arguments. Their report is not made available to the defendant. The same applies to the Chief Economist’s opinion. The Hearing Officer deals only with procedural issues, and does not really deal with substantive legal or factual issues. The Ombudsman too is mainly limited to procedural issues and competition law is a very small part of the office’s overall work. 162 Criticism #2: the decision-making process is arcane, diffuse, and lacking in transparency. The actual decision in an Article 102 TFEU case is taken by the College of 27 EU Commissioners. These are political appointees who will not have seen any of the evidence in the case and will typically have little or no detailed awareness of the issues that arise for their decision. Lobbying of Commissioners is rare nowadays but it does occur—usually in the cases that matter most. When lobbying does occur the submissions made are not part of the Commission’s case file and it is entirely unclear what influence they may have had on the outcome. It is of course a democratic right of undertakings and individuals to lobby public institutions, and in particular legislative bodies. But lobbying tends also to be extensive in major Article 102 TFEU cases, and in a manner that lacks transparency. Commissioners, Commission officials, the Legal Service, and other Directorates-General may be lobbied but it is typically unclear who has been contacted and whether they have

In Case C-199/11, Europese Gemeenschap v Otis NV and Others [2012] ECR I-684, the Court of Justice held that Article 47 of the Charter of Fundamental Rights does not preclude the Commission from bringing an action before a national court, on behalf of the EU, for damages in respect of loss sustained by the EU resulting from a breach of the competition rules (in casu a cartel). In reaching this conclusion, the Court rejected criticisms of the Commission’s “judge and jury” role (as well as the role of the College of Commissioners), finding that the existence of effective judicial review at national and EU level constituted sufficient protection. Leaving aside the fact that it was unlikely that the EU Courts would find their own appeal mechanisms ineffective, the case concerned an admitted cartel under Article 101 TFEU. This is fundamentally different to a strongly contested abuse finding under Article 102 TFEU, where greater concerns as to the effectiveness of judicial review arise. 162 A notable intervention by the Ombudsman was his decision in Intel. It concerned the Commission’s failure to keep a note of a lengthy meeting with a senior Dell executive. Dell was the most important customer in the whole case and the Commission’s decision relied extensively on evidence from Dell (including the individual concerned) to inculpate Intel. The meeting seemed particularly important because Dell’s CEO gave sworn evidence in proceedings involving Intel in the United States that appeared to contradict assessments made by the Commission in the decision. The Ombudsman found that the failure to keep a note constituted maladministration. He did not, however, make any finding as to whether the Commission had infringed Intel’s rights of defence. See Decision of the European Ombudsman Closing His Inquiry Into Complaint 1935/2008/FOR Against the European Commission of 14 July 2009. 161

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been influential. 163 The chain of command may be ignored so those with formal responsibility for decision-making may not be the ones who are most influential in the actual decision-making. Again, notes of meetings will not usually appear on the Commission’s case file. As one commentator notes “the procedure in practice has become less structured, less formal, and more diffuse.” 164 Criticism #3: record fines and significant discretion. The levels of fines in many Article 102 TFEU cases have been staggering, with Intel fined €1.06 billion in 2009 and Microsoft paying a similar cumulative amount for its various transgressions in respect of tying and interoperability abuses. This has led one commentator to say, probably correctly, that “the amount of the fines imposed by the Commission ... exceed fines imposed by the public authority in any democracy of which I am aware for any offence.” 165 While the Commission has published Fining Guidelines, 166 it is well-known anecdotally that the Competition Commissioner often decides the headline figure, himself/herself, with officials then tasked with working back to that figure using the Fining Guidelines. Criticism #4: Commission procedures not compliant with the fundamental rights. It is frequently argued that the Commission’s procedures do not correspond with the standards laid down in Article 6 of the European Convention on Human Rights (ECHR). 167 As a leading commentator notes: 168 “the procedures of the European Commission in determining guilt or innocence under the competition rules, and in imposing sanctions, manifestly do not correspond to the standards established by the ECHR. Condemned parties have often invoked these arguments before the Community courts, so far with little success. The number of cases has grown and the concerns become more strident as the penalties have become fiercer.”

This echoes an unsourced comment from Henry Kissinger: “Who do I call if I want to call Europe?” See J Temple Lang, “Three Possibilities For Reform Of The Procedure Of The European Commission In Competition Cases Under Regulation 1/2003,” CEPS Special Report, November 2011, http://aei.pitt.edu/32989/1/Reform_of_Commission_Procedure_in_Competition_Cases_with cover.pdf. The same author, using Regulation (EC) No 1049/2001 of the European Parliament and of the Council of 30 May 2001 regarding public access to European Parliament, Council and Commission documents, forced the Commission to publish its internal Manual of Procedure, which can now be found at http://ec.europa.eu/competition/antitrust/antitrust_manproc_3_2012_en.pdf. Following publication, he criticised the Manual of Procedure in certain respects, including: (1) it does not deal with submissions to other parts of the Commission in competition cases, which has been a feature of some recent (and controversial) decisions; (2) it does not deal with the legal principle of good administration, including in particular the need to take notes of meetings; (3) it does not refer to the Charter on Fundamental Rights, which is now part of EU law; and (4) it does not deal with due process and impartiality. See J Temple Lang, “The Strengths And Weaknesses Of The DG Competition Manual Of Procedure,” Journal of Antitrust Enforcement (2013) 1(1): 104-131. 165 I Forrester QC, “Due Process In EC Competition Cases: A Distinguished Institution With Flawed Procedures,” 34 European Law Review (2009) 817. 166 Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003, OJ 2006 C 210/2. See Ch. 19 (Remedies) for more detail. 167 This also assumes that the Commission’s procedures are not purely administrative in nature but have sufficient quasi-criminal character to fall within Article 6 ECHR. The better view is that Article 6 ECHR is engaged. See Ch. 1 (Introduction, Scope of Application, and Basic Framework) for more detail. 168 Forrester, ibid. 163 164

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This view is shared by others. 169 Concerns in this regard have become more pressing given greatly increased fines in recent years and the increasing role of the Commission as a lead enforcement agency in major abuse cases such as Microsoft, Intel, and the various prohibition decisions adopted under Article 102 TFEU against Google. Moreover, the Charter of Fundamental Rights is now fully part of EU law, 170 and guarantees as a minimum the ECHR rights. It is also envisaged that the EU will soon become a party to the ECHR. 171 These deficiencies must at least have an indirect impact on the substantive application of Article 102 TFEU. The implication is that the undoubted discretion vested in the Commission may not be subject to effective procedural safeguards in certain respects. All else equal, this is likely to expand the jurisdiction and impact of Article 102 TFEU, and in ways that would likely not occur in the presence of better or fairer procedures. It is also likely to result in an over-inclusive, or at least more haphazard, application of Article 102 TFEU since there may be insufficient internal checks and balances of the endproduct as manifested in Commission decisions. The basic solution to the problem is reasonably clear: that the prosecutorial and decisionmaking elements of the process should be split. One commentator suggests that “the only way in which these criticisms could be satisfied without an amendment of the EU Treaties would be to give the General Court (formerly the Court of First Instance), instead of the Commission, the power to adopt prohibition decisions and to impose fines in competition cases.” 172 This solution is not as radical as it seems: it was actually proposed by the European Parliament as early as 1981. 173 A Treaty amendment could do the same thing or go even further in terms of institutional redesign.

2.5

THE NASCENT POST-REFORM PERIOD

Discouraging initial signs. The early signs on the extent to which the Commission and EU Courts were willing to put the Guidance Paper’s principles on exclusionary abuses Temple Lang, ibid. See Article 6 TEU. The Charter has the same legal value as the EU treaties. 171 Accession became a legal obligation under Article 6(2) TEU. A final version of the draft accession agreement was agreed on 5 April 2013. However, in 2014, the Court of Justice rendered a negative opinion on the compatibility of the (draft) accession agreement with EU law: see Case Opinion 2/13, Opinion pursuant to Article 218(11) TFEU, EU:C:2014:2454. Solutions are currently being considered, including renegotiation of the agreement, which would also depend on ratification, not only by Member States, but also the States party to the Convention, as well as the consent of European Parliament. The latest position is that, on 7 October 2019, the Council reaffirmed its commitment to the accession (after it received a written submission from the Commission addressing the objections raised by the Court of Justice), and agreed to allow for a swift resumption of negotiations with the Council of Europe. However, as discussed in Chapter 1 (Introduction, Scope of Application, and Basic Framework), even before accession, the EU Courts, the EFTA Court, and the European Court of Human Rights have taken a series of steps to subject Commission proceedings and judicial review of competition decisions to many of the obligations reflected in Article 6 ECHR. 172 See J Temple Lang, “Three Possibilities For Reform Of The Procedure Of The European Commission In Competition Cases Under Regulation 1/2003,” CEPS Special Report (November 2011), at 194. 173 See Resolution on the Tenth Report of the Commission of the European Communities on Competition Policy, OJ 1982 C 11/78. 169 170

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front and centre of their analysis were mixed. 174 In Tomra, the EU Courts considered the Guidance Paper to be of no relevance since it post-dated its decision in that case. 175 This was technically correct but some tentative favourable reaction would have been useful and appropriate, not least because the Commission’s decision in that case purported to apply aspects of the analysis of rebates set out in the Discussion Paper (and, now, Guidance Paper). Tomra also rejected the relevance of a price/cost test in the context of rebates 176 and, further, upheld an approach based largely on formalistic reasoning. 177 Finally, on the issue of anticompetitive effects, the Court held that the market coverage of the rebates was not strictly in point, reasoning that the foreclosure by a dominant firm could not be justified by showing that the contestable part of the market was still sufficient to accommodate competitors. 178 This is the precise opposite of what the Guidance Paper says. 179 More worryingly, in Intel, the Commission appeared to regard the test for rebates set out in the Guidance Paper, and many of the Guidance Paper’s statements on anticompetitive effects, as non-essential parts of the analysis. According to the Commission, the Guidance Paper is merely a statement of enforcement priorities rather than a normative basis on which anticompetitive foreclosure concerns could be excluded. 180 The most that the Commission was prepared to say was that its decision “was in line with the 174 It is beyond the scope of this work to identify every national decision or judgment that has referred to the Guidance Paper since its adoption. One case of note, however, is Purple Parking Limited v Heathrow Airport Limited [2011] EWHC 987 (Ch) in the English High Court where Mann J rejected the relevance of the Guidance Paper. He stated (para. 95): “However, as the document itself points out in paragraph 3, it is not a statement of the law, and paragraph 81 makes it clear that what is being referred to is an enforcement priority, not a definition of abuse. I do not think that this document assists the debate.” But it is submitted that this conclusion is likely to be atypical. Most NCAs and national courts will likely find the Guidance Paper at least helpful, even if not strictly binding in all respects. In practice, NCAs and courts are most likely to cite the Guidance Paper where it tends to confirm conclusions that they have reached for other reasons. See, e.g., Case MPINF-PSWA001, Flybe, No Grounds for Action Decision of 5 November 2010 (Office of Fair Trading), footnotes 67, 236, para. 6.34. A majority of the authors in LF Pace (ed.), European Competition Law: The Impact Of The Commission’s Guidance On Article 102, Edward Elgar Publishing (2011), considered that the Guidance Paper would be reasonably influential in their respective jurisdictions. See R Whish, “National Competition Law Goals And The Commission’s Guidance On Article 82 EC: The UK Experience,” in European Competition Law: The Impact of the Commission’s Guidance on Article 102 (ibid.) Ch. 7 and C Prieto, “Anticipated Enforcement In France Of The Commission’s Guidance On Article 82,” in European Competition Law: The Impact of the Commission’s Guidance on Article 102 (ibid.), Ch. 6. In the same work, Ortiz Blanco and Ibáñez Colomo did not anticipate much use being made of the Guidance Paper under Spanish competition law, not for reasons of substantive disagreement but because the national competition law was at a relatively early stage of development (ibid., Ch. 3). By contrast, Mestmäcker considered that aspects of the Guidance Paper would likely not be followed under German competition law because the law was somewhat different and considerably developed (ibid., Ch. 2). 175 Case C-549/10 P, Tomra Systems ASA and others v Commission EU:C:2012:221, para. 73. See also Opinion of Advocate General Kokott in Case C-109/10 P, Solvay SA v Commission [2011] ECR I686, para. 20. 176 Case C-549/10 P, Tomra Systems ASA and others v Commission EU:C:2012:221, paras. 67, 73. 177 Ibid., para. 75. 178 Ibid., para. 42. 179 See Guidance Paper, para. 20, which refers specifically to the extent of market coverage of the practice. 180 Intel, Commission Decision of 13 May 2009, para. 916.

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orientations set out in the Guidance Paper.” 181 On appeal, the General Court essentially accepted the Commission’s view of the Guidance Paper, stating that the reference to the Guidance Paper “is clearly a point that the Commission raised for the sake of completeness, having explained that the Article [102] Guidance was not applicable in the present case.” 182 A potential sea change: Intel and its progenitor. The first serious sign of the Court of Justice making some implicit but clear reference to the thinking behind the Guidance Paper is Post Danmark I—a Grand Chamber judgment. 183 In that case, the Court of Justice made a number of statements that appear indirectly (if not directly) to endorse certain principles from the Guidance Paper. Thus the Court stated: (1) Article 102 TFEU covers conduct that “has the effect, to the detriment of consumers, of hindering the maintenance of the degree of competition existing in the market or the growth of that competition;” 184 (2) price discrimination cannot of itself suggest that there exists an exclusionary abuse; 185 (3) to the extent that a dominant firm sets its prices at a level that covers its costs, it will, as a general rule, be possible for a competitor as efficient as that undertaking to compete with those prices without suffering losses that are unsustainable in the long term; 186 (4) an apparent lack of anticompetitive effect may be relevant to whether conduct is abusive; 187 and (5) it is open to a dominant firm to provide justification for behaviour that is liable to be caught by the prohibition under Article 102 TFEU, 188 either because of objective necessity or efficiency that also benefit consumers. 189 But it is unquestionably the Court of Justice judgment in Intel 190—like Post Danmark I another judgment of the Grand Chamber—which gives the clearest sign yet that many of the core principles set out in the Guidance Paper now form part of Article 102 TFEU. The judgment is striking in that it overturned a General Court judgment upholding the Commission’s decision, which had imposed what was, at the time, the largest ever fine imposed under Article 102 TFEU. Three points in particular bear emphasis for present purposes. First, the Court recalled a number of general principles governing exclusionary conduct under Article 102 TFEU, including, notably, that “competition on the merits may, by definition, lead to the 181

Ibid. Case T-286/09, Intel Corp. v Commission EU:T:2014:547, para. 158. 183 Case C-209/10, Post Danmark A/S v Konkurrencerådet EU:C:2012:172. For a discussion, see E Rousseva and M Marquis, “Hell Freezes Over: A Climate Change For Assessing Exclusionary Conduct Under Article 102 TFEU,” Journal of European Competition Law And Practice (2012), pp. 1-19. 184 Ibid., para. 24. 185 Ibid., para. 30. 186 Ibid., para. 38. 187 Ibid., para. 39. 188 Ibid., para. 40. 189 Ibid., para. 41. 190 Case C-413/14 P Intel v Commission, EU:C:2017:632. For commentary see P Ibáñez Colomo, “The Future of Article 102 TFEU After Intel,” Journal of European Competition Law and Practice (2018) Vol.9 No. 5 pp.293-303; N Petit, “Analysis and Reflections Intel and the Rule of Reason in Abuse of Dominance Cases,” European Law Review (2018) Vol. 43, No. 5 pp.728- 750; and JS Venit, “The Judgment Of The European Court Of Justice In Intel v Commission: A Procedural Answer To A Substantive Question?,” European Competition Journal (2017) pp.172-198. 182

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departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation.” 191 It is notable that, in making these findings, the Court expressly refers to Post Danmark I, and not the judgments rendered by the smaller Court of Justice chambers in Post Danmark II and Tomra. Second, the Court held that, where the dominant firm 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, the Commission “is not only 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; it is also required to assess the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant undertaking from the market.” 192 This conclusion is also striking, since it comes as close as the Court of Justice ever does to overruling itself, by suggesting that its finding in Hoffmann-La Roche that the concept of abuse “in principle includes any obligation to obtain exclusively from an undertaking in a dominant position, which benefits that undertaking” 193 is in practice only a rebuttable presumption. Finally, the Court held that since, in the decision at issue, the as-efficient competitor test played an “important” role in the Commission’s assessment of whether the rebate scheme at issue was capable of having foreclosure effects on as efficient competitors, the General Court was required to examine all of Intel’s arguments concerning that test, which it did not. 194 This is a clear reference to the Guidance Paper, and means that the Commission cannot have it both ways: if it chooses to refer to the Guidance Paper’s principles, the defendant on appeal is then entitled to challenge the decision on the basis that the Commission has erred in so doing. In concrete terms in Intel itself this meant that Intel is entitled to challenge the Commission’s elaboration of an as-efficient competitor test for the rebates impugned in the decision, and to submit its own test in this regard as well. That Intel signals a sea change under Article 102 TFEU is not therefore in doubt. Indeed, there are already signs that the Court of Justice itself considers that the principles set out in Intel apply not only to exclusionary abuses, but may have application for Article 102 TFEU more generally. For example, in MEO, the Court of Justice held, in the context of potentially abusive discrimination under Article 102(c), that the competition authority or national court should consider the undertaking’s dominant position, the negotiating power as regards the tariffs, the conditions and arrangements for charging those tariffs, their duration and their amount, and the possible existence of a strategy aiming to exclude from the downstream market one of its trade partners “which is at least as efficient as its competitors,” expressly citing Intel. 195 This, too, is an Case C-413/14 P Intel v Commission, EU:C:2017:632, para. 134. Ibid., paras. 137-139. 193 See Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 121 (emphasis added). 194 Ibid., paras. 142-146. 195 See Case C-525/16 MEO-Serviços De Comunicações E Multimédia EU:C:2018:270, para. 31. For a detailed discussion, see Ch. 15 (Abusive Discrimination). 191 192

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important shift in long-standing case law. As discussed in Chapter Fifteen (Abusive Discrimination), one of the criticisms of the historic case law on discrimination is that there appeared to be little analysis of the impact on competition of discrimination. MEO now makes clear inter alia that if discrimination affects less efficient competitors, that may be a powerful reason why there is no adverse impact on competition for purposes of Article 102 TFEU. The challenges ahead. Whether because of the Guidance Paper, the Court of Justice judgment in Intel or some self-denying ordinance, it is clear beyond question that the Commission in its decisional practice is now routinely at the issue of anticompetitive effects under Article 102 TFEU. For example, if one reviews the Commission’s five most recent infringement decisions in this area—Google Android, 196 Google Shopping, 197 AdSense, 198 Qualcomm (predation), 199 and Qualcomm (exclusivity) 200—each decision has a lengthy and detailed section on the issue of anticompetitive effects, including some engagement with the arguments advanced by the defendants in this regard. Indeed, AdSense is particularly striking, since, although the Commission took the view that the Intel judgment’s findings on the need to consider evidence from the dominant firm tending to suggest a lack of foreclosure applies to exclusivity rebates, but not to mere exclusivity, it nonetheless went on to consider this issue in any event. 201 Accordingly, the debate has clearly moved away from the discussion in Section 2.4 above concerning the impetus for reform: the era is one in which anticompetitive effects and economic evidence are, to varying extents, aspects of Article 102 TFEU decision-making. Instead, the debate has shifted to other more refined, but no less important, issues. First, the role of the EU Courts, and in particular the General Court, in providing effective judicial review against Commission decisions remains of central importance. An important development in this connection is that the number of General Court judges has effectively doubled in recent years through iterative reforms. This, coupled with a significant reduction in appeals in Article 101 TFEU cartel cases due to the Commission’s cartel settlement procedure, means that the judges will in general have more time to spend on individual competition law (and other) cases. It is already apparent for example that oral hearings in the General Court in competition law cases are longer, more substantive in nature, and with greater engagement from the bench in the form of advance written questions and debate during the hearing.

196 Case COMP 40.099, Google Android, Commission Decision of 18 July 2018. The case is currently on appeal. 197 Case AT.39740, Google Search (Shopping), Commission Decision of 27 June 2017 (currently on appeal). For a detailed discussion see Chapter Seventeen (Abuses In Digital Platform Markets). 198 Case AT.40411, Google Search (AdSense), Commission Decision of 20 March 2019. The case is currently on appeal. 199 Case AT.39711, Qualcomm (Predation), Commission Decision of 17 July 2019. The case is currently on appeal. 200 Case AT.40220, Qualcomm (Exclusivity Payments), Commission Decision of 24 January 2018. The case is currently on appeal. 201 Case AT.40411, Google Search (AdSense), Commission Decision of 20 March 2019, paras. 344345.

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Second, there remains a certain state of dissatisfaction with the typically limited extent to which the EU Courts are willing directly to engage in judicial review of economic (and other) matters that are regarded as “complex assessments.” Historically, this has involved a fairly high degree of deference to the decision-making institution. 202 But whether this approach can still be justified in the context of fines as large as €4.34 billion in Google Android, or other decisions raising foundational issues for the businesses of the companies concerned, may be doubted. In many cases of this kind, the Commission’s conclusions may depend to a material extent on the choice of inputs used in its economic models, and the review of complex factual and other material supporting such analysis. For judicial review to be effective, and consistent with respect for fundamental rights, it is important that the EU Courts should not start from a position that the applicant needs to show that the economic model is not one that no reasonable decision-maker could have adopted. If such an approach is applied, there would, in practice, be no real right of appeal consistent with Article 6 ECHR/Article 47 of the Charter but something more akin to a tick-box exercise. Rather, there should be engagement on the details of such model, its plausibility, its consistency with the real conditions in the market, the scope for doubt over its conclusions, the use of sensitivity analysis, etc. The pending appeals in Google Android, Google Shopping, AdSense, Qualcomm (predation), and Qualcomm (exclusivity) will therefore be watched with some interest from this perspective, since, in virtually all of these cases, the applicants have submitted detailed economic and other technical reports of their own. But there are, clearly, encouraging signs in this regard. In Servier 203 the General Court annulled the Commission’s findings on market definition in the decision, leading to the annulment of the abuse findings overall. The Court took the time to recall, in some detail, its powers to review the decisions of the Commission when it comes to market definition and the limits of the margin of appreciation that the Commission enjoys in respect to complex economic considerations, also showing its readiness to use these powers when it believes necessary. The level of engagement by the General Court on technical and evidential matters is also impressive. The case concerned perindopril, an angiotensin converting enzyme (ACE) inhibitor product, used for the treatment of cardiovascular diseases such as hypertension. The Commission’s finding was that perindopril was different in terms of therapeutic use from the 15 other ACE inhibitors in the same therapeutic class. The General Court held that this conclusion was based on several manifest errors of assessment: (1) based on medical studies, recommendations from international bodies, polls of prescribing physicians, responses from makers of other ACE inhibitors, and expert evidence submitted by Servier, there were no significant therapeutic differences between ACE inhibitors; (2) the large sums spent by Servier in marketing perindopril showed that it competed with other ACE inhibitors; (3) the Commission attached undue importance to 202 See I Forrester QC, “A Bush In Need Of Pruning: The Luxuriant Growth Of Light Judicial Review,” in CD Ehlermann and M. Marquis (eds.), European Competition Law Annual 2009: Evaluation of Evidence And Its Judicial Review In Competition Cases (2010), pp. 407-452. For a discussion of the EU Courts’ traditional role in this regard, see F Castillo de la Torre and E Gippini-Fournier, Evidence, Proof and Judicial Review in EU Competition Law, Elgar Competition Law and Practice Series (2017). 203 Case T-691/14, Servier SAS, Servier Laboratories Ltd, and Les Laboratoires Servier SAS v Commission, EU:T:2018:922. The Commission has appealed this aspect of the judgment.

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the fact that patients do not generally pay for the medicines they consume: non-price competition in the form of therapeutic substitution was the critical issue in pharmaceutical markets; and (4) the Commission had attached too much importance to prescriber/patient “inertia” to switching to other ACE inhibitors, since, relative to other ACE inhibitors, perindopril had a small “installed” patient base. 204 Third, the EU Courts should in our view broaden the scope of hearings, at least in marquee cases. Since the Court of Justice’s generally unhappy experience with expert evidence in the Woodpulp case, 205 it has been extremely reluctant to engage with expert evidence. In most major Article 102 TFEU cases, technical economic evidence is tendered as a central part of the appeal, often from distinguished economists, and typically at considerable expense to the applicant concerned. But it is impossible to know what value (if any) such evidence has in the proceedings, since the experts in question are rarely if ever made the subject of questioning by the opposing party/ies or even the EU Courts themselves. Indeed, the EU Courts have often been keen to limit the scope to rely on such evidence by relying on Byzantine procedural rules. 206 But there is every reason, in principle and in practice, why the EU Courts should engage directly with such evidence, and allow it to be properly scrutinised, at least in major Article 102 TFEU cases. In our view, the EU Courts should be open and innovative in this regard, and consider formats which have worked well in other courts, such as “hot-tubbing” of experts. 207 Judicial intervention and testing should be encouraged as it crystallises the core strength and weakness of arguments. 208

For discussion, see J Killick, J Jourdan, and P Pêcheux, “The Servier Judgment: The General Court Annuls The Commission’s Market Definition But Confirms The Illegality Of Certain Patent Settlement Agreements,” Journal of European Competition Law & Practice, Volume 10, Issue 1, January 2019, pp. 25–30. 205 Cases 89/85, 104/85, 114/85, 116/85, 117/85 and 125/85 to 129/85 Ahlström Osakeyhtiö and Others v Commission [1988] ECR 447. 206 For example, in Microsoft, the General Court took in account Microsoft’s expert evidence “only in so far as they support or supplement pleas or arguments expressly set out by Microsoft or the Commission in the body of their pleadings and in so far as it is possible for the Court to determine precisely what are the matters they contain that support or supplement those pleas or arguments.” See Case T-201/04, Microsoft Corp. v Commission [2007] ECR II-3601, para. 99. 207 This procedure originated in Australia. For a report on its use in competition law and other cases in the UK, see “Concurrent Expert Evidence And ‘Hot-Tubbing’ In English Litigation Since The ‘Jackson Reforms,’ A Legal And Empirical Study,” 25 July 2016. 208 As former Judge Forrester stated in his retirement speech: “Each of the eleven UK members who served in Luxembourg from 1973 has been a former advocate, accustomed to the robust dialogue of the courts in the UK. We enjoy verbal gymnastics. Judges are accustomed to test propositions verbally by asking provocative questions. In my younger days appearing before the House of Lords was like a gladiatorial contest with extra beasts in the arena. It is not rude to challenge an advocate's approach to some question; It is a welcome manifestation of judicial alertness. I recollect sad hearings from the old times in Luxembourg when days of preparation and hours of pleadings elicited not a single question. Far from being offended or disturbed by the challenge the advocate will welcome the chance of identifying the problem on the judge’s mind. So, I say, press counsel to address the doubts you have. Don't be shy. You think it is rude? Counsel thinks it is stimulating. You are doing a valuable service. You are not revealing prematurely your innermost thoughts; you are testing by hypothesis. Putting a question in debate does not mean you endorse or oppose it.” See IS Forrester QC, “A Valediction, Forbidding Mourning,” Luxembourg, 6 February 2020. 204

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Finally, Commission practice on the use of evidence could be usefully improved in various respects, and should be the subject of specific and continuing professional training and development. In the first place, there is a clear hierarchy of evidence. For example, the best evidence is usually contemporaneous documents, since they are both contemporaneous and usually written in tempore non suspecto. Such documents, if they are clear, plainly bear no comparison, in terms of the quality of evidence, to ex post selfserving (unsworn) statements by competitors or customers with a vested interest in the outcome of the case. 209 Whilst misleading the Commission in formal information request responses is an offence, the fact remains that the evidence contained in such responses is not the subject of cross-examination by the party that that evidence is adverse to. In a similar vein, contemporaneous documents with an “exclusionary” bent must be seen in context, both in general sense that most competitors hopefully wish to “crush” their rivals, and in the particular sense that virtually all documents, taken in isolation and out of context, can have their meaning significantly distorted. Equally, of course, the Commission should be alive to the possibility that the best-counselled firms will be adept at not creating such documents to avoid arousing suspicions. More also needs to be done to distinguish correlation from causation. For example, there may be myriad reasons why one or more competitors has fared badly during the period of the alleged abuse, and it is wrong to assume that the cause must be the allegedly abusive conduct. It may just be correlation. Whilst the Commission is not a plaintiff in a damages case seeking to show that monetary loss was caused by anticompetitive conduct, a realistic and fair assessment of the fact, if it is a fact, that one or more competitors proved unattractive to consumers is important. If not, the Commission risks preventing hard, but fair, competition. 210

209 See Yam Seng Pte Limited v International Trade Corporation Limited [2013] EWHC 111 (QB) (para. 8): “I approach the evidence on the basis that, as in almost every case where there is a contemporaneous documentary record, the documents provide the best evidence of what happened” (per Leggatt J (as he then was)). 210 After all, “competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation:” see Case C-413/14 P Intel v Commission, EU:C:2017:632, para. 134.

Chapter 3 MARKET DEFINITION 3.1

INTRODUCTION

The role of market definition under Article 102 TFEU. Article 102 TFEU only applies to the conduct of firms that are dominant at the time the alleged abuse is committed, i.e., firms that can act with a degree of independence from their competitors, customers, and consumers. 1 Evaluating dominance requires an assessment of whether the firm under investigation faces significant competitive constraints. The first step in that assessment is the definition of the relevant market, which comprises all those products (and their geographic locations) that impose an effective competitive constraint on the product(s) of the firm whose unilateral practices are under scrutiny. The second step involves an assessment of the competitive position of the allegedly dominant firm on the relevant market, i.e., its ability to raise prices or reduce output in relation to their competitive levels for a sustained period of time. Both steps are vital in an Article 102 TFEU investigation. Market definition therefore constitutes a critical step in the assessment of dominance: the EU Courts have consistently held that the definition of a relevant market is an essential prerequisite for the assessment of dominance. 2 As stated by the General Court in Volkswagen “for the purposes of Article [102], the proper definition of the relevant market is a necessary precondition for any judgment as to allegedly anti-competitive behaviour, since, before an abuse of a dominant position is ascertained, it is necessary to establish the existence of a dominant position in a given market, which presupposes that such a market has already been defined.” 3 Accordingly, a material error in market definition may result in a finding of dominance being unsustainable and, therefore, preclude a finding of abuse of dominance, even if the conditions for abuse would otherwise be met. Market definition is therefore of some practical importance. An example is the recent judgment in Servier 4 where, in the context of pharmaceutical markets, the General Court annulled the Commission’s findings on market definition in See Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 38. See Ch. 4 (Dominance). 2 See Case 6/72, Europemballage Corporation and Continental Can v Commission [1973] ECR 215, para. 32 (“the definition of the relevant market is of essential significance”). See also Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, para. 10; Case 31/80, L’Oreal v De Nieuwe AMCK [1980] ECR 3775, para. 25; and Case 62/86, AKZO Chemie BV v Commission [1991] ECR I-3359, para. 51. The EU Courts have reaffirmed the importance of market definition in Case T-65/96, Kish Glass & Co Ltd v Commission [2000] ECR II-1885, para. 62, confirmed on appeal in Case C-241/00 P, Kish Glass & Co Ltd v Commission [2001] ECR I-7759. See too Case T-219/99, British Airways plc v Commission [2003] ECR II-5917, para. 91. 3 See Case T-62/98, Volkswagen v. Commission [2000] ECR II-2707, para. 230. 4 Case T-691/14, Servier SAS, Servier Laboratories Ltd, and Les Laboratoires Servier SAS v Commission, EU:T:2018:922. For discussion, see J Killick, J Jourdan, and P Pêcheux, 1

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the decision, leading to the annulment of the abuse findings overall. Full annulments of market definitions are, however, rare. Data from 2015 shows that out of 134 cases in which the market definition was contested by the applicants, in only 5 did the EU Courts partially or wholly annul the Commission’s market definition. 5 That said, the record on substantive annulments by the EU Courts in Article 102 TFEU cases is, if anything, worse. 6 The Servier judgment is thus significant not only because the General Court annulled the Commission’s market definition in its entirety, but also because the Court took the time to recall, in considerable detail, its powers to review Commission decisions concerning market definition and the limits of the margin of appreciation that the Commission enjoys in respect to complex economic considerations. In practice, the two most common indicators of the existence of a dominant position are market shares and the ease of entry. Market shares can only be calculated once the boundaries of the relevant market have been correctly established. The importance attached to market shares is based on the (often incorrect) presumption that market structure—i.e., market shares and concentration indices—determines the behaviour of firms, and, ultimately, market outcomes. 7 Market definition also makes it possible to identify the constraints on exercise of market power that stem from potential entry. 8 Whether a firm actually enjoys a dominant position is materially influenced by the scope of the relevant market defined. An overly narrow definition will be underinclusive and lead to the imposition of obligations that are unjustified. An excessively broad definition will be over-inclusive and allow unilateral conduct that threatens effective competition to escape scrutiny. Both errors are costly. Market definition also plays a key role in the identification and assessment of the actual or likely effects of the alleged abusive conduct. Market definition helps delineate the markets that are affected by an alleged abuse of dominance, i.e., the markets where competition is affected by the behaviour of a dominant firm. The abuse of a dominant “The Servier Judgment: The General Court Annuls The Commission’s Market Definition But Confirms The Illegality Of Certain Patent Settlement Agreements,” Journal of European Competition Law & Practice, Volume 10, Issue 1, January 2019, pp. 25–30. 5 M Sousa Ferro, “Judicial Review: Do European Courts Care About Market Definition?,” Journal of European Competition Law and Practice, 2015, 6(6), p.400. 6 See further Ch. 2 (History, Development, and Reform). 7 See S Bishop and S Baker, “The Role Of Market Definition In Monopoly And Dominance Inquiries,” Economic Discussion Paper 2, OFT 342, July 2001, para. 2.6. This presumption dates back to the structure-conduct-performance paradigm developed by Bain. According to this view, it is the structure of the market that determines its performance via the conduct of its participants. Performance is measured by the ability to charge prices above the competitive level, thereby earning a positive markup for a sustained period of time while structure is given by concentration. See JS Bain, Barriers To New Competition: Their Character And Consequences In Manufacturing Industries, Harvard University Press (1956); and JS Bain, “Relation Of Profit Rates To Industry Concentration: American Manufacturing, 1936–1940,” (1951) 65 Quarterly Journal of Economics 293–324. The structureconduct-performance paradigm was shown to lead to incorrect predictions by modern developments in industrial organisation based on the application of game theory. See A Jacquemin, The New Industrial Organisation, Oxford University Press (1987). 8 M Motta, Competition Policy: Theory And Practice, Cambridge University Press (2004), p. 117. See also AJ Padilla, The Role Of Supply-Side Substitution In The Definition Of The Relevant Market In Merger Control, NERA, A Report for DG Enterprise, European Commission, June 2001, pp. 65–78.

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position may have an effect either on the market where the firm under investigation holds a dominant position, or on a different market that is adjacent to the market where the firm is dominant. To conclude that a given commercial practice in market A has an exclusionary effect on market B, both markets A and B must have been properly defined. Again, an overly narrow definition for market B may lead to the conclusion that exclusion is likely when it is not and vice versa. Relevant product and geographic markets. The relevant market is typically defined along a product dimension and a geographic dimension. In its product dimension, the relevant market includes those products that compete with each other to satisfy customers’ needs. The Commission’s Notice on the definition of the relevant markets defines the relevant product market as comprising “all those products and/or services which are regarded as interchangeable or substitutable by the consumer, by reason of the products’ characteristics, their prices and their intended use.” 9 Substitution is most accurately measured by the extent to which consumers of Firm A’s product would be minded to switch to other firms’ products in response to a price rise by Firm A, i.e., the effect on demand of non-trivial price increases. Where such a price rise would be unprofitable for Firm A—in the sense that the value of the sales lost to rival firms exceeds Firm A’s profits from the price rise—Firm A’s product and its rivals’ products are likely to be in the same relevant product market. Where quantitative analysis of this kind cannot be performed, the relevant product market may be defined according to qualitative criteria, such as product characteristics. This is, however, a second-best solution, as explained below. The relevant geographic market encompasses a geographic area in which the conditions of competition are sufficiently homogeneous. The Market Definition Notice states that “the relevant geographic market comprises the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas.” 10 Depending on the degree of homogeneity of the conditions of competition between different areas, the relevant geographic market may be global, regional, trans-national, national, sub-national, or, in rare cases, confined to a facility in a single geographic location (e.g., a port). Relationship between market definition under Article 102 TFEU and other legal instruments. The approach to market definition under Article 102 TFEU is broadly consistent with the principles applied in merger cases and Article 101 TFEU. This is hardly surprising, since the Market Definition Notice is intended to provide an overview of the general principles that the Commission employs in assessing market definition in the three main areas of EU competition law (i.e., Articles 101, 102, and the EU Merger Regulation). In each case, the purpose of the delineation of the relevant market is to identify the competitive constraints that the firm(s) under investigation face. For example, as the Commission’s horizontal merger guidelines state, the purpose of 9 Commission Notice on the definition of the relevant market for the purpose of Community competition law, OJ 1997 C 372/5, para. 7 (hereinafter the “Market Definition Notice”). 10 Ibid., para. 8.

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defining a relevant market is “to identify in a systematic way the immediate competitive constraints facing the merged entity.” 11 It is also notable that the definition of the relevant market in Form CO (Section 6) adopts almost verbatim the formulation used by the EU Courts for the definition of the relevant market. 12 Despite the doctrinal equivalence of the definition of market power under both Article 102 TFEU and the EU Merger Regulation, a number of differences should be noted. First, and most importantly, the competitive constraints that are the focus of market definition under Article 102 TFEU and the EU Merger Regulation are not the same. In merger control, the objective of market definition is to identify the competitive constraints faced by the merging parties at pre-merger prices, without questioning the legitimacy of those prices. Instead, under Article 102 TFEU, market definition is used to assess whether the firm whose practices are deemed abusive enjoys market power, which involves investigating the existence of competitive constraints at competitive prices. This makes market definition under Article 102 TFEU inherently more difficult than in merger control. While pre-merger prices are readily observable, defining whether a price is competitive or not is a daunting task. 13 A second, difference between market definition under Article 102 TFEU and the EU Merger Regulation is that the latter makes greater use of quantitative techniques to test the degree of substitution among products. Decisional practice under the EU Merger Regulation shows ever-increasing use of econometric techniques, such as co-integration analysis and regression studies, in order to determine the relevant correlations and price elasticities for purposes of defining the relevant market. 14 This willingness to use sophisticated, data-intensive techniques under the EU Merger Regulation contrasts with the largely qualitative approach to market definition historically adopted by the Commission and the EU Courts under Article 102 TFEU. 15 There is no obvious reason, however, why quantitative techniques should be used more widely in the EU Merger Regulation than under Article 102 TFEU. Lack of specialised resources is not an explanation, since the Chief Economist Team may be involved in any subject matter falling within DG Competition’s jurisdiction. Time constraints are 11 Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings, OJ 2004 C 31/5, para. 10. See also Case COMP/M.3108, Office Depot/Guilber, para. 22 (“[T]he precise boundaries of the relevant market are difficult to determine, but this should not distract from the main purpose of defining a market, namely to identify those competitors of the undertakings involved that are capable of constraining their behaviour.”). 12 See, e.g., Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, paras. 12–35. See also Case 31/80, L’Oreal v De Nieuwe AMCK [1980] ECR 3775, para. 25 (“[T]he possibilities of competition must be judged in the context of the market comprising the totality of the products which, with respect to their characteristics, are particularly suitable for satisfying constant needs and are only to a limited extent interchangeable with other products.”). 13 See Ch. 14 (Excessive Pricing) for a detailed explanation of the practical difficulties involved in the definition and calculation of competitive prices. 14 Some of these techniques are briefly described in section 3.3 below. For an application of these techniques see Case COMP/M.5644, Kraft Foods/Cadbury. It should be noted, however, that many merger decisions rely on purely quantitative assessments of the market where the merging parties compete: see e.g., Case COMP/M.6166, Deutsche Börse/NYSE Euronext. 15 See, e.g., Case COMP/37.990, Intel, Commission Decision of 13 May 2009.

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also not a factor. Indeed, if anything, the strict time-limits imposed for merger review are much less conducive to data-intensive econometric studies than investigations under Article 102 TFEU (which have no formal time limits). One possible explanation is that the EU Courts’ use of economics in the context of its judicial review function has been more widespread to date in appeals from decisions adopted under the EU Merger Regulation than Article 102 TFEU, which may have led the Commission to make greater use of quantitative techniques in order to bolster its assessments. In Schneider Electric, 16 for example, the Commission’s prohibition of a proposed merger was overturned due to “several obvious errors, omissions, and contradictions in the Commission’s economic reasoning.” 17 Market definition was critical in this regard, since the Commission based its market definition (and, therefore, its views on dominance) on the existence of several national markets, but then assessed the transaction’s competitive impact on the basis of unsubstantiated trans-national concerns. In other words, the Commission’s market definition and substantive analyses did not marry. 18 Errors in economic assessment were also central to the EU Courts’ decision to annul the merger prohibition decisions in Airtours 19 and Tetra Laval/Sidel. 20 But the recent judgment in Servier 21 now puts it beyond question that the General Court will delve into considerable detail, both factual and economic, in reviewing Commission market definitions in Article 102 TFEU cases. The criticism, if anything, is that it is the Commission, and not the EU Courts, which apply a less economic approach to market definition in Article 102 TFEU cases. Another, more pragmatic, explanation for the greater use of econometric techniques under the EU Merger Regulation than Article 102 TFEU is that the output data required to perform econometric studies will only be available in a small number of cases. Because the number of decisions under the EU Merger Regulation greatly exceeds those adopted under Article 102 TFEU, 22 suitable candidate cases for detailed econometric study are more likely to arise in the merger area. Finally, some of the mergers cases 16 Cases T-310/01, Schneider Electric SA v Commission [2002] ECR II-4071, and Case T-77/02, Schneider Electric SA v Commission [2002] ECR II-4201. 17 See General Court press release No. 84/02, of 22 October 2002. 18 The General Court found that “the Commission incorporated, not only in its presentation, but also in its analysis, of the facts, the unmatched geographic coverage of the merged entity throughout the whole of the EEA, in order to show that a dominant position would be created or strengthened on the national sectoral markets for switchboard components and for ultraterminal equipment.” See Case T310/01, Schneider Electric SA v Commission [2002] ECR II-4071, para. 176. 19 Case T-342/99, Airtours plc v Commission [2002] ECR II-2585. 20 Case T-5/02, Tetra Laval BV v Commission [2002] ECR II-4381, confirmed on appeal in Case C12/03 P, Commission v Tetra Laval BV [2005] ECR I-987. 21 Case T-691/14, Servier SAS, Servier Laboratories Ltd, and Les Laboratoires Servier SAS v Commission, EU:T:2018:922. 22 There have been over 9,000 EU Merger Regulation decisions rendered by the Commission and several dozen appeals to the EU Courts. Article 102 TFEU Commission decisions and EU Court judgments probably total less than 300, i.e., circa 3% of the EU Merger Regulation total. A search on DG COMP’s website results in 228 decisions that list Article 102 TFEU as a legal basis. It is clear, however, that many of these are decisions not finding infringements or do not reach final substantive findings of abuse for other reasons. Even if half of these decisions were appealed—which seems very optimistic—the total remains relatively small overall. For full list of Commission decisions, see https://ec.europa.eu/competition/elojade/isef/index.cfm?fuseaction=dsp_result&policy_area_id=1,2,3

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where the Commission has used econometric evidence for market definition purposes concern fast-moving consumer goods markets where transaction data is widely available and reliable. This is not the case for many of the markets which have been investigated under Article 102 TFEU (e.g., licensing markets). The paramount role of economics in market definition. The largely qualitative approach to market definition for purposes of Article 102 TFEU historically adopted by the EU institutions does not correspond with economists’ current understanding of how markets should be defined. This is hardly surprising since many of the leading cases under Article 102 TFEU pre-date the major advancements in economic thinking on market definition—most notably the introduction of the hypothetical monopolist test in the 1982 United States Horizontal Merger Guidelines. 23 Market definition in leading Article 102 TFEU cases in the 1970s and 1980s might well be decided differently today or at least would require more rigorous analysis. For example, in United Brands, the Commission and Court of Justice essentially used qualitative evidence in concluding that bananas were a separate relevant market to other fruits, 24 relying in particular on the seedlessness and softness of bananas as important defining characteristics for the young and the elderly. They declined to investigate cross-price elasticities, relying instead on a largely subjective assessment, which arguably overstated United Brands’ market power. 25 The existence of modern supermarket scanner data would enable the relative own-price and cross-price elasticities to be easily calculated today. This would allow an empirical evaluation of whether qualitative differences between bananas and other fruits also led to distinct demands for individual products or whether a range of ready-to-eat fruits competed in a broader market. The important point to note is that economic thinking almost certainly provides a more reliable indicator of current and future policy on market definition than older cases under Article 102 TFEU. A related point, and a further reason why economics should play a paramount role in market definition under Article 102 TFEU, is that many earlier market definition decisions under Article 102 TFEU have been criticised as being result-oriented. In other words, there may have been a temptation to define markets narrowly in order to support a finding of dominance and the pursuit of particular policy goals. The resultoriented tendency in older Article 102 TFEU cases has been summarised as follows: 26

See G Werden, “The 1982 Merger Guidelines And The Ascent Of The Hypothetical Monopolist Paradigm,” speech at the 20th Anniversary Of The 1982 Merger Guidelines: The Contribution Of The Merger Guidelines To The Evolution Of Antitrust Doctrine, 4 June 2002 (“The hypothetical monopolist paradigm was the lens through which all evidence was to be viewed.”). 24 Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, paras. 12–35. 25 See V Korah, An Introductory Guide To EEC Competition Law And Practice, ESC Publishing Ltd. (1990) (4th edn), p. 59 (“The interests of the toothless are sufficiently protected by the inability of the dominant firm to discriminate against them. It would lose so much market share from the rest of the population that it would not be worth raising prices to exploit the weak.”). 26 See T Kauper, “The Problem Of Market Definition Under EC Competition Law,” in B Hawk (ed.), International Antitrust Law And Policy: Fordham Corporate Law Institute, Sweet and Maxwell (1997), p. 303. 23

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“It has been said from time to time that the Commission and Court of Justice have tailored market definitions to reach particular outcomes that reflect substantive policies other than those based on conventional antitrust concerns over market power. There is some truth in this observation, at least with respect to Article [102] cases dealing with essential facilities, refusals to deal and some other vertical restraints. Markets in these decisions do seem to have been drawn more narrowly than a purely economic concern about adverse price and output effects would warrant. But this is a very limited number of relatively discrete cases.”

One example is Hilti, 27 where the Commission concluded that power-actuated fastening systems (nail guns) were a distinct market from other fastening systems (e.g., welding, screws, rivets, bolts, and nuts). Again, the Commission focused largely on the differences in characteristics between the products in concluding that there was insufficient demand-side substitution. 28 The Commission did not consider whether the pricing of one product constrains the pricing of the other products. No consideration was given to whether the number of marginal customers who would switch in response to a price rise for nail guns was sufficiently large to act as a constraint. The Commission’s subsequent decision in Pelican/Kyocera 29 illustrates a more nuanced approach, in particular in markets in which primary equipment and consumables are involved. More recent examples come from the pharmaceutical sector, where decisions of the Commission display a tendency to define the relevant product market as narrowly as possible—particularly in “pay-for-delay” cases—seemingly failing to take into account economic analyses that would help reveal competitive constraints which could prove determinant for a correct definition of the product market. 30 These issues are discussed in more detail below. Concerns about market definitions tailored to reach a particular outcome have also been raised about the Google Shopping and Google Android decisions, 31 as well as the Qualcomm (Exclusivity Rebates) and Qualcomm (Predation) cases. 32 For example, in Google Shopping, the Commission’s decision to treat general-purpose and vertical search engines as unrelated, and exclude marketplaces such as Amazon and eBay from the putative market for comparison shopping services, is controversial. The Commission also does not grapple with the full implications of the multi-sided nature of Google’s business when delineating relevant product markets in Google Android. Similar points can be made about the decision not to perform a formal hypothetical monopolist test to

Eurofix-Bauco/Hilti, OJ 1988 L 65/19. Ibid., para. 61. 29 Pelican/Kyocera, XXVth Report on Competition Policy (1997), para. 86–87. 30 See DN Mishol and J White, “Economics: Overview,” The European, Middle Eastern and African Antitrust Review 2019, Global Competition Review Special Report, p.4 (“The rulings in these pay-fordelay and excessive pricing cases indicate that governments appear to be adopting very narrow market definitions, typically limited to the molecule. This ignores the role of alternative-brand pharmaceuticals and generics that are different molecules but provide similar therapeutic benefits.”). 31 Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017; and Case AT.40099, Google Android, Commission Decision of 18 July 2018. 32 Case AT.40220, Qualcomm (Exclusivity Rebates), Commission Decision of 25 January 2018; and Case AT.39711, Qualcomm (Predation), Commission Decision of 18 July 2019. 27 28

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validate the Commission’s narrow market definition in the two Qualcomm matters mentioned above. These issues are also discussed in more detail below. Need for caution in respect of market definition. Excessive importance should not, however, be attached to the outcomes of a market definition exercise: it is, at best, a proxy for identifying a range of products over which a monopolist could in theory exercise market power. 33 As noted by an earlier Commissioner for Competition, the Commission uses “market definition and market shares as an easily available proxy for the measurement of the market power enjoyed by firms.” 34 Thus, market definition is “a cornerstone of competition policy, but not the entire building.” It is “a tool for the competitive assessment, not a substitute for it. What is ultimately important is to understand the nature of the competitive situation facing the firms involved in a certain practice.” 35 In short, “markets cannot be defined in a vacuum; market definitions make sense only in the context in which the questions are posed.” 36

3.2

PRODUCT MARKET DEFINITION: BASIC CONCEPTS

Overview. A relevant product market under Article 102 TFEU comprises all those products and/or services that impose a competitive constraint on the product(s) of the company whose behaviour is being analysed. 37 The most important constraint is exerted by those consumers who can switch their consumption to products that they regard as interchangeable (demand-side substitution). A second, but less important, constraint is created by those competing firms who can quickly produce and commercialise products that are demand-side substitutes to those of the firm in question (supply-side substitution). Supply-side substitution is different from potential competition. Potential competition concerns the ability of firms outside the relevant product market to enter in the long term. Supply-side substitution concerns the ability of firms to switch production in the short term and without incurring large sunk costs. Only when the competitive constraint imposed by entry is equivalent in its effect to that of demand-side substitution—i.e., when the entrants offer products or services that can be regarded as demand-side substitutes to those in the market—entry is considered at the market definition stage. Potential competition is therefore only assessed at the stage of analysing dominance. Finally, it may be that two directly competing products are indirectly constrained by competition from a third product, where the products are linked by so-called “chains of substitution.” The basic features of each of these sources of competitive constraint are explained below.

33 See DS Evans, “Lightening Up On Market Definition,” in E. Elhauge (ed.) Research Handbook On The Economics Of Antitrust Law, Edward Elgar (2012), Chapter 3. 34 M Monti, “Policy Market Definition As A Cornerstone Of EU Competition Policy,” Workshop On Market Definition, Helsinki, 5 October 2001. 35 Ibid. 36 See WE Schrank and N Roy, “Market Delineation In The Analysis Of The United States Groundfish Market,” (1991) 36(1) Antitrust Bulletin 91–154, at 107. 37 See generally, OECD Roundtable On Market Definition, 25 May 2012 (DAF/COMP(201)).

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Demand-Side Substitution

Definition. The most important competitive constraint faced by a firm comes from consumers who are prepared to switch to substitute products in the event of a price increase. When a firm’s customers have demand-side substitutes available, the firm cannot profitably raise the price of its products because that would trigger substitution and, therefore, a loss of business. An increase in price leads to a higher margin per unit sold but causes a fall in output. In the presence of demand-side substitutes, however, the loss of sales outweighs the higher unit margin, so the price rise, overall, makes no economic sense. The dominant role played by demand-side substitution in the process of defining a relevant product market is therefore due to the immediate character of the competitive constraint it gives rise to. 38 As the Market Definition Notice states, “demand substitution constitutes the most immediate and effective disciplinary force on the suppliers of a given product, in particular in relationship to their pricing decisions.” 39 The scope and scale of demand-side substitution depends entirely on consumer preferences, and, specifically, the products that consumers view as substitutes. Whether the products have similar physical characteristics is generally unimportant: consumers might view products with distinct physical characteristics as close substitutes or they might regard products that are physically similar as not being interchangeable. All products that consumers regard as close substitutes to the product or products of the firm whose behaviour is analysed should be part of the same relevant market since they impose a competitive constraint on the firm concerned. Testing for demand-side substitution. Demand-side substitution can be examined either directly or indirectly. Direct evidence of substitution is provided by evidence of consumers’ past behaviour. This is what economists term “revealed preference.” If consumers reacted to past changes in the prices of the firm in question by switching their consumption to other products, then there is clear evidence of demand-side substitution. In some instances, such evidence is not readily available, either because the firm did not change its prices, because the prices of all products that are potential substitutes changed at the same time (and thus there was no change in relative prices that could have triggered substitution), or because of the presence of other factors that masked the volume impact of the price change. In these circumstances, indirect evidence of demand-side preference is required: counterfactual estimation of the influence of price on demand (i.e., the price elasticity of demand) using multiple regression analysis or, if that is not possible, inspection of product characteristics and intended use. Both qualitative and, ideally, quantitative evidence are relevant in this connection: 40 “In its analysis of demand-substitutability, the Commission may make use of both qualitative and quantitative methods. Qualitative methods could, for example, include an examination of product characteristics and the intended use of a product by consumers, whereas quantitative See Tetra Laval/Sidel, OJ 2004 L 43/13, para. 163. Market Definition Notice, OJ 1997 C 372/5, para. 13. 40 See XXIVth Report on Competition Policy (1994), para. 280. See also Market Definition Notice, OJ 1997 C 372/5, para. 39. 38 39

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methods could involve the examination of price trends and the estimation of cross-elasticities using econometric methods.”

The Commission’s basic analytical approach to demand-side substitution. A relevant example of the Commission’s analytical approach to demand-side substitution is Wanadoo, 41 where Wanadoo, a subsidiary of France Télécom, was fined for predatory pricing in the high-speed internet access market in France. A central issue was whether ADSL (or broadband) internet access was a separate product from narrowband (or dialup) and cable-based access, and whether the market should be further segmented between residential and business users. The Commission ultimately concluded that there was a single market for high-speed internet access for residential users, which included cable and ADSL services, but excluded narrowband access. Factors cited by the Commission in support of this conclusion included: (1) high speed internet access is “always on;” narrowband required dial-up each time and, unless the user has a second line, does not permit simultaneous use of the telephone; (2) for certain multimedia applications (e.g., music downloading), narrowband was not an effective option due to excessive download times; (3) there was considerable asymmetry in consumer substitution between the high-speed internet access and narrowband, i.e., consumers would less often switch back to a phone connection when the price of the high-speed internet was raised, whereas when the high-speed internet access price was lowered, France Telecom would see a large increase in new customers; 42 and (4) prices for high-speed internet access differed as between business and residential users. 43 More recent examples of the same approach can be seen in the decisions in Google Shopping 44 and Google Android. 45 In Google Shopping, the Commission defined a market for general search services, concluding that there is limited demand-side substitutability between them and other online services such as content sites, specialised search services, and social networks. 46 This conclusion was based on the following considerations: (1) general search services serve a different purpose to these other services; 47 (2) general search services allow users to search for content all over the web; (3) general search services return more wide-ranging results compared to specialised

41 Case COMP/38.233, Wanadoo Interactive, Commission Decision of 16 July 2003, upheld on appeal in Case T-340/03, France Télécom SA v Commission [2007] ECR II-107 and on further appeal in Case C-202/07 P, France Télécom SA v Commission [2009] ECR I-2369. 42 Wanadoo Interactive, ibid., paras. 193–202, upheld on appeal in Case T-340/03, France Télécom SA v Commission [2007] ECR II-107, para. 88. 43 See also Case AT. 39523, Slovak Telekom. Commission Decision of 15 October 2014, upheld on appeal in Case T-851/14, Slovak Telekom v Commission, EU:T:2018:929, currently on further appeal. 44 Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017. 45 Case AT.40099, Google Android, Commission Decision of 18 July 2018. 46 See also Case AT.40153, E-book MFNs and related matters (Amazon), Commission Decision of 4 March 2017, where the Commission found that e-books and print books are not substitutable from a demand-side perspective for a number of factors including, inter alia, that e-books are easier to transport, have additional features, and can be downloaded immediately and at any time (para. 43). 47 Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017. para. 164. The Commission quotes the “Philosophy” section on Google’s website which states as follows: “[O]ur goal is to have people leave our website as quickly as possible.”

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search services as a result of searching the entire internet; and (4) general search services function on the basis of an automated process called “web crawling.” 48 In the same decision, the Commission also defined a market for product comparison services. In its view, there is limited demand-side substitutability between comparison search services and other services, namely: (1) search services specialised in different subject matters; (2) online search advertising platforms; (3) online retailers; (4) merchant platforms; and (5) offline comparison-shopping tools. That is because, in the Commission’s view, comparison search services serve different purposes to the services mentioned. They provide users that are looking for information on a product with a selection of existing commercial offers available on the internet for that product, as well as tools to sort and compare those offers. They are perceived by users as a service dedicated to them and use it to receive specialised search results for a product, through price comparison service provider intermediaries between users and online retailers. Finally, price comparison services typically seek to refer users to third-party websites where they can buy the relevant product rather than sell products directly. 49 In Google Android, the Commission established two separate markets for open source (licensable) mobile operating systems (OSs) such as Google’s Android and for nonlicensable OSs such as Apple’s iOS. It argued that there is limited demand-side substitutability between the two, at least from the perspective of smartphone original equipment manufacturers (OEMs) as they cannot obtain licences to use iOS or other non-licensable OSs. 50 This conclusion is controversial as discussed in Section 3.5.4 below. In particular, it ignores the key feature of the market which is competition between different “ecosystems” of OSs for the market. In the dominance section of the decision, the Commission also provided an explanation of why it believes that there is only limited demand-side substitutability at the level of users too, citing the following reasons: (1) the significant price differences between Google Android and iOS devices; (2) the substantial costs Google Android users would face in switching to iOS; (3) the significant degree of loyalty shown by users to their existing smart mobile OSs; and (4) app developers are unlikely to stop developing for Google Android and develop exclusively for iOS. 51 Rigour in assessing demand-side substitution: Servier. The recent judgment in Servier, 52 in which the General Court annulled the entire Article 102 TFEU part of the Commission’s decision based solely on errors in respect of market definition, is a timely reminder of the need for factual and economic rigour on demand-side substitution. The case concerned perindopril, an angiotensin converting enzyme (ACE) inhibitor product, used for the treatment of cardiovascular diseases such as hypertension. The Commission’s finding was that perindopril was different in terms of therapeutic use to the 15 other ACE inhibitors in the same therapeutic class. While the Commission accepted that there was a certain degree of functional substitutability between Ibid., para. 168. Ibid., paras. 193-230. 50 Case AT.40099, Google Android, Commission Decision of 18 July 2018, para. 239. 51 Ibid., paras. 497 et seq. 52 Case T-691/14, Servier SAS, Servier Laboratories Ltd, and Les Laboratoires Servier SAS v Commission, EU:T:2018:922. 48 49

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perindopril and other ACE inhibitors with respect to first-time use patients, it relied on product differentiation, switching costs, customer loyalty, the general price insensitivity of demand for perindopril, and the regulatory framework to find that it was in its own market. The General Court held that this conclusion was based on several manifest errors of assessment: 53 (1) based on medical studies, recommendations from international bodies, polls of prescribing physicians, responses from makers of other ACE inhibitors, and expert evidence submitted by Servier, there were no significant therapeutic differences between ACE inhibitors; (2) the large sums spent by Servier in marketing perindopril showed that it competed with other ACE inhibitors; (3) the Commission attached undue importance to the fact that patients do not generally pay for the medicines they consume: non-price competition in the form of therapeutic substitution was the critical issue in pharmaceutical markets; and (4) the Commission had attached too much importance to prescriber/patient “inertia” to switching to other ACE inhibitors, since, relative to other ACE inhibitors, perindopril had a small “installed” patient base.

3.2.2

Supply-Side Substitution

Definition. Supply-side substitution occurs when suppliers of products that are not demand-side substitutes to the products in the relevant product market canquickly and without incurring significant costsswitch their production plans to offer products that compete with those in the relevant market. When two products are supply-side substitutes, they are taken to be part of the same relevant product market. That is, the possibility of supply-side substitution broadens the scope of the relevant product market. Supply-side substitutability is likely to be of relevance in situations where firms produce a wide range of different qualities, or different grades of a product, that are not seen as substitutable by consumers but which are produced on similar equipment. A trivial, but intuitive, example of supply-side substitution is shoes. An individual using shoes of size X is not willing to switch to shoes of size Y size if the price of shoes of the size he uses is raised. Shoe manufacturers, however, can easily switch production from shoes of size X to shoes of size Y, and vice versa, and are able to supply shoes of both sizes immediately and without incurring any additional costs. In this example, shoes of sizes X and Y are supply-side substitutes and form part of the same relevant product market. Another example is the production of paper. Paper plants usually produce paper in a range of different qualities, for products as diverse as art books, writing paper, etc. While consumers do not regard the different paper product as substitutes, manufacturers can easily and at negligible costs adjust production at short notice. Such an instance of supply-side substitution would lead to a wide relevant market definition that includes all qualities of paper. 54

For a discussion, see J Killick, J Jourdan, and P Pêcheux, “What The Servier Judgment Teaches Us About Market Definition Under Article 102 And Patent Settlement Agreements Under Article 101,” Competition Policy International, February 2019. 54 See Market Definition Notice, OJ 1997 C 372/5, para. 22. 53

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Testing for supply-side substitution. The disciplinary effect exerted by supply-side substitution is subject to strict conditions. Of particular importance is the need for supply-side substitution to be sufficiently proximate or immediate so as to be considered equivalent to demand-side substitution: 55 “Supply-side substitutability may also be taken into account when defining markets in those situations in which its effects are equivalent to those of demand substitution in terms of effectiveness and immediacy. This means that suppliers are able to switch production to the relevant products and market them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices.”

From an economic point of view, effective supply-side substitution requires consideration of a number of conditions: (1) the assets needed to produce, distribute and commercialise the relevant products are readily available; 56 (2) the firm can purchase or lease additional necessary assets without incurring sunk costs; (3) suppliers of supplyside substitutes have the economic incentive to engage in production of the relevant goods/services; (4) other suppliers are able to divert production from supply-side substitutes to the relevant products because, for example, they possess unused plant capacity that can be brought into production at a reasonable cost; and (5) consumers regard their products as valid substitutes for the existing set of products. 57 Conditions (1) to (5) are necessary but not sufficient. Supply-side substitution also requires that a sufficiently large number of suppliers can switch production to the relevant product in response to a modest price increase. 58 Consideration of supply-side substitutability translates into market aggregation and will therefore lead to wider markets than those that would obtain by considering demand substitution factors only. Yet, aggregating markets for products that are not seen as substitutes by consumers goes against the established principles of economic analysis and may incorrectly enlarge the actual boundaries of the relevant market. It is perhaps for this reason that the Market Definition Notice requires that “most of the suppliers” or “most if not all Ibid., para. 20. In Case AT.40153, E-book MFNs and related matters (Amazon) (Commission Decision of 4 March 2017), the Commission argued that it would not be possible for either a traditional book store or an online print book store to switch from print book to e-book sales without acquiring significant tangible and intangible assets, incur additional investments and/or strategic decisions with the immediacy required to allow for a finding of significant supply-side substitutability (para. 43). In Case COMP/A.37.507/F3, AstraZeneca (Commission Decision of 15 June 2005), the Commission’s analysis did not take into account the possibility of supply-side substitution because “the effects were not equivalent to those of demand substitution in terms of effectiveness and immediacy,” specifically due to the fact that it took a significant period of time to develop pharmaceutical products, which was exacerbated by the need to avoid patent infringement in producing or marketing new drugs (para. 403). The decision was largely upheld on appeal: see Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805 and Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. For discussion of the market definition aspects of the case see F Murphy, “Abuse of Regulatory Procedures-the AstraZeneca Case: Part 1: Relevant Markets and Dominance,” European Competition Law Review, Issue 5 (2009). 56 This includes access to the required technology, know-how, machinery, and facilities. It also requires access to the appropriate transport infrastructure and distribution channels. Moreover, a supplier must also be able to commercialise the products immediately—i.e., no investment in marketing and brand building is necessary. 57 Market Definition Notice, OJ 1997 C 372/5, paras. 22–23. 58 Ibid., paras. 23–24. 55

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manufacturers,” 59 must be able to produce and market demand-side substitutes in order to enlarge the relevant product market. This is the condition required under the US Horizontal Merger Guidelines to aggregate markets as a result of supply substitution: two products A and B which are not demand-side substitutes belong to the same relevant product market if supply-side substitution between them is “nearly universal.” 60 Distinction between supply-side substitution and potential competition. Potential competition represents a competitive constraint that is different from supply-side substitution. While supply-side substitution takes places immediately, potential competition represents a threat of entry either in the long term or one that involves significant sunk costs. The Market Definition Notice therefore states that “potential competition, is not taken into account when defining markets, since the conditions under which potential competition will actually represent an effective competitive constraint depend on the analysis of specific factors and circumstances related to the conditions of entry.” 61 There is no doubt that the threat of entry, even when costly and long term, constrains the extent to which a firm can exert market power. However, the threat of long-term entry imposes a different competitive constraint than supply-side substitution. To the extent that it involves irreversible investments, the former entails a strong “commitment.” Potential entrants do not respond to modest price increases and do not commit resources to markets where post-entry prices are expected to be low. In contrast, supply-side substitution represents a form of “uncommitted” or “hit-and-run” entry. It responds to modest increases in current prices sufficiently fast to render any retaliatory strategy pointless. 62 More precisely, potential entry and supply-side substitution can be distinguished in at least three respects. First, by the length of time that goes from the price rise to the commencement of supply by the new entrant. Supply-side substitution responds promptly to price increases, while potential entrants may take longer than a year to commence supplying the market with their products. Second, supply-side substitution involves “uncommitted entry,” i.e., entry at a low cost and without incurring irreversible investment. Potential entry or “committed entry” refers to entry at a substantial sunk cost. 63 Finally, the competitive constraint imposed by supply-side substitutes has a clear-cut significant impact on both pre-entry and post-entry prices. Meanwhile, potential entry is felt via lower post-entry prices only. When entry involves incurring in sizeable sunk costs, entrants do not decide whether to join the market on the basis of current prices but, instead, they focus on the price level that would prevail in the market once entry occurs, which obviously depends on the credibility of retaliation by

Ibid., para. 34. US Department of Justice Antitrust Division and Federal Trade Commission 1992 Horizontal Merger Guidelines, 57 Fed. Reg. 41522 (1992) (revised 8 April 1997), (hereinafter “US Horizontal Merger Guidelines”), fn 14. 61 Market Definition Notice, OJ 1997 C 372/5, para. 24. 62 See J Padilla, The Role Of Supply-Side Substitution In The Definition Of The Relevant Market In Merger Control, NERA, A Report for DG Enterprise, European Commission, June 2001, p. 21. 63 The concept of “uncommitted” and “committed” entry was first defined in the US Horizontal Merger Guidelines, para. 1.32. 59 60

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incumbents and, thus, ultimately hinges on whether the fundamental characteristics of the market are likely to support high post-entry prices or not. The Commission’s basic analytical approach to supply-side substitution. Analysis of supply-side substitution has featured prominently in the decisional practice of the EU institutions. In Continental Can, the Commission’s decision was annulled by the Court of Justice on the grounds, inter alia, that it had not considered supply-side substitution when defining the relevant product market. 64 The Commission distinguished several markets: (1) light containers for canned meat products; (2) light containers for canned seafood; and (3) metal closures for the food packing industry (other than crown corks). On appeal, the Court of Justice criticised the Commission for not considering how these three markets differed from each other, how they differed from the general market for light metal containers, namely the market for metal containers for fruit and vegetables, condensed milk, olive oil, fruit juices, etc., and whether particular characteristics of production made them specifically suitable for their specific purpose. The defendant’s high share on the “market” for light metal containers for meat and fish was irrelevant in the absence of evidence that competitors from other sectors of the market for light metal containers were not in a position to enter this market, by a simple adaptation, with sufficient strength to create a serious counterweight. In contrast, in Michelin I, the Court of Justice upheld the Commission’s definition of separate markets for heavy vehicle car tyres. It held that these two categories of tyre were produced using different production techniques so that time and considerable investment was required to switch production from one type of tyre to the other. Consequently, the Court considered that they could not be regarded as supply-side substitutes, and given that they were not demand-side substitutes either, the Court defined separate relevant markets for heavy vehicle and car tyres. 65 The Commission now routinely considers supply-side substitution, even if, in practice, this circumstance rarely broadens the boundaries of the relevant market. 66 In Microsoft, for example, the Commission spent considerable effort on analysing supply-side substitution, but ultimately concluded that it did not broaden the market identified from a demand-side perspective. 67 For each of the three relevant markets (i.e., client 64 Case 6/72, Europemballage Corporation and Continental Can v Commission [1973] ECR 215, para. 33. See also Case No IV/M.32, Granari/Ültje/Intersnack/May Holding, paras. 20–23. 65 See Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission [1983] ECR 3461, para. 41. 66 See Eurofix-Bauco/Hilti, OJ 1988 L 65/19, para. 55, upheld on appeal in Case T-30/89, Hilti AG v Commission [1991] ECR II-1439, and on further appeal Case C-53/92 P, Hilti AG v Commission [1994] ECR I-667; Microsoft, OJ 2007 L 32/23, para. 322, upheld on appeal in Case T-201/04, Microsoft v Commission [2007] ECR II-3601; Case COMP/38/096, Clearstream (Clearing and settlement), Commission Decision of 4 June 4 2004, para. 200; DSD, OJ 2001 L 166/1, paras. 65–86; Virgin/British Airways, OJ 2000 L 30/1, upheld on appeal Case T-219/99, British Airways plc v Commission [2003] ECR II-5917, para. 74; Van den Bergh Foods Ltd, OJ 1998 L 246/1, para. 135; Trans-Atlantic Conference Agreement, OJ 1999 L 95/1, para. 75; Wanadoo España v Telefónica, OJ 2008 C 83/5, paras. 154-160, upheld on appeal in Case C-295/12 P Telefónica and Telefónica de España v Commission, EU:C:2014:2062. 67 Microsoft, ibid., paras. 321–425, upheld on appeal in Case T-201/04, Microsoft v Commission [2007] ECR II-3601. See similarly DSD, OJ 2001 L 166/1, paras. 65–86; P&I Clubs/Pooling

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operating systems, work group server operating systems, and streaming media players), the Commission checked systematically for demand-side substitutes and then supplyside substitutes before concluding on the relevant market. The Commission found that supply-side substitution was not relevant in the three markets concerned. In a nutshell, the Commission argued that (1) not all suppliers were able to produce demand-side substitutes (i.e. supply-side substitution was not nearly universal) and (2) entry into the candidate market by suppliers from adjacent markets was costly and would take considerable time. 68 Similarly, in Clearstream, while the Commission ultimately concluded that demand-side substitution was the principal determinant, 69 supply-side substitution was cited as a relevant factor in various security clearing services markets. 70

3.2.3

Chains of Substitution

Definition. Within a relevant market, it is not necessary that all products or services (or regions) are substitutes for each other: it might be sufficient for some products to be indirect substitutes to other products to be included in the same market. Products can be indirectly substitutable if they are linked through so-called “chains of substitution.” The Commission has endorsed this concept and indicated in the Market Definition Notice that: 71 “In certain cases, the existence of chains of substitution might lead to the definition of a relevant market where products or areas at the extreme of the market are not directly substitutable….product B is a demand substitute for products A and C. Even if products A and C are not direct demand substitutes, they might be found to be in the same relevant product market since their respective pricing might be constrained by substitution to B.”

Economic theory provides support for a market definition that takes into consideration chains of substitution. A number of contributions have examined the effect of so-called “straddling firms” on the behaviour of companies who do not compete directly. 72 One model analyses situations in which there are three differentiated products. Company A offers one of the product varieties and company B offers a different product variety. The product varieties offered by companies A and B are distant substitutes. There is a “straddling” company, company C, which sells a variety that competes with varieties of both A and B. The model shows how the presence of the “straddling” firm creates indirect competition between the products of companies A and B. The ability of company A to raise its price profitably is constrained directly by the presence of Firm C, and indirectly by the existence of firm B.

Agreement, OJ 1999 L 125/12, paras. 52–64; and De Post–La Poste, OJ 2002 L 61/32, paras. 36–50. 68 Microsoft, ibid., paras. 342, 401, and 425, upheld on appeal in Case T-201/04, Microsoft v Commission [2007] ECR II-3601. 69 Case COMP/38/096, Clearstream (Clearing and settlement), Commission Decision of 4 June 2004, paras. 135–37, upheld on appeal in Case T-301/04, Clearstream Banking AG and Clearstream International SA v Commission [2009] ECR II-3155. 70 Ibid., para. 200. 71 Market Definition Notice, para. 57. See also OFT Market Definition Guidelines, OFT 403, December 2004, para. 3.11. 72 See T Cooper, “Indirect Competition With Spatial Product Differentiation,” (1989) 37(3) The Journal of Industrial Economics, 241–57. See also PJ DeGraba, “The Effects Of Price Restrictions On Competition Between National And Local Firms,” (1987) 18(3) RAND Journal of Economics 333–47.

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Suppose that company A considers increasing the price of its product. It will obviously take into account the possibility that some of its sales are diverted to company C, who offers a direct substitute. The loss of business will be smaller if company C responds to the price increase of A by raising the price it charges for its own product. However, the response of company C depends on the reaction of company B. If company C expects company B to keep its prices constant, then it likely will not raise its own prices by as much in response to the price increase of company A, which may then decide not to increase its price. In other words, competition from B deters company C from responding to the price increase of company A, making the price rise less profitable, and thereby imposing an indirect competitive constraint on company A. Examples of chains of substitution. The Commission has applied the concept of substitution chains in several market definition exercises, primarily in the merger control area. 73 In AstraZeneca/Novartis, for example, the Commission identified two specific herbicides for two different kinds of weed that were not direct substitutes and a broad-spectrum herbicide that could be used for both kinds of weed. The Commission concluded that a chain of substitution operating through the broad-spectrum herbicide linked the two specific herbicides, preventing a hypothetical monopolist for one of the herbicides from raising profitably its price. Its reasoning was as follows: 74 “In this case, a natural question to ask would be whether a hypothetical sole supplier of all herbicides capable of controlling grasses (i.e. graminicides and, to a lesser extent, broad spectrum herbicides) would find it profitable to increase prices for these products in the way described above. This is not necessarily the case. After all, given that broad spectrum herbicides are competing with broadleaf weed herbicides, an increase in the price of the first would not only lead to a drop in sales stemming from farmers no longer using the broad spectrum product for grass control, but also stemming from farmers that used to buy the product for broadleaf weed control switching to “pure” broadleaf herbicides. To the extent that many buyers of broad spectrum herbicides buy the product to control both types of weeds and the value of broad spectrum products is substantial in comparison with grass weed herbicides, broadleaf weed herbicides do exercise a competitive pressure on the prices of broad spectrum herbicides and, hence, on the prices of graminicides. This is the so-called chain of substitution effect.”

3.2.4

Potential Competition

Generally irrelevant to market definition. As noted above in the context of supplyside substitution, the Commission’s Market Definition Notice states that “potential competition, is not taken into account when defining markets, since the conditions under which potential competition will actually represent an effective competitive constraint depend on the analysis of specific factors and circumstances related to the conditions of entry.” 75 This is clearly correct. There is no doubt that the threat of entry, even when 73 Case COMP/M.1806, AstraZeneca/Novartis, paras. 57, 58, and 60. See also Case COMP/M.2333, De Beers/LVMH, paras. 25–27; Case No IV/M.1780, LVMH/PRADA/FENDI, para. 11; and Case COMP/M.1882, Pirelli/BICC, para. 17. 74 Case COMP/M.1806, AstraZeneca/Novartis, para. 60. 75 Market Definition Notice, OJ 1997 C 372/5, para. 24. Thus, in Clearstream, the Commission analysed the threat of potential competition in the section on the assessment of dominance. See Case COMP/38/096, Clearstream (Clearing and settlement), Commission Decision of 4 June 2004, paras. 209-215, upheld on appeal in Case T-301/04, Clearstream Banking AG and Clearstream International

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costly and long term, constrains the extent to which a firm can exert market power. However, the threat of long-term entry imposes a different competitive constraint than supply-side substitution. To the extent that it involves irreversible investments, the former entails a strong “commitment.” Potential entrants do not respond to modest price increases and do not commit resources to markets where post-entry prices are expected to be low. In contrast, supply-side substitution represents a form of “uncommitted” or “hit-and-run” entry. It responds to modest increases in current prices sufficiently fast to render any retaliatory strategy pointless. 76 The approach in Paroxetine. In a striking deviation from the approach set out in Market Definition Notice, the Court of Justice judgment in Paroxetine found that it may, in certain specific circumstances, be permissible to have regard to potential competition when defining a relevant market under Article 102 TFEU. 77 The case concerned a decision rendered by the UK competition authority, the Competition and Markets Authority (CMA), finding that an originator company, GlaxoSmithKline (GSK), entered into anticompetitive settlement agreements involving transfers of value to two generic companies who were involved in patent litigation with GSK. A third generic company, IVAX, also entered into a settlement agreement with GSK. However, under domestic UK law at the time, the competition laws concerning anticompetitive agreements did not apply to the IVAX agreement. The CMA instead applied domestic laws on abuse on dominance to the IVAX agreement—which are for all practical purposes the same as Article 102 TFEU—and found that GSK had abused its dominant position by entering into this agreement. The basic issue of market definition was simple. The case concerned paroxetine, one of many different types of anti-depressants falling into a category known as selective serotonin reuptake inhibitors (SSRIs), which are generally therapeutic substitutes for each other. It was accepted by the CMA that GSK would not be dominant in a market defined as SSRIs, since there were multiple therapeutic substitutes in the SSRI category, and therapeutic substitution is the main indicator of demand-side substitution in pharmaceutical cases. In a novel approach, however, the CMA suggested that the market should be defined as paroxetine—a single molecule—on the theory that, following independent entry by generic suppliers of paroxetine, the locus of competition would shift to intense price competition between GSK’s and the generics’ paroxetine products (rather than competition between paroxetine and other SSRIs). The complication which arose was that the settlement agreement between GSK and IVAX in the context of a patent dispute contained a provision that prevented IVAX from entering the market with its own product—at the time IVAX had not (yet) entered the market with its own product. Instead of entering with its own (potentially infringing) product, IVAX concluded a distribution agreement with GSK to distribute GSK’s paroxetine. The CMA’s case on SA v Commission [2009] ECR II-3155, paras. 65-66. This view is consistent with the US approach which considers potential entry as a factor that reduces market power rather than as an element of market definition. US Horizontal Merger Guidelines, ibid., para. 3. 76 See J Padilla, The Role Of Supply-Side Substitution In The Definition Of The Relevant Market In Merger Control, NERA, A Report for DG Enterprise, European Commission, June 2001, p. 21. 77 Case C-307/18, Generics (UK) Ltd and others v CMA, EU:C:2020:52.

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abuse was that this settlement agreement affected potential competition from IVAX with its own paroxetine product. In respect of market definition, the CMA sought to rely on these putative abuse issues to argue that: (1) market definition should also take into account the impact of potential independent generic entry by IVAX; and (2) if one assessed this potential competition, the market was not wider than paroxetine, and GSK would, on this basis, be dominant. The CMA argued that this approach was correct when (but for the settlement agreement) independent generic entry is looming and the very issue under consideration is action taken by the patent holder to stave off such independent generic entry. This approach was controversial. In the first place, as noted, it is contrary to the Commission’s approach in the Market Definition Notice of excluding potential competition from market definition, which, as also noted above, is justified in principle. More importantly, it involves regard being had to the putative abusive conduct at the market definition stage. This approach is unorthodox since “before an abuse of a dominant position is ascertained, it is necessary to establish the existence of a dominant position in a given market, which presupposes that such a market has already been defined.” 78 The CMA’s approach involves having regard to the effects of the putative abuse on potential competition at the market definition stage. The Competition Appeal Tribunal referred this question to the Court of Justice. The question referred was “whether, where a patented medicine is therapeutically substitutable with a number of other medicines of a therapeutic class and where the alleged abuse within the meaning of Article 102 TFEU consists in the patent holder effectively excluding from the market generic versions of that medicine, those generic medicines should be taken into consideration for the purposes of definition of the product market concerned, although they could not lawfully enter the market before the expiry of the patent if (as is uncertain) that patent is valid and if that patent is infringed by those generic medicines.” The Court of Justice answered the question in the affirmative. 79 The Court of Justice’s essential reasons were as follows: 80 (1) the key aspect of market definition under Article 102 TFEU is the degree of substitutability between the products under consideration; (2) substitutability is not, however, assessed solely in relation to the objective characteristics of the products at issue and can include consideration the conditions of competition and the structure of supply and demand on the market; (3) the substitutability of products is naturally dynamic, in that a new supply of products may alter the conception of the products considered to be interchangeable with a product already present on the market or as substitutable for that product and, in that way, justify a new definition of the parameters of the relevant market; (4) if the generic manufacturers are in a position to present themselves within a short period on the market concerned with sufficient strength to constitute a serious counterbalance to the originator medicine already on the market, the market may be limited to the molecule in question; (5) evidence of entry within a “short period” can include the generics See Case T-62/98, Volkswagen v. Commission [2000] ECR II-2707, para. 230 (emphasis added). Case C-307/18, Generics (UK) Ltd and others v CMA, EU:C:2020:52. 80 Ibid., paras. 123-140. 78 79

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obtaining a marketing authorisation, concluding supply contracts with third-party distributors, or even the perception of the originator of the immediacy of the threat of market entry; and (6) the fact that the originator relies on patents against the generics does not undermine this conclusion, since the mere assertion of such patents offers no certainty that generic entry can ultimately be prevented. These findings stretch the concept of market definition under Article 102 TFEU considerably. They appear intended to plug a perceived gap in circumstances where, as in Paroxetine, Article 101 TFEU cannot for some idiosyncratic reason apply. It is certainly controversial to approach market definition on such a “forward-looking” basis, since it attaches potentially decisive importance to competition which has not yet taken place yet. Indeed, it is even more controversial in circumstances where, as in Paroxetine, independent generic entry may not lawfully happen at all due to the originator’s patents—that is why the litigation arose in the first place. It is of course a truism that if there is generic entry the originator’s prices will fall quickly as a direct result of such generic entry. But to covert such uncertain potential benefits—which may never materialise due to the patents—into the lodestar of market definition, to bolster the case for dominance, is controversial. In many ways, the radical aspect of Paroxetine is not such much a technical question of market definition as to whether potential competition can feature in the analysis. The more pressing issue is that it may now allow what are effectively attempted abuses to be challenged under Article 102 TFEU. In contrast to Section 2 of the United States Sherman Act, Article 102 TFEU contains no offence of attempted monopolisation. Article 102 TFEU only applies to firms that are dominant at the time the alleged abuse is committed. There is no scope for applying Article 102 TFEU to conduct that would tend to create a dominant position where none exists at the time the conduct was carried out, i.e., monopolisation claims: 81 “only the strengthening of dominant positions and not their creation can be controlled under Article [102 TFEU].” 82 The requirement of prior (or at least contemporaneous) dominance does of course impose limitations on the application of Article 102 TFEU to deception-related issues, since it may mean that, at the time the undertaking commits the alleged deception, it is not dominant, and Article 102 TFEU cannot therefore apply. 83 As discussed in Chapter Thirteen (Abusive Conduct And Standards), this presented some difficulties for the Commission in Rambus. Rambus was accused of allegedly deceptive activity within a By contrast, monopolisation claims (including attempted monopolisation) can be made under Section 2 of the Sherman Act in the United States. 82 See Case T-102/96 Gencor Ltd v Commission [1999] ECR II-753, para. 155 (citing Case 6/72, Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 215, para. 26). 83 Competition authorities and courts would thus be prevented from conducting the type of analysis that is sometimes undertaken in technology markets under merger control rules, where account is taken of pipeline products in assessing the extent to which nascent technologies would create dominance in the near future. See, e.g., Glaxo Wellcome/SmithKline Beecham, OJ 2000 C 170/6, para. 70 (“In the pharmaceuticals industry, a full assessment of the competitive situation requires examination of the products which are not yet on the market but which are at an advanced stage of development.”). See also AstraZeneca/Novartis, OJ 2004 L 110/1; Pfizer/Warner Lambert, OJ 2000 C 210/9; COMP/M.5661 Abbot/Solvay Pharmaceuticals; and COMP/M.7975 Mylan/Meda. 81

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standards setting organisation (SSO). One of the issues which may arise in a SSO context is that, at the time of the allegedly deceptive activity, the patentee may not be dominant, since the SSO would usually have the option of working around a known patent issue. However, if a patent is concealed, and then later asserted, the patentee may have acquired considerable market power through the allegedly deceptive activity. The way the Commission got around this issue was to characterise the abuse not as intentional non-disclosure but Rambus’ ability to claim royalties “at a level which absent its allegedly intentional deceptive conduct it would not have been able to charge.” 84 On this basis the Commission considered that Rambus held a dominant position “at the point when it started asserting its patents and continues to hold that dominant position since.” 85 But, in the light of Paroxetine, the Commission (and competition authorities and plaintiffs) may well seek to argue that, applying a “forwardlooking” approach to market definition, dominance is now made out at the earlier point of the conduct.

3.3 3.3.1

RELEVANT PRODUCT MARKETS: FROM THEORY TO PRACTICE Hypothetical Monopolist Test: Overview

Basic elements of the hypothetical monopolist test. Definition of the relevant product market requires a determination of which products, if any, are reasonably close substitutes for the products under examination, and so are in competition with them. Such a determination cannot be based on anecdote or intuition. Rather, it must be based on a rigorous assessment of economic substitutability. The search for an analytical means of identifying such products has led to the development of an economically sound methodology—the “hypothetical monopolist test” (“HMT”). Under this test, a market is defined as a product or a group of products that a hypothetical firm, seeking to maximise its profits not subject to price regulations and constituting the unique present and future seller of these goods, could impose a significant and lasting price increase. In short, the hypothetical monopolist test seeks to determine the narrowest market on which a hypothetical monopolist could exercise market power. The HMT test was first developed by the US enforcement agencies in their Horizontal Merger Guidelines, amended most recently in 2010. 86 The HMT has subsequently gained widespread acceptance among competition authorities and courts worldwide, authorities including the Commission, 87 the EU Courts, and national courts. The HMT Rambus, OJ 2010 C 30/17, para. 28. Ibid., para 26 (emphasis added). 86 US Department of Justice and Federal Trade Commission Merger Guidelines issued 19 August 2010. 87 See Market Definition Notice, OJ 1997 C 372/5, s. III. The Commission also followed the principles of the hypothetical monopolist test in several cases. See, e.g., Tetra Pak I (BTG licence), OJ 1988 L 272/27, para. 30; Eurofix-Bauco/Hilti, OJ 1988 L 65/19, para. 60; and 1998 Football World Cup, OJ 2000 L 5/55, para. 66. See also Case IV/M.214, Du Pont/ICI, para. 23 (“For two products to be regarded as substitutable, the direct customer must consider it a realistic and rational possibility to react to, for example, a significant increase in the price of one product by switching to the other product in a relatively short period of time.”). The United Kingdom competition authorities have also confirmed that 84 85

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has made a valuable contribution in providing a more rigorous basis for market definition in EU competition law. This test is a “thought experiment” 88 that can be applied in practice relying on both quantitative and qualitative evidence. The translation of the theory of the HMT into a practical tool applied to the facts of a particular case may not always be easy, however. While the theory behind the HMT is reasonably clear, implementing it in practice is much less so. Crisp equations and clean demand curves often become blurred and imprecise when the HMT theory is applied to a given set of facts. The actual definition of the relevant market necessarily involves the exercise of judgment and discretion in practice. Iteration of the HMT test. The HMT test iterates through three steps. The first step is to define a candidate set of products for the hypothetical monopolist to control. This defines the so-called candidate market, 89 which in an Article 102 TFEU investigation is given by the products or services of the allegedly dominant firm that are the subject of commercial practices under investigation. 90 For example, in a predation case, the candidate market will be given by the product(s) of the allegedly dominant firm which are allegedly priced below cost. The second step is to consider the effect of demand-side substitution on the profitability of a price rise by the hypothetical monopolist. The test asks whether this would be rendered unprofitable by defections of customers who choose to buy products outside the candidate market rather than paying the higher price. The final step in the process is to consider the effect of supply-side substitution. The test asks whether suppliers of products outside the candidate market could and would respond to an increase in price by the hypothetical monopolist by quickly entering the candidate market and offering a substitutable product. If the hypothetical monopolist is not able to raise prices profitably over the initial set of products for a sustained period of time, it means that consumers would switch to products outside the candidate market. The candidate market would have to be redefined to include those substitutable products. This process would continue iteratively until a putative market is found for which the hypothetical monopolist is able to raise prices profitably.

the HMT is the central plank of their analysis. See Office of Fair Trading and Competition Commission, Merger Assessment Guidelines, CC2 (Revised) and OFT 1254, September 2010. See also Autorité de la Concurrence, Projet révisé des lignes directrice de l’Autorité de la concurrence relative au contrôle des concentrations, February 2013, and International Competition Network, Assessing Dominance/Substantial Market Power, May 2011. 88 See J Gual, “Market Definition In The Telecoms Industry,” CEPR Discussion Paper No. 3988 (2003). 89 The term “candidate market” originates from Werden. See GJ Werden, “Market Delineation And The Justice Department’s Merger Guidelines,” (1983) Duke Law Journal 514; and GJ Werden, “The 1982 Merger Guidelines And The Ascent Of The Hypothetical Monopolist Paradigm,” (2003) 71 Antitrust Law Journal 253–75. 90 The candidate market should not be disaggregated further. See GJ Werden, “Market Definition Algorithms Based On The Hypothetical Monopolist Paradigm,” US DOJ Antitrust Division Economic Analysis Group Discussion Paper No. 02-8, July 2002.

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A difficulty with the HMT test is that the precise boundaries of the relevant market may depend on the iterative process that is applied. This is why (1) it is essential to define the candidate market as indicated above and (2) apply an iterative algorithm such that the candidate market is sequentially enlarged by adding products according to their “closeness” to the products in the candidate market. 91

3.3.2

Assessing Demand-Side Substitution Under The HMT

Overview. Several quantitative techniques can be used to undertake a HMT. The most satisfactory of all—because it attempts to directly implement the HMT test—is the small but significant non-transitory increase in price (SSNIP) test. This test uses data on prices and sales volumes to assess whether a hypothetical monopolist could profitably increase the prices of the products in the candidate market by 5–10% during a sustained period of time. 92 An alternative quantitative approach is to investigate how the prices of the products in the candidate market react to changes in the prices of some products outside the candidate market, but which are in principle related to them. Price correlation studies and co-integration analysis are the main techniques used in this connection. If a reduction in the price of a product outside the candidate market triggers a price cut within the candidate market, then there are reasons to argue that the market should be enlarged. The SSNIP test and price correlation and co-integration techniques are described in detail below, as well as their respective limitations. A second-best approach to the HMT test is the use of qualitative evidence based on an analysis of product characteristics and customer preferences and needs. This information is used to identify substitutable products that may undermine the attempt to raise the prices of the products in the putative market. Qualitative evidence is less reliable than quantitative techniques since it does not measure the hypothetical monopolist’s ability to raise prices either accurately or at all. As noted earlier, qualitative evidence has historically played an important role in Article 102 TFEU cases, although quantitative techniques are increasingly being used, with qualitative evidence providing a useful cross-check. The role of qualitative evidence under Article 102 TFEU is also discussed below. Finally, other evidence—such as consumer surveys and natural experiments—may be used in some cases to support market definition. 3.3.2.1 Quantitative techniques Basic operation of the SSNIP test. The SSNIP test operates as follows. Starting with the candidate market, the analysis considers whether a hypothetical monopolist with control over this (initial) set of products is able permanently and profitably to raise the price of these products by 5–10%, assuming that the prices of all other products remain constant. If the answer is affirmative, then the relevant product market contains that (initial) set of products—i.e., coincides with the candidate market. Otherwise, new products (the closest substitute to those in the initial set) should be added to the market and the exercise repeated. The relevant market is then defined as the smallest set of 91 See GJ Werden “Market Definition Algorithms Based On The Hypothetical Monopolist Paradigm,” SSRN 327282, 2002. 92 As noted by Baker, “this figure is not a tolerance level for anticompetitive price increases; it is merely a conceptual benchmark for assessing buyer substitution.” See J Baker, “Market Definition,” in WD Collins (ed.), Issues In Competition Law And Policy, (2008) Vol I, pp.315-352.

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products that meets the “hypothetical monopolist” test. Definition Notice: 93

According to the Market

“The question to be answered is whether the parties’ customers would switch to readily available substitutes…in response to an hypothetical small (in the range 5%–10%), but permanent relative price increase in the products and areas being considered. If substitution were enough to make the price increase unprofitable because of the resulting loss of sales, additional substitutes and areas are included in the relevant market. This would be done until the set of products…is such that small, permanent increases in relative prices would be profitable.”

A price increase has two opposing effects on profits: a higher price leads to a higher unit margin and greater profits, but reduces demand. Only if the first effect outweighs the second is the price increase profitable. This trade off is resolved by means of a critical loss analysis. This analysis compares the actual losses that are likely to result from a price increase with a threshold—the critical loss—which is equal to the level of sale losses for which a given price increase is just profitable. 94 Thus, the critical loss is the point where the two opposing effects of a price increase offset each other so that the net effect in profits is nil. If the actual losses of a price increase exceed this threshold, then the price increase is not profitable. Formal steps in a critical loss analysis. A critical loss analysis involves three steps: (1) the calculation of the critical loss; (2) an estimate of the sales likely to be lost to competitors in the event of a price increase; and (3) a comparison of two figures in order to see if a price increase would be profitable or not. 1.

Assessing the critical loss. Consider a hypothetical monopolist with control over the products and services included in the relevant product market. Suppose that it considers increasing its prices by X per cent (where X is equal to 5 or 10 in the typical experiment). Suppose in addition that prior to that price increase the gross margin (the difference between revenues and the cost of sales) achieved by the monopoly supplier was m per cent. 95 The profits earned by the hypothetical monopolist prior to the price increase were equal to m p Q, where Q denotes the monopolist’s output and p its price. After the price increase, the monopolist’s profits equal (m + X) p Q (1- z), where z captures the reduction in output that results from the price increase. The critical loss is then given by the value of z that makes the profits before and after the price increase equal:

z* =

X X +m

Market Definition Notice, OJ 1997 C 372/5, para. 17. The critical loss analysis was formally developed by BC Harris and JJ Simon, “Focusing Market Definition: How Much Substitution Is Necessary?,” (1989) 12 Research in Law and Economics 207– 26. See also J Langefeld and W Li, “Critical Loss Analysis In Evaluating Mergers,” (2001) Antitrust Bulletin 299–337; and DP O’Brien and AL Wickelgren, “A Critical Analysis Of Critical Loss Analysis,” (2003) 71(1) Antitrust Law Journal 161–84. 95 Formally, m = (p – c)/p, where c denotes the unit variable cost of the monopolist. This is also known as the Lerner index. 93 94

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A greater loss (i.e., a value of z greater than z*) would render the price increase unprofitable. Note that the critical loss is lower when the gross margin m is higher. When m is high, the negative impact on profits of a reduction in volume is large. 2.

Assessing actual losses. The loss in sales that results from an X per cent price increase is given by the price elasticity of demand of the product or products in the candidate market. The elasticity of demand measures the response of consumers to a change in price and, therefore, provides information on the amount of sales lost as a result of a small though significant and non-transitory increase in price of X per cent. A high elasticity indicates that consumers are very responsive to price changes and, consequently, that the loss in sales resulting from the price increase is large. Let e denote the elasticity of demand of the products in the candidate market, then the actual loss in sales associated with a price increase is greater when e is large. Suppose it is possible to estimate the proportion of sales D that would be lost following an X per cent price increase, the actual loss would be:

A = (1 − D) 3.

X m

Comparison. If the price increase leads to a loss in sales lower than the critical loss, the overall effect on profits is positive and the price increase is profitable. If that is the case, the candidate market constitutes a properly defined relevant product market. If, instead, the price increase leads to a loss in sales that exceeds the critical loss z*, then the candidate market does not constitute a relevant market and, therefore, needs to be enlarged to encompass those products which attracted consumers from the products in the candidate market following the price increase (i.e., their closest substitutes). The actual loss associated to an X per cent price increase likely will exceed the critical loss, and hence the market will be broader than the candidate market, when the elasticity of demand e is large and the gross margin m is high. A high elasticity of demand implies a significant loss in volume, while a high gross margin indicates than the opportunity cost of losing volume is high. 96

A practical example. Sauces like mustard, ketchup, brown sauce and other condiments are “cold sauces,” to use the language of the Commission in its merger decision in Unilever/Best Foods. 97 Suppose two makers of a variety of condiments wish to merge in a national market and wish to ascertain whether the approving agency is likely to conclude that different product categories (e.g., mayonnaise, barbecue sauce, brown sauce, ketchup etc.) constitute separate or combined markets. In order to apply the SSNIP test to each of these product categories, the merging firms would need to provide

Note, however, that in equilibrium there is an inverse relationship between m and e. In other words, the margin is high when the elasticity is low and vice versa. Thus, critical loss analyses claiming that both m and e are very high are likely to be erroneous. See below. 97 Case No IV/M.1990, Unilever/Bestfoods. 96

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data on the gross margins for each product. With these data, the critical loss for each product could be calculated. A complete analysis would require the econometric estimation of a full demand model in order to compute the loss that would result from a modest but non-trivial price increase. The simplest technique would be to regress sales volumes against the price of each product (controlling for product characteristics as well as for time-specific and company-specific fixed effects). Supermarket scanner data from firms such as ACNielsen, GfK, or IRI would allow the sales volume and prices of each product category, and for each firm selling that product, to be calculated over multiple periods. The coefficient of the price variable in such a regression would provide a direct estimate of the elasticity of demand for each product, which could then be used to calculate the actual loss associated to a price increase. This could then be compared with the critical loss value calculated previously to see if its is larger (narrow market) or smaller (broad market). Criticisms of the SSNIP test. The SSNIP test has been subject to two principal criticisms. The first criticism relates to false conclusions that may result from the measurement of the elasticity of demand in Article 102 TFEU cases—known as the “cellophane fallacy.” Suppose A’s products are already priced supra-competitively. In this circumstance, the elasticity of demand of Firm A’s products may be very large simply because at those prices some products which consumers would not regard as substitutes at competitive prices become credible alternatives. So, the SSNIP test may show switching to other products at prevailing prices, whereas, had Firm A priced its product at a competitive level, switching would either not have occurred at all or at a level insufficient to impose an effective competitive constraint. This defect in the SSNIP test is discussed below, together with the principal solutions proposed. A second criticism also concerns the practical application of the SSNIP test and, in particular, the relationship between the estimated values of the elasticity of demand and the gross margin. Normally, when gross margins are high, one would expect a low value of the critical loss, so that it would be unprofitable for a firm to risk a price increase. However, a high margin is typically associated to a low elasticity of demand. 98 And, as we saw above, a low elasticity of demand constitutes evidence in favour of a narrow market. Therefore, it is not possible to rely exclusively on the size of the gross margin in the delineation of the relevant product market. A third criticism of the SSNIP test is that its implementation requires making an assumption about the shape of the demand schedules around the benchmark price (i.e., the competitive price in abuse of dominance cases). A fourth criticism is that the SSNIP test tends to produce overly narrow markets, especially in industries where marginal costs are low and fixed costs are high. 99

98 Economic theory shows that a monopolist maximising short-term profits would set prices (quantities) so that its gross margin is inversely related to its own elasticity of demand: m = 1/e. This is known as the Lerner equation. 99 DS Evans, “Lightening Up On Market Definition,” in E Elhauge (ed.) Research Handbook On The Economics Of Antritust Law, Edward Elgar (2012), Chapter 3. This bias towards narrow markets

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a. The cellophane fallacy. The cellophane fallacy highlights a practical flaw of the SSNIP test and the critical loss analysis when applied to Article 102 TFEU cases. 100 The SSNIP test requires examining whether a hypothetical monopolist could profitably and permanently raise prices above their “competitive level.” However, if a firm is dominant, its prices are already likely to be at supra-competitive levels. The implication of this is that the estimated elasticity of demand and gross margin will be greater than if prices corresponded to a competitive market. The elasticity of demand will therefore be overestimated because, at high prices, consumers regard even inferior substitutes as attractive, whereas, if prices were at the lower, competitive level, they would not. As a result, the application of the SSNIP test in abuse of dominance cases may lead to excessively broad market definitions that tend to mask the existence of dominant positions. A number of solutions have been proposed to address the problem of the cellophane fallacy. Ultimately, however, there is no single, best solution. Much will depend on what evidence is available to estimate the extent to which prices already exceed the competitive level, including by reference to qualitative criteria and experience in comparable markets: 1.

Estimate the competitive price before undertaking a critical loss analysis. One obvious solution in order to avoid drawing a wrong inference from the existence of supra-competitive prices is to estimate the competitive price level prior to engaging in a critical loss analysis. 101 But, in practice, this is not a very realistic alternative, given the enormous difficulties of estimating a competitive price in most industries. 102 These problems have plagued the analysis of excessive pricing under Article 102 TFEU and, as discussed in Chapter 14 (Excessive Prices), no effective solution has emerged. A second difficulty is that estimating the competitive price level would transform the SSNIP test into a direct test of dominance. If, somehow, the competitive price level could be identified, then there would be no need to go through the whole process of defining relevant markets and assessing dominance on the basis of structural and behavioural proxies. 103

inherent in the SSNIP or HMT test should make analysts somewhat less concerned about the cellophane fallacy. 100 The cellophane fallacy received its name from United States v E.I. Du Pont De Nemours & Co, 351 US 377 (1956). DuPont (wrongly) claimed that cellophane was not a separate market, since there was a high cross-price elasticity of demand with other flexible packaging material. 101 S Bishop and S Baker, “The Role Of Market Definition In Monopoly And Dominance Inquiries,” Economic Discussion Paper 2, OFT 342, July 2001, para. 3.4. Both the Commission and the OFT acknowledge the distinction between the prevailing and the competitive price level in their respective guidelines. See Market Definition Notice, OJ 1997 C 372/5, para. 19; OFT Market Definition Guidelines, OFT 403, December 2004, para. 2.10. 102 Rejecting the prevailing price level in favour of some notional “competitive” price also renders correlation analysis irrelevant and complicates consumer surveys. See W Consult and S Sanders, Methodologies For Market Definition And Market Analysis, Study for ICP-ANACOM, 2003, p. 23. 103 S Bishop and S Baker, “The Role Of Market Definition In Monopoly And Dominance Inquiries,” Economic Discussion Paper 2, OFT 342, July 2001, para. 3.7.

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2.

Use a combination of qualitative and quantitative evidence. Another proposed solution is to adopt a qualitative approach based on the analysis of product characteristics and intended use, but taking into account the logic and principles of the SSNIP test and the critical loss analysis. 104 The SSNIP test forces analysts to take a structured view of the process of market definition and takes into account only those products that are potentially demand-side or supply-side substitutes of those forming part of the relevant market. A purely ad hoc market definition, which ignores these basic principles, is likely to produce overly narrow markets. What is important is not the difference in physical characteristics per se but the manner in which these differences influence demand. Relying on the sound principles of the SSNIP test ensures that: (a) two physically similar products which, however, are not regarded as substitutes by consumers, are not included in the same market; and (b) two products with relatively dissimilar functionality, but which consumers regard as substitutes, are included in the same relevant product market. Additionally, because the cellophane fallacy may lead to overly broad markets, it is important to verify that the characteristics and intended use of the products that are taken to be part of the relevant market make them credible substitutes.

3.

Use other comparable markets as a crosscheck. A third alternative complements the critical loss analysis approach to market definition with: (a) the qualitative analysis of product characteristics and customer needs; and (b) the study of competition in “comparable” markets, i.e., markets with similar structural and non-structural characteristics. Direct application of the critical loss analysis provides an upper boundary to the scope of the relevant product market: all products that are found to be outside the relevant product market using a critical loss analysis at prevailing (high) prices can be safely excluded. 105 The additional analysis of physical product characteristics could help to limit the size of the possibly overly wide market emerging from the critical loss analysis. Another possible way to refine the market definition resulting from the quantitative analysis is to investigate market conditions in similar markets that are more competitive than the one under investigation. If the price level in these markets is not significantly lower than in the market defined using a standard critical loss analysis, then it is unlikely that the cellophane fallacy plays a major role. 106

4.

Examine the competitive reactions of the allegedly dominant firm. Another possibility is to investigate whether the allegedly dominant firm monitors and reacts to the price changes and new product introductions of its competitors. If it does, then those products are likely to be close substitutes for its own products and the locations where those rivals operate are likely to be part of the same geographic market than the firm in question. 107

Ibid., paras. 3.35–3.40. S Bishop and S Baker, “The Role Of Market Definition In Monopoly And Dominance Inquiries,” Economic Discussion Paper 2, OFT 342, July 2001, para. 3.34. 106 Ibid., para. 3.46. 107 See J Baker, “Market Definition,” in WD Collins (ed.), Issues In Competition Law And Policy, 104 105

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The small but significant non-transitory “decrease” in price (SSNDP) test. An alternative way to delineate the boundaries of the relevant market is to consider the impact on the volume sold by a hypothetical monopolist of a 5–10% reduction in the prevailing price (unlike an increase in the case of SSNIP). 108 If the prevailing price was supra-competitive, the price reduction would lead to a relatively small increase in sales (otherwise, the price would not have been increased to its prevailing level in the first place). On the contrary, if the prevailing price was competitive, the output response to the price reduction would be large or small depending on the degree of substitution between the products in the candidate market and those outside it. Therefore, evidence that the response to a price reduction would trigger a significant output response suggests a broad market and a high degree of competition. On the other hand, if a small price reduction does not cause a significant increase in output, then the candidate market is likely to be a proper antitrust market where market power can be, or already is, exercised.

While one cannot ignore the cellophane fallacy when defining markets in Article 102 TFEU cases, concerns in this regard may be overstated in exclusionary abuse cases. These cases can be assimilated to mergers, as the key question is whether the unilateral behaviour is likely to change market structure and lead to increases in prices. If a competition authority is interested in investigating the incentive and ability of a company to engage in exclusionary conduct, it is essentially interested in understanding the competitive constraints that exist at the time the abuse is taking place and that may prevent the company from profitably raising prices once competitors are excluded—i.e., during the so-called recoupment period. Therefore, as the relevant competitive constraints in exclusionary abuse cases are those which exist at the time that the dominant firm is engaged in the conduct under scrutiny, and not those that would keep prices at levels that would only be observed in a hypothetical perfectly competitive scenario, the SSNIP test can be as meaningfully applied in exclusionary cases as in mergers. b. Consistency between elasticity and margin estimates. As explained above, a higher gross margin is typically associated with a lower value of the critical loss threshold. This fact has been used by defendants to argue that a firm enjoying high gross margins is unlikely to find a price increase profitable and, hence, to support a finding of a wide product margin. This argument is conceptually flawed and may lead to incorrect delineations of the relevant product market. Economic theory shows that in markets where firms maximise short-term profits, the gross margin is inversely related to the own price elasticity of demand. A high gross margin is therefore associated to a low elasticity of demand and vice versa. But since a low elasticity of demand implies that the actual volume loss resulting from a price increase is small and hence points to a narrow market finding, it is not possible to establish an unambiguous relationship between the size of the gross margin and the dimension of the relevant product market. vol I, ABA Publishing, 2008. 108 See Baker, ibid. See also PB Nelson and LJ White, Market Definition And The Identification Of Market Power In Monopolisation Cases: A Critique And A Proposal, Working Paper #EC-03-06 of Stern School of Business, (November 2003).

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In sum, it is not possible to conclude that the relevant product market is likely to be broad based on an analysis of gross margin only. And, furthermore, unless there are good reasons to sustain otherwise, 109 a rigorous critical loss analysis must take into account the inverse relationship between the gross margin and the own price elasticity of demand. 110 c. The shape of demand. As noted above, the implementation of the SSNIP test in Article 102 TFEU cases requires making an assumption on the shape of the demand curve around the competitive price-quantity equilibrium. The standard assumption is that demand is linear. However, this assumption is often unjustified since demand is likely to be non-linear. The results of the HMT critically depend on the curvature of the demand function. 111 Other quantitative techniques for assessing demand-side substitution. The SSNIP test is not the only quantitative approach to market definition. An alternative is to analyse the behaviour of the prices of the products in the candidate market in response to changes in the prices of products with characteristics that place them outside the candidate market. Two common methodologies for this sort of analysis are price correlations and co-integration analysis. a. Price correlations. Price correlation analysis measures the extent to which the prices of two or more different products are interrelated. 112 A strong positive correlation between the prices of two different products suggests, but does not prove, that the two products belong to the same market. If two products A and B are in the same relevant market, their relative price (the ratio of the price of A with respect to the price of B) cannot change significantly: a change in their relative prices would trigger a process of demand-side or supply-side substitution that would bring the relative price back to its starting point. This relationship is given mathematically by the “correlation coefficient.” Two prices are perfectly positively correlated prices if their correlation coefficient is +1, while they are perfectly negatively correlated if they have a correlation coefficient of -1. A coefficient of 0 means that two prices are uncorrelated. The Commission has used correlation analysis in several cases, most notably in the Nestle/Perrier merger decision. The Commission found that the prices of all water 109 This may be the case, for example, because firms do not maximise short-term profits but rather engage in dynamic pricing to penetrate a market or because they operate in two-sided markets. 110 See ML Katz and C Shapiro, “Critical Loss: Let’s Tell The Whole Story,” Antitrust, Spring 2003, 49-56. For a response, see DT Scheffman and JJ Simons, “The State of Critical Loss Analysis: Let’s Make Sure We Understand The Whole Story,” Antitrust Source, November 2003. For a counterresponse, see ML Katz and C Shapiro, “Further Thoughts On Critical Loss,” Antitrust Source, March 2004. 111 See L Froeb, S Tschanz, and G Werden, “Pass-Through Rates And The Price Effects Of Mergers,” International Journal of Industrial Organisation, 2005. 112 Instead, price level comparisons are not useful for market definition. Two products A and B may have very different prices and still be part of the same relevant product market. This is because consumers may be willing to substitute the high price (but high quality) product A for the low price (but low quality) product B. The OFT Market Definition Guidelines are explicit on this point: “Athough a one is of a lower quality, customers might still switch to this product if the price of the more expensive product rose and if they no longer felt that the higher quality justified the price differential.” See OFT Market Definition Guidelines, OFT 403, December 2004, para. 3.5.

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brands were highly correlated, regardless of whether the water was still or sparkling. In contrast, the prices of the water brands were poorly correlated with those of soft drink brands. In these circumstances, the Commission concluded that there was a separate market for all bottled waters, distinct from the soft drink market. 113 In AstraZeneca, the Commission analysed a series of price correlation studies to confirm whether there was evidence of substitution between PPIs and H2 blockers, which might rebut its preliminary conclusion that there was no such substitution from a therapeutic usage perspective. The Commission concluded that on the sole basis of the correlation coefficients, there was prima facie no substitution between PPIs and H2 blockers in five of the geographic markets considered. 114 In the correlation study it was assumed that only the existence of a constantly negative pattern (i.e., a negative correlation coefficient of between 0 and -1) between relative prices and sales in a country would indicate that there was substitution between PPIs and H2 blockers. In each of the five relevant geographic markets, the correlation coefficient was positive, albeit to differing degrees ranging from +0.15 to +0.92. 115 This methodology presents two problems. First, there is no threshold coefficient above which the two products can be considered conclusively part of the same relevant market. Second, the correlation may be spurious, i.e., due to factors other than demandside or supply-side substitution. For example, the prices of two products may move together over time in response to common external factors, such as cost shocks, exchange rate shocks, etc. They may be correlated simply as a result of having a common trend. In short, a positive correlation need not necessarily indicate that two products are close substitutes. 116 Consistently, the Commission has in practice adopted the following rule of thumb: while no price correlation (or a negative price correlation) constitutes evidence that two products belong to separate product markets, a positive price correlation, even when close to one, is not evidence that they are part of the same relevant product market. b. Co-integration or stationarity analysis. The goal of a co-integration analysis is to estimate possible relationships between economic data series, such as price series, that are non-stationary. Broadly speaking, a non-stationary time series varies widely over time without exhibiting a long-run stable relationship. Two price series (the price series of, say, products A and B) are co-integrated if a combination of two price series (for example, the difference between two prices) is stationary and exhibits a long-run relationship. 117 If the price series of two products are co-integrated, this means that Nestlé/Perrier, OJ 1992 L 356/1. Case COMP/A.37.507/F3, AstraZeneca, Commission Decision of 19 July 2006, paras. 76 and 400-457, largely upheld on appeal in Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805 and Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. 115 AstraZeneca, ibid., para. 76. 116 See LECG, Quantitative Techniques In Competition Analysis, OFT Research paper 17, October 1999, pp. 53–55. 117 For a formal treatment of co-integration, see RF Engle and CWJ Granger, “Co-Integration And Error Correction: Representation, Estimation And Testing,” (1987) 55 Econometrica 251–76. For a discussion of how to apply co-integration analysis to market definition, see S Gürcan Gülen, “Rationalisation In The World Crude Oil Market,” (1997) The Energy Journal 109–26; I Horowitz, “Market Definition In Antitrust Analysis: A Regression-based Approach,” (1981) 48 Southern Economic Journal 1–16; M Forni, “Using Stationarity Tests In Antitrust Market Definition,” (2004) 113 114

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there is a strong relationship between the two, which indicates that both products may be interchangeable. The Commission has employed co-integration analyses in several merger cases. 118 In Gencor/Lonrho, for example, the Commission had to consider whether platinum, gold, silver, rhodium, and palladium were part of separate markets. The Commission found high correlation coefficients between those products, but noted that “a high correlation does not in itself imply a causal relationship…indeed economic price-series data are often non-stationary (i.e., trended) and therefore automatically correlated.” 119 Accordingly, the Commission undertook a co-integration analysis that led to the conclusion that the products were in separate markets. 120 This method addresses some of the concerns associated with price correlation analysis. Because the analysis focuses on relative price changes between two series, common influences are cancelled out and do not contaminate the results. Co-integration analysis is capable of identifying delayed price responses, something that is impossible with contemporaneous price correlations. 121 However: 122 “[b]oth analyses should be viewed as complements rather than substitutes, as each has its own advantages and disadvantages. While the key advantage of correlation analysis is that it is fairly easy to implement, it suffers from some important shortcomings that need to be taken into account when interpreting the results. Stationarity tests, on one hand, avoid most of the issues that correlation analysis is suspect to and also do not require any benchmarks. On the other hand, they involve sophisticated econometric tests that are more difficult to implement and can also result in misleading findings due to for example a presence of a number of structural breaks in the relative prices.”

3.3.2.2 Qualitative evidence Comparing prices, product characteristics, and functions. The Market Definition Notice does not limit demand-side substitution to consumers’ willingness to switch in response to increases in price, but also includes non-quantitative factors such as the product characteristics and intended use. Indeed, if anything, this qualitative approach 6(2) American Law and Economics Review 441–64; AE Rodriguez and MD Williams, “Is the World Oil Market ‘One Great Pool’? A Test,” (1993) Energy Studies Journal 121–30; ME Slade, “Exogeneity Tests Of Market Boundaries Applied To Petroleum Products,” (1986) 34(3) Journal of Industrial Economics 291–303; JG Werden and LM Froeb, “Correlation, Causality, And All That Jazz: The Inherent Shortcomings Of Price Tests For Antitrust Market Definition,” (1993) 8 Review of Industrial Organisation 329–53, 344; and H Wills, “Market Definition: How Stationarity Tests Can Improve Accuracy,” (2002) 23(1) European Competition Law Review 4–6. For a defence of these methods, see M Forni, “Using Stationarity Tests In Antitrust Market Definition,” (2004) 6(2) American Law and Economics Review 441–64. 118 See Case IV/M.619, Gencor/Lonrho, upheld on appeal in Case T-102/96, Gencor Ltd v Commission [1999] ECR II-753. See also Case COMP/M.2187, CVC/Lenzing; and Case IV/M.315, Mannesmann/Vallourec/Ilva. 119 Gencor, ibid., para. 52. 120 Ibid., para. 53. 121 Lexecon, An Introduction to Quantitative Techniques in Competition Analysis (2004), p. 10. See also P Davis and E Garcés-Tolón, Quantitative Techniques for Competition and Antitrust Analysis, Princeton University Press (2010), Chapter 4. 122 A Amelio and D Donath, “Market Definition In Recent EC Merger Investigations: The Role Of Empirical Analysis,” Concurrences (2009), pp.1-9.

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to market definition characterises most of the major decisions and judgments under Article 102 TFEU. 123 One of the seminal cases under Article 102 TFEU—United Brands—decided the relevant market on the basis of a subjective evaluation of the product’s characteristics. The Commission and Court of Justice concluded that bananas were in a separate relevant market to other fruits because of their seedlessness, softness, and ease of handling (which were said to be important for the very young, the sick, and the elderly). 124 No quantitative evidence of United Brands’ ability to successfully raise prices was put forward: indeed, the Court of Justice declined to undertake such an analysis. This largely subjective approach to market definition has characterised much of the main precedents under Article 102 TFEU: 125 “Demand substitutability was measured in large part on physical and technical characteristics, with price differences, cross elasticity of demand and distribution differences also playing a role, primarily to confirm what the physical characteristics analysis seemed to indicate…The Commission also defined markets in terms of end uses, even when products were physically identical, without inquiry into the ability of the seller to segregate particular end users with regard to price.”

More recent decisions under Article 102 TFEU have also relied heavily on qualitative evidence. For example, in Microsoft, the Commission defined a product market for “streaming” media players distinct from the market for media players not including streaming functionality by pointing to their different functionality. 126 The Commission also undertook a detailed analysis in Clearstream to assess demand-side substitutes and identified a number of characteristics of specific securities clearing services that distinguished them from other services in consumers’ eyes. 127 In Wanadoo, 128 the 123 Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, paras. 12–35. See also Decca Navigator System, OJ 1989 L 43/27, paras. 83–85; ECS/AKZO (Interim Measures), OJ 1983 L 252/13; Warner-Lambert/Gillette and Others, OJ 1993 L 116/21, para. 6; GVL, OJ 1981 L 370/49, paras. 18, 19, and 45; Eurofix-Banco v Hilti, OJ 1988 L 65/19, paras. 55– 56; Magill TV Guide/ITP, BBC and RTE, OJ 1989 L 78/43, para. 20; Bandengroothandel Frieschebrug BV/NV Nederlandsche Banden-Industrie Michelin, OJ 1981 L 353/33, paras. 31–34; London European/Sabena, OJ 1988 L 317/47, paras. 13–15; Case C-333/94 P, Tetra Pak International SA v Commission [1996] ECR I-5951, paras. 7–20; Vitamins, OJ 1976 L 223/27, para. 20; Case COMP/38/096, Clearstream (Clearing and settlement), Commission Decision of 4 June 2004, paras. 199–200; and Van den Bergh Foods Ltd, OJ 1998 L 246/1, paras. 129–33. See also Case 31/80, L’Oreal v De Nieuwe AMCK [1980] ECR 3775, para. 25 (“The possibilities of competition must be judged in the context of the market comprising the totality of the products which, with respect to their characteristics, are particularly suitable for satisfying constant needs and are only to a limited extent interchangeable with other products.”). See also Case T-7/93, Langnese-Iglo GmbH v Commission [1995] ECR II-1533, para. 61 and, more recently, Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017 and Case AT.40099, Google Android, Commission Decision of 18 July 2018 124 Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, para. 31 125 See T Kauper, “The Problem Of Market Definition Under EC Competition Law,” in B Hawk (ed.), International Antitrust Law And Policy: Fordham Corporate Law Institute, Sweet and Maxwell (1996), p. 251. 126 Microsoft, OJ 2007 L 32/23, paras. 411–25; upheld on appeal in Case T-201/04, Microsoft v Commission [2007] ECR II-3601. 127 Case COMP/38/096, Clearstream (Clearing and settlement), Commission Decision of 4 June 2004, para. 199, upheld on appeal in Case T-301/04, Clearstream Banking AG and Clearstream

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Commission relied not only on quantitative data showing asymmetries in switching between high-speed internet access and dial-up, but also relied on qualitative factors, such as the unavailability of many streaming media and global games products to users without high-speed internet. In Google Shopping, the Commission defined a product market for general search services which excluded alternative ways of discovering content such as content sites, specialised search services, and social networks. 129 Its conclusions on a lack of substitutability between these different services and general search services was driven by two main factors, each of which was largely analysed in qualitative terms: (1) general search services and other content discovery services served different purposes, with general search services primarily seeking to guide users to other sites (whereas other content sources typically send users the content in question directly); and (2) content search functionality remains limited to their own content or content from partners and does not allow users to search for all content over the internet, let alone all information on the web. In Google Android the Commission justified its conclusion that Google’s Android and Apple’s iOS do not belong in the same product market by focusing on their different characteristics, 130 seemingly placing little weight on the quantitative and other evidence Google put forward in an attempt to prove that its mobile OS is, in fact, competing with Apple’s mobile OS. This issue is discussed in detail in Section 3.5.4 below. Reliance on qualitative evidence is problematic—for the obvious reason that it risks being wholly or mainly subjective, as well as confirmation bias—and the more systematic use of econometric techniques in second-phase merger review should be followed more closely in Article 102 TFEU cases. However, recent indications from the case law may further embolden the Commission to have regard to qualitative evidence. In Topps, 131 the General Court stated: “In the present case, as regards, first of all, the applicant’s argument that the Commission ought to have carried out an SSNIP test, it must be found that although that type of economic test is indeed a recognised method for defining the market at issue, it is not the only method available to the Commission. It may also take into account other tools for the purposes of defining the relevant market, such as market studies or an assessment of consumers’ and other competitors’ points of view. The SSNIP test may also prove unsuitable in certain cases, for example in the presence of the ‘cellophane fallacy’, that is, the situation where the undertaking concerned already holds a virtual monopoly and the market prices are already at a supra-competitive level, or where there are free goods or goods the cost of which is not borne by those determining the demand. It is also apparent from point 25 of the Commission notice on the definition of relevant market for the purposes of Community competition law (OJ 1997 C 372, p. 5) that the definition of the relevant market does not require the Commission to

International SA v Commission [2009] ECR II-3155, paras. 51-57 128 Case COMP/38.233, Wanadoo Interactive, Commission Decision of 16 July 2003; upheld on appeal in Case T-340/03, France Télécom SA v Commission [2007] ECR II-107 and on further appeal in Case C-202/07 P, France Télécom SA v Commission [2009] ECR I-2369. 129 Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017, Section 5.2.1.2. 130 Case AT.40099, Google Android, Commission Decision of 18 July 2018. 131 Case T‑699/14, Topps Europe Ltd v Commission EU:T:2017:2, para. 82.

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follow a rigid hierarchy of different sources of information or types of evidence. The Commission did not, therefore, commit a manifest error of assessment in basing its conclusions on the relevant market on its assessment of the evidence gathered without having recourse to an SSNIP test.”

In both Qualcomm (Predation) and Qualcomm (Exclusivity) 132 the Commission relied on this ruling to conclude that it did not need to perform a quantitative assessment of the hypothetical monopoly test and decided to rely exclusively on qualitative evidence without imposing the logical discipline that is implicit in the SSNIP test. The problem is not the use of qualitative evidence, but the abandonment of the rigorous thought experiment that lies at the heart of the test; a test which does not require quantitative data to be implemented. The problematic implications of defining markets on the basis of qualitative assessments without the discipline imposed by the SSNIP test can be illustrated by reference to the Commission’s decision in Olympic/Aegean. 133 The Commission decided that airlines and ferries connecting the Greek peninsula with the Greek islands belong to separate markets for two reasons: (1) airline tickets were more expensive than ferry tickets; and (2) airline trips were of shorter duration than the ferry trips. This absurd conclusion is the result of ignoring that the observed price differences simply reflected the differences in the duration of the trip and the possibility of substitution between expensive/short trips and cheap/long trips. The Commission would have reached a different conclusion if it had applied the common sense assessment of substitution that is implicit in the SSNIP test. Unfortunately, the General Court’s ruling in Topps provides the Commission with a wild card in market definition, and one that can be abused as in Olympic/Aegean. For these reasons, it is at least hoped that qualitative data should be used in future as a crosscheck on quantitative data. That said, in some cases, good data may not be available, in which case competition authorities have no choice but to rely exclusively on qualitative techniques. 3.3.2.3 Other sources of evidence Consumer surveys. Market studies and consumer survey data may reveal information on consumer preferences and, therefore, may be useful to identify those products that consumers regard as interchangeable with those in the candidate market. 134 The Market Definition Notice states that: 135 “Marketing studies that companies have commissioned in the past and that are used by companies in their own decision making as to pricing of their products and/or marketing actions may provide useful information for the Commission’s delineation of the relevant market. Consumer surveys on usage patterns and attitudes, data from consumer’s purchasing patterns, the views expressed by retailers and more generally, market research studies…are 132 Case AT.40220, Qualcomm (Exclusivity), Commission Decision of 25 January 2018; and Case AT.39711, Qualcomm (Predation), Commission Decision of 18 July 2019. 133 Case M.5830 Olympic / Aegean Airlines, Commission Decision of 26 January 2011. 134 See, e.g., Case COMP/38/096, Clearstream (Clearing and settlement), Commission Decision of 4 June 2004, paras. 146 and 166. 135 Market Definition Notice, OJ 1997 C 372/5, para. 41.

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taken into account to establish whether an economically significant proportion of consumers consider two products as substitutable.”

The reliability and validity of such studies must be carefully considered. Survey evidence has always been considered cautiously by competition authorities. For example, the Commission has always been sceptical about the probative value of surveys. 136 The Commission is aware of the risk that studies prepared ad hoc for the case at hand may not be objective since “[u]nlike pre-existing studies, they have not been prepared in the normal course of business for the adoption of business decisions.” 137 The UK Competition and Markets Authority (CMA) has relied on surveys on several occasions but places tight methodological constraints on its surveys. 138 This is why survey evidence is typically a complement to other corroborating, qualitative or quantitative evidence. So-called “contingency surveys,” where customers or consumers are asked direct questions about their preferences, are particularly problematic. 139 Respondents often claim to be much more price sensitive than they truly are in order not to appear stupid to the interviewer. Other respondents may answer strategically to the survey’s questions, because they may want to push the case in a given direction, e.g., if they are a customer or competitor. Even when they answer candidly, their responses may not serve to elicit their true preferences because they may be conditioned by the way the questions are posed, because the set of possible answers is constrained, or because the questions impose answers that are vague, unrealistic, or drastic. It is also possible that the respondents exhibit personal, potentially irrational, biases. All the above-mentioned problems are aggravated in phone interviews because respondents have limited time to answer and potentially care about the impression they give to the interviewer. The alternative is to use a discrete-choice conjoint design. It is common ground that discrete choice modelling analysis or conjoint analysis, like those pioneered by Nobel Prize laureate Daniel McFadden, are superior to contingency surveys like the ones typically relied upon by competition agencies. 140 Discrete choice modelling analysis 136 See for example No. COMP/M.7758 Hutchison 3G Italy / Wind / JV and COMP/M.8792 TMobile NL / Tele2. 137 Ibid. 138 See for example Case ME/6501/14 Greene King/Spirit, Case ME/6467-14 Poundland/99p Stores and CMA (2018) Good Practice In The Design And Presentation Of Survey Evidence In Merger Cases, updated 23 May 2018. 139 See, among others, DL McFadden, AC Bemmaor, FG Caro, J Dominitz, BH Jun, A Lewbel, RL Matzkin, F Molinari, N Schwarz, RJ Willis, and JK Winter, (2005) “Statistical Analysis Of Choice Experiments And Surveys,” Marketing Letters, 16(3-4), pp.183-196; D Kahneman and A Tversky, (1973) “On The Psychology Of Prediction,” Psychological Review, 80(4), p.237; D Kahneman and A Tversky, (2013) “Choices, Values, And Frames,” in Handbook Of The Fundamentals Of Financial Decision Making: Part I (pp. 269-278); AJ Nederhof, (1985) “Methods Of Coping With Social Desirability Bias: A Review,” European Journal Of Social Psychology, 15(3), pp.263-280; and A Furnham, (1986) “Response Bias, Social Desirability And Dissimulation,” Personality And Individual Differences, 7(3), pp.385-400. 140 See J Hausman, (2012) “Contingent Valuation: From Dubious to Hopeless,” Journal of Economic Perspectives, 26 (4), pp. 43-56, and PA Diamond and J Hausman, (1994). “Contingent Valuation: Is Some Number Better than No Number?,” Journal of Economic Perspectives, 8 (4), pp. 45-64.

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and conjoint analysis are commonly used in business decision making as well as in the assessment of competitive effects in competition cases. These methodologies are preferred over contingency surveys, because they are less vulnerable to the problems described above. In particular, the “survey environment” of these methodologies is designed to resemble the real decision-making situation as closely as possible. The clear choice structure is not the only advantage of a discrete-choice conjoint design. A discrete-choice model allows different choice alternatives to be presented to the respondent by characterising the options with different attributes such as price, quality, and flexibility of delivery. It also allows respondents to mix and match different product groups from different suppliers and compare the total costs, prices, and shopping costs of such combinations with the cost of buying everything only from a generalist. Natural experiments. Unexpected events may provide valuable information on substitution patterns between different products. Such events include strikes, promotions and advertising campaigns, unexpected plant outages, supply shortages, regulatory intervention, and market entry. 141 For example, consumers may react to a disruption in supply due to a strike by switching consumption to other products which they regard as substitutes, thereby revealing information on demand-side substitution. Natural experiments involving market entry can be particularly revealing. For example, evidence that branded drug A’s prices and sales dropped in response to the launch of branded drug B (or a generic variant of A) would indicate that the two products are part of the same product market. Internal business documents. Internal documents may also reveal which products a firm regards as close substitutes to its own. Business and strategic plans, internal pricing studies, and analyses of promotions, may provide information on competitors and the degree of substitutability between their products and those in the candidate market, although the probative value of such documents will vary in each case. 142 In addition, it should be appreciated that such documents are usually prepared for purposes other than market definition under competition law. 143 The approach taken in such documents is also likely to offer a narrower appreciation of a firm’s competitive constraints than would result from a properly-defined relevant market.

Lexecon, An Introduction To Quantitative Techniques In Competition Analysis, 2004, p. 34. See e.g., in Case COMP/A.37.507/F3, AstraZeneca, Commission Decision of 19 July 2006, para. 494, where the Commission cast doubt on the probative value of contemporaneous business documents, concluding that they were of secondary value in comparison to hard evidence relating to actual use and demand patterns. It noted that as market definition analysis was an objective exercise, established objective facts (e.g., on actual substitution between products) would normally prevail over parties’ subjective perceptions of developments however contemporaneously they may have been made. The decision was largely upheld on appeal in Case T-321/05, AstraZeneca v Commission [2010] ECR II2805 and Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. 143 This is reflected in Market Definition Notice, OJ 1997 C 372/5, para. 3: “the concept of ‘relevant’ market is different from other definitions of market used in other contexts. For instance, companies often use the term ‘market’ to refer to the area where its sells its products or to refer broadly to the industry or sector where it belongs.” 141 142

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3.3.3

Assessing Supply-Side Substitution Under The HMT

Conditions for supply-side substitution. To determine whether two products A and B are regarded as supply-side substitutes, a number of cumulative conditions must be satisfied. Only if all of these questions are answered positively can products A and B be considered as supply-sides substitutes. Then, and only then, does supply-side substitution have a similar effect as demand-side substitution “in terms of effectiveness and immediacy,” as required by the Market Definition Notice. 144 The conditions are as follows: 1.

Ability of other suppliers to switch production without major additional investment. For supply-side substitution to be effective, other suppliers must be able to switch production quickly and relatively costlessly. This involves consideration of the assets needed to produce the relevant products and in particular whether manufacturers of supply-side substitutes: (a) possess the required technology, know-how, machinery and facilities; (b) have access to the appropriate network infrastructure, transport infrastructure and distribution channels; and (c) possess the relevant marketing assets, such as brand name, and/or the ability to develop those assets within a reasonable period of time. 145 If any relevant assets are missing, it is relevant to ask whether they can be acquired without the need for significant, irreversible new investments by buying assets that involve no sunk costs or contracting with third parties.

2.

Economic incentives of manufacturers to divert production. Even if manufacturers of potential supply-side substitutes could divert production, it must still be shown that they have the economic incentives to do so. It would thus be relevant to ask whether: (a) suppliers are contractually tied to continue production of existing products; and (b) spare capacity is available or whether additional capacity that can be brought into production at a reasonable cost. 146

Market Definition Notice, OJ 1997 C 372/5, para. 20. The Commission seems to have endorsed this condition. In several cases, the Commission rejected the presence of supply-side substitution because of costly switching or because of the long time horizon needed. For example, in Industri Kapital (Nordkem)/DYNO, the Commission did not include supply-side substitutes into the relevant market, because it considered that switching production capability was “time-consuming and costly.” See Case COMP/M.1813, Industri Kapital (Nordkem)/DYNO, paras. 26–27. See also Case COMP/M.1879, Boeing/Hughes, para. 22 (the Commission rejected supply-side substitutability between satellites with different orbits because it took three to five years for a producer to develop the technical capacity to develop a new satellite); and Case COMP/M.2314, BASF/Eurodiol/Pantochim, para. 35; and Case COMP/38.784, Wanadoo España v Telefónica, Commission Decision of 4 July 2007, paras. 172-176 (the Commission held that local loop unbundling and regional wholesale access were not substitutable since a new operator would have to incur substantial network roll-out investments, which would be extremely time consuming and even then would only be economically viable if the operator achieved a sufficient customer base, which was neither certain not immediate), upheld on appeal in Case T-336/07, Telefónica and Telefónica de España v Commission EU:T:2012:172 and Case C-295/12 P Telefónica and Telefónica de España v Commission, EU:C:2014:2062. 146 A lack of commercial incentives was one of the arguments by the Commission not to include supply-side substitutes in the relevant market in Case IV/M.774, Saint-Gobain/Wacker-Chemie/NOM, para. 36. See also Case COMP/M.2420, Mitsui/CVRD/Caemi (Commission’s market investigation indicated that the low degree of supply-side substitution was due to lack of economic incentives). See 144 145

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Unless manufacturers can economically adapt production—in other words they do not face opportunity costs sufficiently large to make switching production unprofitable (even without sunk costs)—supply-side substitution is not effective. 147 3.

Consumer reaction. The final, and decisive, condition is that consumers must regard potential supply-side substitute products as valid substitutes for the existing set of products. That is, the existence of supply-side substitutes must influence the market behaviour of the alleged dominant firm by allowing supply-side substitutes to steal sales from incumbents charging excessively high prices. In this regard, it is important to assess whether consumers are really willing to change consumption. For example, in the presence of switching costs, consumers might not be willing to change to a substitute product, rendering supply-side substitution ineffective. Therefore, it may be useful to distinguish between situations in which firms compete with products that are currently available from others and those that compete by producing to order or on the basis of blueprints. In the last set of cases, supply-side substitutability is much more likely to be of importance since switching costs do not play a major role.

These cumulative conditions are not enough, however. The Commission requires that “that most of the suppliers are able to offer and sell the various qualities under the conditions of immediacy and absence of significant increase in costs described above.” 148 Thus, before including supply-side substitutes in a single separate market, the Commission must assess the universal character of supply-side substitution. That is, a sufficiently large number of suppliers of supply-side substitutes must be ready to respond and move production before their products would be included in the relevant market. Examples of effective supply-side substitution in the decisional practice and case law. Supply-side substitution is most likely to be effective where a market contains a number of different grades, varieties, or sizes of essentially the same underlying of product. For example, no shoemaker manufactures only one shoe size; no car manufacturer produces only white cars. In some cases, supply-side substitution may not require adjustments in production, but a repositioning of an existing brand or product through, for example, a successful marketing strategy, design changes or revised marketing. In such circumstances, supply-side substitution occurs only if the repositioning involves no sunk costs. The strict conditions for supply-side substitution have resulted in the expansion of the market to include supply-side substitutes in only a small number of cases. For example, too Case COMP/M.1381, Imetal/English China Clays, para. 16 (supply-side substitution between kaolin, a form of china clay, and certain other pigments was considered “technically possible” but unlikely in practice given that the “economics of the additional processing would make the product non-competitive”). 147 See Case IV/M.1313, Danish Crown/Vestjyske Slagterier, paras. 62–64. The Commission defined a narrow relevant geographical market due to contractual obligations. 148 Market Definition Notice, OJ 1997 C 372/5, para. 21.

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in Electrolux/AEG, the Commission found that all models and sizes of each type of major domestic appliance constituted a single relevant market because a “high degree of supply side substitutability” permitted producers to use the same production line to manufacture a broad range of different models and sizes. 149 Likewise, in Volvo/Scania, the Commission determined that, notwithstanding some differences in functional characteristics, rigid trucks and tractor trucks comprised part of a single market for all heavy-duty trucks, inter alia, because the costs related to switching from the production of one type of heavy truck to another were not substantial. 150 Finally, in Kish Glass, the General Court upheld the Commission’s finding that the production of 4mm glass is technological identical to the production of glass of other thicknesses and that manufacturers could easily switch production “without excessive costs.” 151 A common problem when assessing supply-side substitution is failing to understand that while product A may be a supply-side substitute for product B, the opposite need not be true. Suppose we are testing whether there is a separate product market for product High Quality A, a product for which there are no demand side substitutes. In particular, consumers are unwilling to substitute High Quality A for Low Quality A. Suppose that we are investigating whether Low Quality B is a supply-side substitute for High Quality A. If that were the case, we would expect that all (or at least most) producers of Low Quality A were also producers of High Quality A, in which case they could shift production from the former to the latter in case of a SSNIP for High Quality A. That all producers of High Quality A also produce Low Quality A is irrelevant for demonstrating that Low Quality A imposes a competitive constraint on High Quality A (rather it demonstrates that the competitive constraint operates in the opposite direction). This is unfortunately a common mistake. 152

3.4

GEOGRAPHIC MARKET DEFINITION 3.4.1

Key Concepts

Definition. Geographic market definition is the second essential step in the definition of the relevant market: a product market is meaningless without a corresponding definition of its geographic scope. As early as United Brands, the Court of Justice stated that the opportunities for competition must be considered “with reference to a clearly defined geographic area in which the product is marketed and where conditions of competition are sufficiently homogenous for the effect of the economic power of the undertaking concerned to be able to be evaluated.” 153 More recently, the Market Case IV/M.458, Electrolux/AEG, para. 9. See also Case IV/M.2498, UPM/Kymmene/Haindl, para. 13; and Case IV/M.2499, Norske Skog/Parenco/Walsum, para. 13 (single market for newsprint). 150 Case IV/M.1672, Volvo/Scania, paras. 24–30. 151 Case T-65/96, Kish Glass & Co Ltd v Commission [2000] ECR II-1885, para. 68, confirmed on appeal in Case C-241/00 P, Kish Glass & Co Ltd v Commission [2001] ECR I-7759. 152 See for example Comisión Nacional de la Competencia, Case S/0354/11 Hewlett-Packard v Oracle Corporation, 26 February 2013. 153 Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, paras. 11. See also Case 247/86, Société alsacienne et lorraine de télécommunications et d'électronique (Alsatel) v SA Novasam [1988] ECR 5987 (Commission’s finding of dominance rejected on the basis of an incorrect geographic definition). 149

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Definition Notice defines the relevant geographic market as the area where: (1) the company or companies whose behaviour is in question are involved in the supply and demand of products or services, (2) the conditions of competition are sufficiently homogeneous, and (3) those conditions are appreciably different from the conditions of competition in neighbouring areas. 154 The principles of product market definition apply with equal force to the definition of the relevant geographic market. 155 The relevant geographic market therefore includes all those regions where consumers can find demand-side substitutes for the products of the firm under scrutiny (demand-side substitution) and there are suppliers who can readily shift production to the markets where the firms whose commercial practices are investigated operate (supply-side substitution). The chain of substitution logic is also relevant to delineate the scope of the relevant geographic market. Consider, for example, broadband internet access. In many countries, this service is offered by local cable companies and national telecommunications providers offering ADSL services. Typically, a country is subdivided into non-overlapping regions, each of which is served by one or more local cable providers. Although consumers cannot switch between local cable providers active in distinct regions, the presence of the national supplier ensures that there is nevertheless (indirect) competition between those local firms. Decisions taken by local cable companies are likely to influence the policy adopted by the national telecommunications provider, which in turn may affect the actions chosen by cable companies in other regions. 156 Basic analytical process. According to the Market Definition Notice, the analytical approach used when defining relevant geographic markets involves three steps: 1.

Identifying the putative market from the demand-side. A preliminary view on the scope of the relevant geographic market must first be taken. This defines a putative geographic market. Market shares and prices in and out of the putative market must then be compared to ascertain whether the conditions of competition are homogenous or heterogeneous across regions. None of this is conclusive, however. For example, market shares may be evenly distributed across regions and yet the relevant market may be regional. Also, prices may differ widely from region to region and yet the market may cover all the regions. This is why the Commission considers the characteristics of the products and services offered at different locations to determine whether

Market Definition Notice, OJ 1997 C 372/5, para. 8. M Motta, Competition Policy: Theory And Practice, Cambridge University Press (2004), p. 113. 156 See, e.g., Case IV/36.539, British Interactive Broadcasting/Open; Commission Notification Case COMP/M.2845, Sogecable/Canalsatélite Digital Vía Digital. Note, however, that the validity of the chain-of-substitution argument hinges crucially on the inability of the “straddling” firm to pricediscriminate across local markets. In the broadband example, the scope for price discrimination of this type seems to be limited, which is due in particular to either regulatory constraints or reputation considerations. The same logic can not only be applied to Pay-TV and telecommunications markets, but also to markets such as food retailing where frequently large supermarket chains compete with local retailers. In many of these instances, a large national supplier faces competition only in some regions, but is unable to exert market power because of the inability to price-discriminate between regions. 154 155

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producers that are available in locations outside the putative market can be regarded as demand-side substitutes by consumers in the putative market. 157 2.

Supply-side factors. Supply-side substitution factors must then be considered. The goal is to investigate whether suppliers located outside the putative market would be able to enter the market in response to a price increase. For example, the Commission investigates whether that reaction is feasible or there are impediments to entry, such as limited access to distribution channels, regulatory barriers and substantial set-up costs. 158

3.

Scope for widening the market based on future integration. Finally, it is relevant to ask whether there is a continuing process of market integration. As a result, it may identify a wider geographic market when there is a rational expectation that legislative or technical barriers are likely to fall in the near future. 159

3.4.2

Defining Geographic Markets In Practice

Sources of evidence. The EU institutions, and national authorities and courts have relied on various sources of evidence to assess the extent of demand-side and supplyside substitution across different geographic areas. They have also gathered and analysed information on transport costs, trade barriers, or contractual obligations to assess the extent to which suppliers located outside the candidate market effectively constrained the behaviour of those located inside. The principal types of evidence are discussed below. a. Price evidence. The scope of the relevant geographic market can be investigated by means of price correlation and co-integration studies, with the same caveats described in Section 3.3 above. The prices of a product sold in the region that forms a candidate market cannot be constantly higher than the prices for the same product in region outside the candidate market unless there are substantial obstacles to trade. Thus, a strong positive correlation between the prices of products sold in regions within and outside the candidate market indicates that: (1) consumers located in the candidate market can easily purchase the product in regions outside it; or (2) suppliers outside the candidate market do not face obstacles to shipping their products into the boundaries of the candidate market. b. Trade flows (quantity evidence). Although not conclusive, information on trade flows and the pattern of shipments can be used to obtain an understanding of geographic purchasing patterns, and hence, to delineate the boundaries of the relevant geographic market. 160 Some commentators have suggested defining geographic markets on the basis of data on product flows, arguing that “the only data required to estimate market areas—at least in most cases—are shipments data in physical terms.” 161 Their Market Definition Notice, OJ 1997 C 372/5, paras. 28-29. Ibid., para. 30. 159 Ibid., para. 32. 160 Ibid., para. 49. 161 KG Elzinga and TF Hogarty, “The Problem Of Geographic Market Definition In Antimerger Suits,” (1973) 18 Antitrust Bulletin 45–81, at 73; and KG Elzinga and TF Hogarty, “The Problem Of 157 158

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“shipment test” measures quantify the export and import flows taking place between two regions: if both levels were high, the relevant geographic should comprise both regions. 162 This proposal has been criticised, since high levels of imports and exports are neither a necessary nor sufficient condition for a broad geographic market. 163 Products may move between two regions and yet the two regions may belong to separate product markets. If there are differences in demand between the two regions, and producers are able to price discriminate, trade may occur in great quantities and yet the products sold in one of the regions are not constrained by the products sold in the other. On the contrary, there may be few imports and exports between two regions and yet they may belong to a single market. If transportation costs are small, each region exerts a competitive constraint on the other but there may be no trade between the two because the products sold in both regions are relatively homogeneous and prices are the same in the two regions. The threat of imports may be enough to discipline prices in both regions. If the threat of imports is credible and substantial, it should lead to broader geographic markets. The Commission appeared to have ignored this in Italian Flat Glass. 164 It argued that market definition ought to be based on actual product shipments, not those that were “theoretically possible.” Since Italian producers supplied 80% of Italian flat glass, there could be no doubt that the geographic market was Italy, the Commission concluded. 165 c. Barriers to trade. The existence of barriers to trade gives rise to separate relevant product markets. The following barriers have been identified in the economic literature and the case law: 1.

Transport costs. Transport costs are the most important factor in the definition of the relevant geographic market. The impact of transport costs is likely to be high for bulky, low value products. Import tariffs are also direct costs that increase the price of transportation. In British Plasterboard, for instance, the Commission based the definition of the relevant geographic market on the existence of significant transport costs and identified Great Britain and Ireland as separate relevant markets. The Commission relied on estimates of transport costs and information of competing firms about entry plans to conclude that

Geographic Market Delineation Revisited,” (1978) 23 Antitrust Bulletin 1–18. 162 See M Motta, Competition Policy: Theory And Practice, Cambridge University Press (2004), p. 114 (“Suppose for instance that a considerable proportion of trade was observed between one region and another. This would be a clear indication that the regions’ producers are exercising a competitive constraint on each other.”). 163 See DL Kaserman and H Zeisel, “Market Definition: Implementing The Department Of Justice Merger Guidelines,” (1996) 41(3) Antitrust Bulletin 665–90. See also G Stigler and R Sherwin, “The Extent Of The Market,” (1985) 28 Journal of Law and Economics 555–86. 164 Italian Flat Glass, OJ 1988 133/34. The General Court seemed troubled by geographic market definition because certain documents indicated that Italian producers took account of competition from producers in other member states and in Turkey and Eastern Europe. See Joined Cases T-68 and 7778/89, Società Italiana Vetro SpA, Fabbrica Pisana SpA and PPG Vernante Pennitalia SpA v Commission (re Italian Flat Glass) [1992] ECR II-1403. 165 Italian Flat Glass, OJ 1981 L 326/12, para. 77.

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imports between Europe, Great Britain and Ireland represented no competitive threat. 166 2.

Consumer preferences. An important factor in the definition of the relevant geographic market is to assess whether consumers have a marked preference for local products. Local preferences are not uncommon and may stem from cultural differences, differences in lifestyle or differences in language. The Market Definition Notice states that differences in consumer preferences must be taken into account in the definition of the relevant geographic market. 167 If differences in local preferences are strong, as in the case of media markets, the geographic market is likely to be defined narrowly. 168 In Magill, for example, the Commission emphasised the importance of Ireland’s cultural identity in the definition of a region-wide geographic market (Ireland and Northern Ireland). 169

3.

Capacity constraints. If firms in remote regions could offer their products in the regions forming part of the candidate market without incurring any significant additional costs, those regions should be included in the relevant product market. However, the existence of capacity constraints may lead to separate geographic markets.

4.

Long-term contracts. Like capacity constraints, firms in different regions might be committed to their local markets by long-term contracts and, therefore, be unable to divert sales from their regions to regions in the candidate market even after a price increase. Thus, those regions would not form a single geographic market. 170

BPB Industries plc, OJ 1989 L 10/50, paras. 21–24. Other case where transport costs were considered in the definition of the relevant market include Napier Brown/British Sugar, OJ 1988 L 284/41; Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207; ECS/AKZOInterim Measures, OJ 1983 L 252/13; Italian Flat Glass, OJ 1981 L 326/12; Eurofix-Banco v Hilti, OJ 1988 L 65/19; Tetra Pak I (BTG licence), OJ 1988 L 272/27; Tetra Pak II, OJ 1992 L 72/1; Case AT. 39767 BEH Electricity, Commission Decision of 10 December 2015; and Case AT.39767, E.ON Gas, Commission Decision of 26 July 2016. 167 Market Definition Notice, OJ 1997 C 372/5, para. 29. 168 See Bass, OJ 1999 L 186/1, paras. 115–16; Scottish and Newcastle, OJ 1999 L 186/28, paras. 85– 86; and Tetra Pak I (BTG licence), OJ 1988 L 272/27, para. 37. See also Case T-69/89, Radio Telefís Éireann (RTE) v Commission [1991] ECR II-485, Case T-70/89, British Broadcasting Corporation and BBC Enterprises Ltd (BBC) v Commission [1991] ECR II-535, and Case T-76/89, Independent Television Publications Ltd (ITP) v Commission [1991] ECR II-575, confirmed in Joined Cases C241/91 P and C-242/91 P, Radio Telefís Éireann and Independent Television Publications Ltd (RTE & ITP) v Commission [1995] ECR I-743. 169 See Case T-69/89, Radio Telefís Éireann (RTE) v Commission [1991] ECR II-485. The Commission did not, however, mention national/regional preferences when defining the geographical market. See Magill TV Guide/ITP, BBC and RTE, OJ 1989 L 78/43, para. 21. See also Case AT.40153, E-book MFNs and related matters (Amazon), Commission Decision of 4 March 2017. The Commission considered that the market for the distribution of e-books in English and German could be national in scope rather than EEA-wide due to the fact that customer preferences are not fully homogeneous across countries, differences including language and cultural preferences (para. 49). 170 See Case IV/M.1313, Danish Crown/Vestjyske Slagterier, paras. 62–64. The Commission defined Denmark as the relevant geographical market despite the fact of price correlation of 0.93–0.98 between 166

Market Definition

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5.

Regulatory barriers. There is a wide range of regulatory barriers that may limit the size of the relevant geographic market. Examples of regulatory barriers are legal monopolies, price regulation, or technical standards. 171 The Commission has defined nationwide relevant geographical markets in the case of fiscal monopolies and exclusive rights. 172

6.

Local presence. When it is important to have a local distribution or an aftersales network, foreign competitors might be at a competitive disadvantage and not able to exert a competitive constraint on domestic suppliers. 173

Examples of geographic market definitions in the decisional practice and case law. Depending on how homogeneous the conditions of competition between different areas are, the relevant geographic market may be global, regional, trans-national, national, sub-national, or, even, confined to a facility in a single geographic location (e.g., a port): 1.

Worldwide markets. Worldwide markets are most likely for globally-traded commodities such as minerals, metals, and oil. 174 Technology, such as software and hardware, may also give rise to global markets given standardisation and ease of distribution. In Microsoft for example the Commission concluded that a worldwide market existed with respect to work group server operating system software and media player software. It noted that multinational computer manufacturers entered into worldwide licensing agreement for the software and sold computers globally. An important element of the Commission’s determination was the lack of significant import restrictions and transport costs associated with Microsoft’s software. 175

2.

EU-wide markets. When products are sold on a similar price and scale across the EU, EU-wide market definitions are likely. In Chiquita, for example, the Commission found that the relevant geographical market for the company’s bananas consisted of a substantial portion of the EU, including Denmark, Germany, the Netherlands, Ireland, Switzerland, and Austria. Despite

the Danish market and other northern European markets, because Danish farmers had to supply locally due to contractual obligations. 171 M Monti, “Policy Market Definition As A Cornerstone Of EU Competition Policy,” Workshop On Market Definition, Helsinki, 5 October 2001. 172 Amministrazione Autonoma dei Monopoli di Stato, OJ 1998 L 252/47, upheld on appeal in Case T-139/98, Amministrazione Autonoma dei Monopoli di Stato (AAMS) v Commission [2001] ECR II3413; Deutsche Post AG, OJ 2001 L 125/27; and Deutsche Post AGInterception of cross-border mail, OJ 2001 L 331/40. See also British Sugar plc, OJ 1999 L 76/1; Soda-Ash/Solvay, OJ 1991 L 152/21 and Case AT.39813, Baltic Rail, Commission Decision of 2 October 2017. 173 See Tetra Pak I (BTG licence), OJ 1988 L 272/27, para. 41 (Commission considered the need to establish a local distribution network and concluded that the costs of doing so were not high enough to narrow the definition of the relevant geographic market). See too PO–Michelin, OJ 2002 L 143/1. 174 See, e.g., Case IV/M.1161, Alcoa/Alumax (aluminium); Case IV/M.1383, Exxon/Mobil (crude oil); Case COMP/M.2413, BHP/Billiton (copper); and Case IV/M.619, Gencor/Lonrho (platinum). 175 Microsoft, OJ 2007 L 32/23, para. 427; upheld on appeal in Case T-201/04, Microsoft v Commission [2007] ECR II-3601. See also Case COMP/37.990, Intel, Commission Decision of 13 May 2009, on appeal in Case T-286/09, Intel v Commission, EU:T:2014:547 and Case C-413/14 P, Intel v Commission, EU:C:2017:632. See too Case AT.40099, Google Android, Commission Decision of 18 July 2018 (worldwide market, with the exception of China).

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sometimes lengthy transport routes, the Commission found that transport costs were not so high as to constitute a significant barrier to entry within those nations. The Commission did not provide a detailed explanation of its exclusion of France, Italy, and the United Kingdom from the relevant market, but noted generally the unfavourable “import arrangements and trading conditions in these countries and the fact that bananas of various types and origin are sold there.” 176 In Hilti, the General Court provided greater guidance in its determination that the relevant geographic market for nail guns and consumables was EU-wide. Specifically, the Court found that the transport cost of nails was low and that price differences between the Member States were sufficient to encourage parallel trade. 177 3.

National markets. National markets have featured most prominently in the decisional practice under Article 102 TFEU. 178 For example, in Irish Sugar, the Commission concluded that the relevant geographic market for sugar was Ireland. Although sugar prices were higher than in other areas of the EU as to encourage imports to Ireland, the Commission noted that sugar importing was in fact minimal. Barriers to entry, in the form of transport costs, helped explain this trend. The Commission also observed that, “[d]uring the price war in the United Kingdom, Irish Sugar was able to continue to maintain a substantial price difference for, in particular, retail sugar in Ireland. As regards industrial sugar, Irish Sugar [also maintained] significantly higher prices for those customers operating only on the home market.” 179 In contrast, in DSD, the Commission relied almost exclusively on differences between technical regulatory schemes among Member States in determining that the wastemanagement sector was divided into national markets. 180

Chiquita, OJ 1976 L 95/1, Art. 1. Case T-30/89, Hilti AG v Commission [1991] ECR II-1439, para. 79–81. See also Tetra Pak I (BTG licence), OJ 1988 L 272/27, para. 41 (“Even if there exist the differing demand conditions between Member States [for milk cartons], the EEC is the relevant geographical market for the cartons and machines under discussion….all types of carton and machine are found to a significant extent in all Member States. Secondly transport costs for both machines and cartons are not significant.”). See also Tetra Pak II, OJ 1992 L 72/1, para. 98 (noting that the market consisted of the entire EU) and Case AT.40072, Magyar Suzuki, Commission Decision of 14 October 2014, where the Commission expressed its belief that the car market might now be EU-wide as a consequence of, inter alia, manufacturers adopting EU-wide pricing. 178 Case 127/73, Belgische Radio en Televisie v SV SABAM and NV Fonior [1974] ECR 313; HOV SVZ/MCN, OJ 1994 L 104/34; Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission [1983] ECR 3461; Case T-69/89, Radio Telefís Éireann (RTE) v Commission [1991] ECR II-485; Case C-333/94 P, Tetra Pak International SA v Commission [1996] ECR I-5951; Virgin/British Airways, OJ 2000 L 30/1, upheld on appeal Case T-219/99, British Airways plc v Commission [2003] ECR II-5917; and Case AT.39813, Baltic Rail, Commission Decision of 2 October 2017. 179 Irish Sugar plc, OJ 1997 L 258/1, para. 92–97. See also Napier Brown/British Sugar, OJ 1988 L 284/41, para. 43–49 (noting transport costs and trade flow statistics in concluding that the United Kingdom was the relevant geographic market). 180 DSD, OJ 2001 L 166/1, para. 87–91 (noting that “the laws and regulations governing the disposal of packaging, including their implementing rules, differ widely from one country to another….One result of this is that the take-back and exemption system operated by DSD is restricted to Germany.”). 176 177

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Local markets. The relevant geographic market has been found to be limited to a local facility in cases where the nearest alternative facility was in practical terms unsuitable or where the product or service by definition must be provided within the local facility. In Stena Sealink, the Commission deemed the port of Holyhead to be the entire relevant market because the nearest alternative port, Liverpool, was nearly twice the distance from Dublin to Holyhead. Because there was no practical substitute for the port, the Commission limited the relevant geographic market to the local facility. 181 Similarly, the Court of Justice found in Aéroports de Paris that, because ground handling services must be supplied within the airport only, the relevant geographic market was limited to the local facilities at the airport. 182

3.5

SELECTED ISSUES ON MARKET DEFINITION

Overview. Market definition can raise more complex issues in certain settings. First, the impact of price discrimination on market definition is considered. When firms can effectively price discriminate between customers, this may impact on the relevant market definition. Second, market definition in cases of tying and bundling presents issues, in particular whether separate markets exist for: (1) the bundled products alone; (2) for each of the bundled products on a stand-alone basis; or (3) separate markets comprising the bundled products and each of the stand-alone products. Third, market definition in aftermarkets—where consumers of a primary market need to purchase compatible consumables—require consideration. At the extreme, a firm’s own consumables may be a relevant market. Finally, market definition in so-called multisided markets—where firms compete simultaneously for two groups of customers A and B whose demands are interrelated—is considered. These issues are discussed below.

3.5.1

Impact Of Price Discrimination On Market Definition

Issue stated. Very often firms can and do price discriminate, often in astoundingly For example, airlines generally operate complex yieldmultifarious ways. 183 management systems whereby they try to differentiate ticket prices between customers based on time of purchase, ticket flexibility etc. Price discrimination is an ubiquitous

Sea Containers v Stena Sealink—Interim measures, OJ 1994 L 15/8, para. 62–65. See too FAG— Flughafen Frankfurt/Main AG, OJ 1998 L 173/32, paras. 55–56; Ilmailulaitos/Luftfartsverket (Finnish Airports), OJ 1999 L 69/24, paras. 24–33; and Case AT.39.886, Ryanair/DAA-Aer Lingus, Commission Decision of 17 October 2010, paras. 70–75. 182 Case C-82/01 P, Aéroports de Paris v Commission [2002] ECR I-9297, at para. 95–96. See also Case T-128/98, Aéroports de Paris v Commission [2000] ECR II-3929, para. 141–42 (noting that “land and buildings in the Paris region cannot be taken into consideration, since they do not in themselves enable those services to be provided” and that “for most passengers leaving or arriving in the Paris region or other French regions, the air transport services…are not interchangeable with the services offered in other airports”). 183 See for example the amount of price discrimination on display in just one Broadway theatre (in what is a highly competitive industry) in P Leslie, “Price Discrimination In Broadway Theatre,” (2004) 35(3) RAND Journal Of Economics 520–541. 181

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business practice, 184 which, on its own, does not evidence market power, 185 and which, even where there is market power, is a type of behaviour that almost invariably enhances market efficiency (although not necessarily consumer welfare). 186 Price discrimination can sometimes be relevant for market definition. The Commission’s Notice on market definition states that “[a] distinct group of customers for the relevant product may constitute a narrower, distinct market.” 187 This may be appropriate “when such group could be subject to price discrimination.” 188 As the Commission’s Notice clarifies, the first condition needed for a group of customers to form a separate relevant market is that “it is possible to identify clearly which group an individual customer belongs to.” 189 If it is not clear to which group a customer belongs, the particular price intended for the group will also be charged to many customers outside the group. If a hypothetical monopolist attempts to offer the same product at different prices to two different groups, customers will (all else equal) all attempt to buy at the lower price. Customers of the “high price” group will pretend to be customers of the “low price” group. The profitability of the price offered to the “high-price” group will be constrained by demand substitution if the members of that group can buy at the lower price, and, consequently, demand substitutes will need to be included in the market. Similarly, if the hypothetical monopolist charges a price based on some observable feature that is only partially associated with the target group, the result will be that many customers outside the target group will be charged the target price, and the demand substitutes that are relevant to these other customers must be included in the relevant market. However, price discrimination not only requires the existence of clearly identifiable sets of consumers, but also requires that trade among customers belonging to different groups or arbitrage by third parties is not feasible. Otherwise, the hypothetical monopolist would not be able to price discriminate among different customer groups. Effect of price discrimination on demand-side substitution. To better understand the impact of price discrimination on market definition, it is useful to distinguish between third-degree price discrimination (where consumers are grouped according to observable characteristics and each group is charged a different price for the same good) and second-degree price discrimination (where consumers are offered a menu of 184 See for example the extensive, unanimous discussion (involving a round-table discussion of six US academic economists) in the Empirical Industrial Organisation Roundtable, Federal Trade Commission, 2001, at p. 104ff. 185 S Carbonneau, P McAfee, H Mialon and S Mialon, Price Discrimination And Market Power, Emory Economics 0413, 2004. See also B Klein and JS Wiley Jr “Competitive Price Discrimination As An Antitrust Justification For IP Refusals To Deal,” Antitrust Law Journal, 2003. 186 See R Schmalensee, “Output And Welfare Implications Of Monopolistic Third-Degree Price Discrimination,” (1981) American Economic Review 239–4. See also AS Edlin, M Epelbaum and WP Heller, “Is Perfect Price Discrimination Really Efficient: Welfare And Existence In General Equilibrium,” (1998) 66 Econometrica 897–922. See also M Armstrong and J Vickers “Competitive Price Discrimination,” Rand Journal of Economics, 2001. 187 Market Definition Notice, OJ 1997 C 372/5, para. 43. 188 Ibid. 189 Ibid.

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price/quality combinations and each consumer selects his most preferred combination, i.e., groups are formed by self-selection). Third-degree price discrimination is only feasible when consumers of one group are clearly identifiable and there is no arbitrage. Each group of consumers constitutes a separate product market. This is the case we explained above and the one that has been explicitly covered in the Commission’s Notice on market definition. Market definition is not as straightforward, however, in the case of second-degree price discrimination. Consider a market scenario where firms offer different versions of the same product at different prices. In this way, they induce consumers to reveal their preferences by selecting their most desired version. 190 Some consumers will choose a low quality version because of its low price, while others will be willing to pay extra to have access to a higher quality version. For each version, a separate group of consumers can be identified. However, unlike in the case of third-degree price discrimination, those self-selected groups need not constitute separate relevant product markets: unless the price differential between the various versions is sufficiently large, consumers will regard them as substitutes and may be ready to switch between them in response to changes in their relative prices. Suppose, for example, that a firm sells two product varieties, H and L, at prices PH and PL, respectively. The firm knows that some customers may be willing to pay more for quality than others but it does not know the identity of those customers. The firm will set PH and PL so that those customers who are willing to pay more for quality choose the high quality/high price combination while those with a lower valuation for quality self-select the low quality/low price combination. The choice of PH will be, however, constrained by the choice of PL since if the differential is too large, all consumers, irrespective of their preference for quality will select the low quality/low price combination. So the mere fact that one observes menu pricing (i.e., second-degree price discrimination) is not enough to conclude that separate markets exits. The Commission has in many occasions recognised the possibility of substitution between different price/quality combinations in its market definition decisions. 191 Substitution may be asymmetric, however. For example, it may happen that at prevailing prices the high quality version may exert a considerable competitive constraint on the pricing of a low quality version—i.e., a price increase for the low quality version would trigger substitution towards the high quality variant—whereas the opposite is not true. In this example, there are two separate product markets: one

190 This strategy is known as “versioning”. See C Shapiro and HR Varian, Information Rules, Harvard Business School Press (1998), Chapter 3. 191 Case COMP/38.233, Wanadoo Interactive, Commission Decision of 16 July 2003, para. 182; Case T-342/99, Airtours plc v Commission [2002] ECR II-2585, para. 34. In Carnival/P&O Princess, whilst not taking a definitive decision, the Commission considered the possibility that cruises of different quality were in the same market. See Case COMP/M.2706, Carnival Corporation /P&O Princess. In Nestle/Ralston Purina, the Commission, even though stating that to some extent makers of pet food segment their products into “economy,” “mainstream” or “premium” categories, decided to not define separate product markets on quality levels. See Case COMP/M.2337, Nestle/ Ralston Purina.

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including the low and high quality versions, and another one including the high quality version only. 192 Effect of price discrimination on supply-side substitution. Price discrimination does not represent an obstacle to supply-side substitution. On the contrary, “challenges based on such price discrimination markets have to overcome formidable supply-side obstacles that reduce the likelihood of anticompetitive effects.” 193 In the case of thirddegree price discrimination, the products sold to different groups of consumers are functionally identical, which makes supply-side substitution a credible constraint and could lead to broad market definitions. When firms engage in versioning strategies (second-degree price discrimination), supply-side substitution is also relevant. A producer of a high-quality version can often downgrade his product at no significant cost and almost instantaneously. If that were the case, supply-side substitution would represent an effective competition constraint that would have to be taken into account when delineating the market. Price discrimination may even facilitate supply-side substitution. This is because, when price discrimination is feasible, the entrant into the candidate market can compete aggressively in it by setting low prices for a downgraded version of its product while charging high prices in its “home” market with the highquality version of its product.

3.5.2

Market Definition In Tying And Bundling Cases

Issue stated. Consider two components, A and B, which could be supplied separately or together. If there was sufficient demand, competing businesses could provide AB, A, and B. Sometimes businesses do just that: one can buy headache medicine, sinus medicine, and combined headache and sinus medicine. Other times there is not sufficient demand for A on a stand-alone basis and businesses provide AB and B: cars come with tyres and one can buy tyres separately, but not cars without tyres. And sometimes there is sufficient demand only for the combined product AB, which is the case for most books—generally one cannot buy chapters separately, even if they cover distinctly different subjects that are themselves the subjects of other books. 194 Tying and bundling occurs when a firm offers two products A and B jointly. Tying refers to a situation where product A (the tying good) can only be purchased with 192 In Case COMP/38.233, Wanadoo Interactive, Commission Decision of 16 July 2003, the Commission followed this logic to conclude the existence of a separate high-speed Internet access market. It commissioned a survey of high-speed users to determine whether they would switch back to low speed access if the price of high-speed access increased. It found that the rate of switching from high speed to low speed was much less than from low speed to high speed, an asymmetry that suggested the existence of a separate market for high-speed access. The Commission decision was upheld on appeal in Case T-340/03, France Télécom SA v Commission [2007] ECR II-107 and on further appeal in Case C-202/07 P, France Télécom SA v Commission [2009] ECR I-2369. 193 JA Hausman, GK Leonard and CA Vellturo, “Market Definition Under Price Discrimination,” (1996) 64(2) Antitrust Law Journal 367, at 383. 194 M Salinger, “A Graphical Analysis Of Bundling,” (1995) 68(1) Journal of Business 85–98; DS Evans and M Salinger, “Why Do Firms Bundle And Tie? Evidence From Competitive Markets And Implications For Tying Law,” (2005) 22(1) Yale Journal on Regulation 37; S Stremersch and GJ Tellis, “Strategic Bundling Of Products And Prices: A New Synthesis For Marketing,” (2002) 66(1) Journal of Marketing 55–72; and DS Evans and M Salinger, “An Empirical Analysis Of Bundling And Tying: Over-The-Counter Pain Relief And Cold Medicines,” CESifo Working Paper No. 1297, 2004.

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product B (the tied good); so only AB and B are sold in the market. In contrast, mixed bundling occurs when products A and B are sold in a bundle but are also available separately, albeit at a greater total cost. Finally, pure bundling occurs when the two products can only be purchased as part of a bundle, i.e., only AB is commercialised. Effect on market definition: tying and pure bundling. The effect of tying and bundling practices on market definition varies according to the type of bundling at issue. Consider first tying and bundling. The first key question in cases involving allegations of illegal tying and bundling is to establish whether A and B are “separate products” from the viewpoint of consumer demand or whether instead they should be treated as components of a single product. 195 Two products can only be tied if they are genuinely distinct products. That is, when an independent product market exists for each of them; or, in other words, when there are separate product markets for both A and B. 196 As noted by Professors Areeda, Elhauge, and Hovenkamp: 197 “However, under the competitive market practices test, a distinct market for the tied item does not imply separate products absent widespread sales of the tying item in unbundled form. For example, an independent market for carburettors does not make a car with carburettor installed two products because no significant independent market exists for cars stripped of their carburettors. Nor does an independent market for television tubes prove that a television and its installed tube are separate products because we have no significant independent market for televisions lacking tubes. Two items constitute one product under the market practices test unless each could efficiently be sold without the other.”

That is, one cannot determine whether the bundle AB is a single product or the combination of two separate products by looking solely at the demand for product B. In fact, once it is established that B is a separate product, the relevant question is whether there is demand for A as a stand-alone product. Are there are consumers prepared to pay a price to acquire product A without product B attached? If so, then A and B are separate products; otherwise, there are two products AB and B, and A is just a component of the first of the two products. A case that has considered this issue is BT Analyst. 198 In that case, the Office of Fair Trading (OFT) was concerned about a product (BT Analyst) which British Telecom (BT) was giving to multi-line customers free of charge. BT Analyst provided a retail telephony electronic bill service. A rival company, Magictelecom, complained alleging that BT was attempting to foreclose the market. The OFT decided that BT Analyst did not constitute a separate product. Instead, it concluded that there was a single market for retail telephony services, which should be considered as a “cluster” and which included inter alia an electronic bill provision service: 199

See Ch. 11 (Tying and Bundling) below. This test was approved by the Irish Supreme Court in Competition Authority v John O’Regan and others [2007] IESC 22, para. 120. 197 P Areeda, E Elhauge and H Hovenkamp, Antitrust Law, Aspen Publishers (2004) (2nd edn.), Vol. X, p. 183, ¶1745d2. 198 Pricing of BT Analyst, OFT Decision of 26 October 2004. 199 Ibid., para. 43. See too OFT Market Definition Guidelines, OFT 403, December 2004, para. 5.11. 195 196

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“In a cluster market, consumers choose suppliers on the basis of the most competitively priced cluster of products offered. Once a supplier is chosen on this basis, the consumer will purchase all products/services within the cluster from the chosen supplier. This means that purchasing decisions are not made on the basis of the individual prices of products. Consequently, the practice of ‘bundling’ these services together is not in itself anticompetitive.”

The Commission took a different position in Microsoft. In that case, the Commission concluded that operating systems and media players were separate products because there was separate demand for and supply of media players. The Commission held that whether there was separate demand for operating systems without media players did not need to be considered to determine whether operating systems and media players were separate products. This approach was upheld by the General Court. 200 Likewise in Google Android, the Commission defined individual markets for: (1) the licensing of smart mobile OSs; (2) Android app stores; (3) the provision of general search services; and (4) non OS-specific mobile web browsers. 201 In so doing, it rejected the argument that these products were part of a single market involving mobile platform-to-platform competition between Android and other OSs like Apple’s iOS. Among the reasons for this conclusion were: (1) app stores and smart mobile OS are only components of the smart mobile device and the spending on apps is small compared to the costs of a smart mobile device; (2) a user’s choice of an app store is determined by its choice of a smart mobile device and the corresponding mobile OS; (3) a user cannot, for technical reasons, install an app store that has not been developed for that OS; app stores and smart mobile OSs are separate products satisfying different user needs; (4) Google gives access to Android without the Play Store; and (5) several players offer only one of these products (e.g., Aptoide, LG Electronics, Opera, SFR and Yandex offer an app store but not a smart mobile OS). 202 This conclusion forms an important part of Google’s appeal. Effect on market definition: mixed bundling. There are several candidates for the relevant market when companies compete by offering mixed bundles. First, the bundle and the single products may all be part of the same relevant market. Second, there may be different relevant markets for the bundle and for the separate products. The first option is the correct one if at current prices consumers are practically indifferent between buying the bundle and the two products separately—that is, if a small increase in the price of the bundle induces consumers to acquire the two products separately. Alternatively, separate markets for the bundle and its constituent products may be found when consumers derive a large benefit from buying the products jointly, so that at current prices no substitution is likely in response to a small increase in the price of the bundle. 203 In sum, whether or not the stand-alone products belong to the same relevant market than the bundle depends on the size of any economies of scope in consumption. Microsoft, OJ 2007 L 32/23, paras. 342, 401, and 425, upheld on appeal in Case T-201/04, Microsoft v Commission [2007] ECR II-3601. 201 Case AT.40099, Google Android, Commission Decision of 18 July 2018. 202 Ibid., paras. 299-305. 203 Europe Economics, “Market Definition In The Media SectorEconomic Issues,” Report for the European Commission, DG Competition, 2002, pages. 24–26. 200

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These include transaction cost savings, learning-by-doing advantages, reduction in shipping costs, and technological compatibility benefits.

3.5.3

Aftermarkets

Issue stated. In some instances, the consumer of a product, typically a durable good (e.g., a jet engine), must subsequently purchase a complementary follow-on product (e.g., spare parts or maintenance and repair services). The market for the durable good is denoted as the “primary market” or the foremarket, while the markets for the followon products are known as “secondary markets” or “aftermarkets.” Examples of foremarkets and aftermarkets include inkjet printers and replacement cartridges, game consoles and game cartridges, electric toothbrushes and replacement heads, and photo cameras and their repair parts. 204 The application of the hypothetical monopolist test to situations where competition occurs both in primary and secondary markets requires great care. As noted by the Commission’s Market Definition Notice, the “method to define markets in these cases is the same, i.e., assessing the responses of customers based on their purchasing decisions to relative price changes.” 205 The difference lies in that attention needs to be paid to the “constraints on substitution imposed by conditions in the connected markets,” 206 and in particular to the extent to which competition in the foremarket prevents exploitation of consumers in the aftermarket(s). Effect on market definition. Consider the example of jet engines and the maintenance, repair, and overhaul (MRO) services for jet engines. 207 Suppose that the jet engines manufactured by different original equipment manufacturers (OEMs) are substitutes and, therefore, all belong to the same relevant product market. There are in principle three conceivable market configurations: (1) two dual markets—one for all jet engines and one for the spare parts and MRO services for all engine brands; (2) a single system market for jet engines including their spare parts and MRO services; or (3) a primary market for jet engines and separate secondary MRO markets for each engine brand. Which of these market configurations is appropriate depends on the particular facts of the case. 208 If the spare parts and the MRO services for each engine brand are compatible with the spare parts and the MRO services for other brands (and are 204 See C Shapiro, “Aftermarkets And Consumer Welfare: Making Sense Of Kodak,” (1995) 63(2) Antitrust Law Journal 483–512. See too J Temple Lang, “Practical Aspects Of Aftermarkets,” Competition Policy International (Spring 2011) Volume 7, No. 1, p. 199. For an economic discussion, see P Davis, L Coppi and P Kalmus, The Economics of Secondary Product Markets, Compass Lexecon study for the Office of Fair Trading, 21 December 2012. 205 Market Definition Notice, OJ 1997 C 372/5, para. 56. See also OFT Market Definition Guidelines, OFT 403, December 2004, paras. 6.1–6.7. See further, Case COMP/C-3/39692, IBM Maintenance Services, Commission Decision of 13 December 2011, para. 21 (whether an aftermarket service constituted a separate product market depended on the likely reaction of customers to moderate price increases in the aftermarkets”). 206 Market Definition Notice, ibid., para. 56. 207 This example is taken from Case COMP/M.2220, General Electric/Honeywell, and the judgment on appeal in Case T-210/01, General Electric Company v Commission [2005] ECR II-5575. 208 XXVth Report on Competition Policy (1995), para. 86. See also C McSorley, AJ Padilla and M Williams, “Switching Costs,” OFT-DTI Discussion Paper, April 2003, para. 7.16.

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perceived as such by customers), then market configuration (1) is likely appropriate. In this scenario, the purchase of a particular jet engine brand does not “lock-in” customers, who remain free to use the maintenance service providers and the spare parts of competing engine brands. If, instead, the spare parts and the MRO services of one brand are incompatible with those of other brands (or are perceived as such by customers), then the right configuration is either (2) or (3). Customers of a given engine brand are “forced” to make use of the spare parts for that engine, i.e., they are locked in. Which of the two is correct depends on the extent to which a rise in the price of spare parts and MRO services affects the sales of jet engines. That is, it depends on the extent to which current and future customers of jet engines react to a price increase in spare parts and MRO services, which inter alia depends on whether customers take into account the whole-life cost of the jet engine, including its maintenance and repair, when choosing the primary product. If they do take into account the cost of spare parts and MRO services when acquiring an engine, and the “characteristics of the primary good market make quick and direct consumer responses to relative price increases of the secondary products feasible,” 209 then a price increase in the aftermarket (spare parts and MRO services) would not be profitable due to a fall in sales of the primary product (jet engines) and the aftermarket. In such circumstances, the aftermarket does not constitute a separate product market, and so market definition (2) is likely to be appropriate. 210 However, in many cases customers either do not consider whole-life costs or underestimate them. This may make a unilateral rise in the price of spare parts and MRO services profitable, as it will not lead to a response in the primary market. In other cases, even if aircraft buyers correctly estimate the whole-life costs of an engine, a unilateral price rise for the aftermarket product will be profitable if: (1) the installed base of jet engine customers is locked in because it is extremely onerous to replace the existing jet engines with new ones in response to a price increase in spare parts and MRO services. CEAHR. The judgment of the General Court in CEAHR 211 confirms the foregoing analysis. In this case, the applicant had complained to the Commission that several luxury watch manufacturers had entered into an agreement or a concerted practice, and Market Definition Notice, OJ 1997 C 372/5, para. 56. See, e.g., the Commission’s approach in its investigation of Kyocera/Pelikan. Kyocera was accused of dominating the aftermarket for the supply of spare parts to its printers. The Commission found that Kyocera was not dominant in the market for spare parts as it was constrained by competition in the market for printers, since customers took into account the price of the consumables when considering which printer to buy. See Pelikan/Kyocera, XXVth Report on Competition Policy (1995), para. 87. See also Case COMP/C-3/39.391 European Federation of Ink Manufacturers, Commission Decision of 20 May 2009; Novo Nordisk, XXVIth Report on Competition Policy (1996), 37; and Infolab/Ricoh, Competition Policy Newsletter, No. 1, (February 1999) pp. 35-37. At national level see Kaisha v. Green Cartridge Company (Hong Kong) Limited (Hong Kong) [1997] UKPC 19 and Case CA98/6/2001, ICL/Synstar, Office of Fair Trading Decision of 20 July 2001. 211 Case T-427/08, Confédération européenne des associations d’horlogers-réparateurs (CEAHR) v Commission [2010] ECR I-5865. 209 210

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committed an abuse of dominance by refusing to continue to supply spare parts to independent watch repairers. The Commission rejected the complaint. One of its reasons was that in the Commission’s view the market for luxury watches and the two aftermarkets at stake (namely the market for the supply of spare parts, and the market for repair and maintenance services) were part of the same product market and that the luxury watch manufacturers did not hold a dominant position (either collectively or individually) in such a market. On appeal, the Court considered that the Commission had committed manifest errors in assessing market definition. In doing so, the Court made a series of clarifications. First, the Court stated that an aftermarket of a specific brand could be a separate relevant market in two situations: (1) if it was possible for a user of primary products of a brand to switch to secondary products manufactured by another producer (i.e., if secondary products of different brands were interchangeable); or (2) if it was possible for a user of primary products of one brand to switch to primary products of another brand in order to avoid a price increase for secondary products of the first brand: in this case there is a “system market” because price increases in the aftermarket would affect demand for products in the primary market so that such price increases would be unprofitable. Second, the Court held that it must be demonstrated that a sufficient number of consumers would switch to other primary or secondary products in order to render price increases unprofitable. 212 Third, the Court clarified that the mere possibility for a consumer to choose from several brands on the primary market was not sufficient to treat the primary market and aftermarkets as a single market unless that choice was made on the basis of the competitive conditions on the secondary market.213 Finally, the Court held that the fact that there are undertakings which are active only in the aftermarket provided a strong indication that the aftermarket was a separate market. 214 Applying the above to the case at hand, the Court held that the Commission had insufficient evidence to base its conclusion that the two aftermarkets in question did not constitute separate relevant markets. As regards spare parts, concerning the first test, the Court criticised the Commission for failing to assess the degree of substitutability between spare parts manufactured by competing brands and whether users of primary products of a specific brand could switch to spare parts manufactured by another producer. 215 Concerning the second test, the Court held that the Commission erred in finding that, in the event of a price increase on the market for spare parts of a specific brand, users that already owned a primary product could switch to primary products of another brand since, as the Commission itself recognised in the rejection decision, a moderate price increase for spare parts would be negligible as compared to the cost of 212 Ibid., paras. 79-80. The test was applied in Case COMP/C-3/39693, IBM Maintenance Services, Commission Decision of 13 December 2011, paras. 21-24, where the Commission stated that an aftermarket consisting of the secondary products or services of only one brand of primary product could be a relevant product market if: (1) switching to secondary products of other brands was not possible; and (2) there were high switching costs in the market for the primary product. 213 Confédération européenne des associations d’horlogers-réparateurs (CEAHR) v Commission, ibid., para. 105. 214 Ibid., para. 108. 215 Ibid., paras. 84-89.

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buying a new primary product (i.e., a new luxury watch). 216 In addition, the Court considered that the Commission’s claim that, in the event of a price increase of spare parts, users could sell their primary products in the second-hand market in order to buy a new primary product of another brand was implausible. 217 Further, the fact that there were undertakings which were active only in the production of spare parts was in itself a strong indication that spare parts constitute a separate market. 218 As regards repair and maintenance services, the Court again held that the Commission failed to take into account the fact that there were existing undertakings which were active only on the market for repair and maintenance services (namely independent repairers). 219 The Court further found that the Commission failed to establish whether a moderate price increase on the repair and maintenance services market would affect demand for the primary product (i.e., luxury watches) such that a price increase would be unprofitable. Moreover, the Court suggested that this would unlikely be the case since the decision itself indicated that the cost of repair and maintenance services was minor as compared to the cost of the primary product. 220 Example of overall “systems” market: EFIM. In the EFIM case, 221 producers of generic ink cartridges complained to the Commission that they were denied access to the intellectual property rights by the four original equipment manufacturers (OEMs) of printers: Hewlett Packard, Lexmark, Canon and Epson. The Commission dismissed the complaint as it concluded that it was not likely that the OEMs held a dominant position on the secondary market of ink cartridges, since the OEMs did not have a dominant position on the primary market of inkjet printers. According to the Commission, there is a single systems market rather than separate primary and secondary markets when the following conditions hold: (1) consumers can, and are likely to, make an informed choice when purchasing the system, taking into account, among other things, the total cost of ownership of the system (i.e. both the cost of the primary product and the lifecycle cost of the secondary product); and (2) in case of an apparent policy of exploitation being pursued in the secondary market, a sufficient number of customers would adapt their purchasing behaviour at the level of the primary market within a reasonable time. Condition (1) is more likely to hold when the secondary product is a consumable used with the primary product in fixed proportions, than in the case of spare parts and services. By contrast, it may be less likely to hold when replacement times for the secondary product are long and unpredictable.

3.5.4.

Market Definition In Multi-Sided Markets

Overview. In many industries, firms compete simultaneously for two (or more) groups of customers, A and B, whose demands are interrelated. As two leading economists Ibid., paras. 94-96. Ibid., paras. 97-99. 218 Ibid., para. 108. 219 Ibid., paras. 112-113. 220 Ibid., paras. 115-118. 221 Case AT.39391 Printers (EFIM complaint), Commission Decision of 20 May 2009, upheld on appeal Case T-296/09 EFIM v Commission EU:T:2011:693 and Case C-56/12 P EFIM v Commission C:2013:575. 216 217

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note, “many if not most markets with network externalities are two-sided.” 222 This is certainly the case of the software industry at large. The video game market constitutes a neat example of a multi-sided market. No game platform, such as Sony’s PlayStation, Nintendo’s Wii or Microsoft’s Xbox, can sell consoles without games to play on. But no game platform will ever convince game developers to write for its console without the prospect of an installed base of consumers. The same is true of platform search services like Google who compete to acquire “eyeballs” (or attention) from users searching for information, e.g., on products, on one market side and to then match those users to vendors or advertisers on the other side who have services or products to sell. The same is also true of most social media platforms. The key feature of multi-sided markets is therefore that, to succeed, competitors must get all sides of the market on board. This requires solving a typical “chicken-and-egg problem.” 223 Competitors in multi-sided industries have to decide which side of the market will be subsidised and which one will be charged to make money. This explains why zero or even negative prices are often observed in multi-sided industries. For example, videogame manufacturers treat the console side as a loss leader and make money on game developers by charging per-unit royalties on games and fixed fees for development kits. Search services and social media platforms are normally free to users, but are monetised through selling advertising. Manufacturers of PC operating systems use the opposite price structure. They aim to make money on end users and do not make or lose money on application developers. The choice of an appropriate business model seems to be the key to commercial success and is, therefore, the subject of significant corporate attention. 224 Two-sided markets raise a series of discrete issues under Article 102 TFEU. As discussed in Chapter Four (Dominance), competition between multi-sided platforms, if it close and intense enough, may mean that no single platform is dominant even if users on one or other platform face some switching costs. Chapter Seventeen (Abuses In Digital Platform Markets) deals in detail with the law and economics of multi-sided platforms and the decisional practice and case law on abuses in such markets. Such markets can present confounding features under Article 102 TFEU. For example, a zero price by a dominant firm is normally predation. But in a multi-sided market, it may be inherent that one side pays nothing or next to nothing and that a customer group on the other side who needs access to those users is the source of monetisation. Similarly, tying is more likely to be prevalent and efficient in such markets given the interdependencies between the two sides. This chapter is concerned with a relatively narrow issue about how the multi-sidedness of such markets affects market definition under Article 102 TFEU. A number of preliminary remarks may be useful. First, whilst it may be possible to avoid defining a 222 C Rochet and J Tirole, “Platform Competition In Two-Sided Markets,” (2003) 1(4) Journal Of The European Economic Association 990–1029. In practice, there may be more than two sides but the two-sided paradigm is useful for ease of exposition. 223 See B Caillaud and B Jullien, “Chicken & Egg: Competition among Intermediation Service Providers,” (2012) RAND Journal of Economics 34(2): 309-328. 224 See DS Evans and R Schmalensee, Catalyst Code: The Strategies Behind The World’s Most Dynamic Companies, Harvard Business School Press (2007).

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relevant market in certain other cases, 225 the definition of a relevant market is an essential prerequisite for the assessment of dominance under Article 102 TFEU. 226 Second, market definition in multi-sided markets can raise significant theoretical complications. 227 In practice, many of these issues are likely to be arcane in the sense that provided the effects of the market having two or more sides are taken into account somewhere in the analysis—which, in law, they must be 228—the question of market definition should not assume such importance. Third, it is important that the delineation of the relevant market should not become a sort of “guillotine” for the substantive analysis of whether competition is restricted. A good example is Cartes Bancaires, where the Court of Justice overturned the Commission’s and General Court’s analysis primarily due to basic errors on the multi-sided nature of the markets concerned. The banks operated a card payment system and had introduced measures to try to balance the mix of members’ activities in: (1) issuing cards on one side of the market; and (2) acquiring merchants to join the payment system on the other. The measures provided for contributions designed to disincentivise the former activity and incentivise the latter. The Commission and General Court held that the benefits on the merchant acquisition side of the market could not be taken into account in assessing a restriction of competition by object, since they were not part of the relevant market. The Court of Justice held that this was wrong: 229 “…the General Court wrongly held…that the analysis of the requirements of balance between issuing and acquisition activities within the payment system could not be carried out in the context of Article [101(1) TFEU] on the ground that the relevant market was not that of payment systems in France but the market, situated downstream for the issue of payment cards in that Member State. In so doing, the General Court confused the issue of the definition of the relevant market and that of the context which must be taken into account in order to ascertain whether the content of an agreement or a decision by an association of undertakings reveals the existence of a restriction of competition ‘by object’ within the meaning of Article [101(1) TFEU]. In order to assess whether coordination between undertakings is by nature harmful to the proper functioning of normal competition, it is necessary…to take into consideration all relevant aspects – having regard, in particular, to the nature of the services at issue, as well as the real conditions of the functioning and structure of the markets – of the economic or legal context in which that coordination takes place, it being immaterial whether or not such an aspect relates to the relevant market.

225 For some object infringements under Article 101 TFEU it may be unnecessary to define the relevant market. See, e.g., Case T-62/98Volkswagen v Commission, [2000] ECR II-2707. 226 See Case 6/72, Europemballage Corporation and Continental Can v Commission [1973] ECR 215, para. 32 (“the definition of the relevant market is of essential significance”). 227 For a detailed treatment, see J-U Franck and M Peitz, “Market Definition And Market Power In The Platform Economy,” Centre on Regulation in Europe, May 2019. 228 This is well established under Article 101 TFEU: see Case C-67/13 P, Groupement des cartes bancaires v Commission, EU:C:2014:2204 and Case C-228/18 Gazdasági Versenyhivatal v Budapest Bank Nyrt. and Others, EU:C:2020:265. Not only is there no reason to think that the position would be different under Article 102 TFEU, but it is surely a fortiori given the market positions and unilateral practices of many two-sided platforms. 229 Ibid., paras. 76-79 (citations omitted).

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That must be the case, in particular, when that aspect is the taking into account of interactions between the relevant market and a different related market…and, all the more so, when, as in the present case, there are interactions between the two facets of a two-sided system.”

The final point is that it is important that there should be at least tolerable clarity as to how market definition is approached in multi-sided markets under Article 102 TFEU. An unduly narrow market definition will, all else equal, make it more likely that a firm is found dominant, which will then automatically engage its “special responsibility” not to abuse its position. Equally, an unduly broad definition may allow genuinely abusive conduct to escape scrutiny. On a more prosaic level, firms, and their advisers, are entitled to have some tolerable degree of legal certainty so that they can advise their principals, and the businesses can react accordingly if necessary. Effect of multi-sidedness on market definition: economic theory. In multi-sided industries, if a firm (a multi-sided platform in the jargon of those businesses) raises the price it charges to one group of customers (group A), it will not only lose sales made to those customers, but also will experience a reduction in the volume of sales to the other group of customers (group B), since the members of group B value the product offered by the firm more when it attracts more group A customers. That is, when a multi-sided platform raises the price charged to the A side of the platform, it negatively impacts the B side of the market, which then causes an additional negative impact on the A side and so on. For example, consumers may have an expectation that they can receive search services or social media access free of charge. This pricing structure can make sense if access to those users can be monetised through advertising on the second side of the market. But if users on the first side were charged a positive price, their number may reduce, which in turn would reduce significantly the attractiveness of that platform to advertisers. A good example is the rise of Facebook and demise of MySpace: as soon as users started leaving in large numbers, the economics of MySpace ceased to make sense. A paper by Evans and Noel argues that the standard techniques used to test for a relevant competition law market are incorrect when the firms under scrutiny operate multi-sided platforms. 230 In particular, they claim that applying standard (one-sided) critical loss analysis to a multi-sided business would lead to excessively narrow market definitions. This is because the one-sided formulation when applied to a price increase for group A consumers fails to take into account the loss in volume (and hence on profits) on the B side of the platform, as well as the subsequent reduction of activity on both sides of the business. The authors have extended the standard (one-way) critical loss analysis formulas to the case of multi-sided platforms, 231 which allegedly demonstrates that the bias from the misuse of one-sided formulas in a multi-sided setting can be very large.

230 DS Evans and MD Noel, “Defining Antitrust Markets When Firms Operate Two-Sided Platforms,” Columbia Business Law Review (2005), Vol. 3. 231 See also OECD, Rethinking Antitrust Tools for Multi-Sided Platforms (2018), Chapters 1 and 2.

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These views have been supported by a number of academics and practitioners 232 and, overall, were taken on board by the US Supreme Court in the controversial Ohio v Amex ruling. 233 Amex is a credit card platform that links cardholders with merchants. A key question in this case was whether Amex operates: (1) in two separate antitrust markets, facing cardholders in one market and merchants in the other; or (2) instead operates in a single product market. The Court opted, by a tight majority (5 to 4), for (2): Amex was a multi-sided platform supplying only one product—the transaction. This conclusion has been criticised. 234 In addition to the four US Supreme Court Justices that disagree with the majority in Ohio v Amex, several other economists and practitioners, as well as the Commission (see below), 235 consider that, while the demand from both sides of the platform may be linked by (indirect) network effects, and hence the prices charged on one side may have an impact on the other side’s demand, that does not imply that the multi-sided platform faces the same competitive constraints on both sides of the market. It may (in which case whether we define a single market or not is irrelevant) or it may not (in which case we should consider separate product markets). Some appear to consider that—unlike non-transaction platforms, such as Google Search or Facebook—transaction platforms, such as Amex, the NYSE and other stock exchanges, face the same conditions of competition on both sides of the market because their product is the transaction. 236 This is, however, unclear. It may depend on whether both sides of the market single home (i.e., use a single platform, e.g. a single credit card) or multi-home (i.e., they use multiple credit cards). If one side of the market single homes, the other is likely to multi-home, and vice versa. Platforms will compete very aggressively for the single homers, but will be able to exploit the multi-homers. In fact, each platform with a customer base of single homers on one side of the market, will be able to charge monopoly prices on the multi homing side of the market. This is because from the view of the users on the multi-homing side, each platform is a gatekeeper to its single-homing customers on the other side. Thus, while users on the single-homing side can force platforms to compete with each other; those on the multi-

232 See, e.g., L Filistrucchi, D Geradin, E van Damme and P Affeldt, “Market Definition In TwoSided Markets: Theory And Practice,” (2014), Journal of Competition Law and Economics (2014), Vol. 10(2), 293-339. For a wider discussion, see J-U Franck and M Peitz, “Market Definition And Market Power In The Platform Economy,” Centre on Regulation in Europe, May 2019. 233 Ohio v. Am. Express Co., 138 S. Ct. 2274 (2018). 234 For discussion of the case see HJ Hovenkamp, “Platforms and the Rule of Reason: The American Express Case,” (2019) Faculty Scholarship at Penn Law, 2058. Competition Policy International devoted an entire volume to the case: see “Ohio v. American Express: A Year Later…,” Competition Policy International, Spring 2019, Volume 3, Number 2. 235 See e.g., M Katz, “Platform Economics And Antitrust Enforcement: A Little Knowledge Is A Dangerous Thing,” Journal of Economics and Management Strategy, (2019), Vol. 28, 138-152. See also T Wu, “The Supreme Court Devastates Antitrust Law,” The New York Times, 26 June 2018. 236 See DS Evans and R Schmalensee, Antitrust Analysis of Platform Markets: Why the Supreme Court Got It Right in American Express, CPI-Books 2, 2020.

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homing side face a number of monopoly platforms. 237 Effect of multi-sidedness on market definition: case law and decisional practice. The Commission’s practice on market definition in multi-sided markets under Article 102 TFEU can be simply stated: the Commission has to date basically applied its standard (i.e., one-sided market) product substitution analysis, and has not factored into that analysis the consequences of the multi-sidedness of the markets concerned. In the context of market definition, there has been no serious consideration of the extent to which the pricing structure and price levels across the two market sides affects market definition or consideration of issues of substitution between alternative multi-sided business models. The most that can be said is that, in Article 102 TFEU cases, to the extent that the Commission has taken into account competition from other multi-sided platforms, it has only done so at the stage of assessing dominance. Even then, as discussed in Chapter Four (Dominance), its assessment has tended to be fairly perfunctory. In Google Shopping, the Commission defined markets for general search services and comparison shopping services. 238 But there is no real discussion of the interrelationship between the search and advertising sides of the market, and how this affects pricing structures and levels for purposes of market definition. Whilst there is some discussion as to competition between general search services and social networking sites, the analysis starts and ends with the trite observation that general search services and social media platforms perform difference functions. This of course is true, but how advertisers on the other side of the market decide whether to advertise on Google Search or Facebook (or both) is an unavoidably important issue also. A similar approach was taken to rejecting the argument that price comparison services compete with merchant platforms like Amazon and eBay. In Google Android, the Commission defined individual markets for: (1) the licensing of smart mobile OSs; (2) Android app stores; (3) the provision of general search services; and (4) non OS-specific mobile web browsers. 239 In so doing, it rejected the argument that these products were part of a single market involving mobile platform-to-platform competition between Android and other OSs like Apple’s iOS. Among the reasons for this conclusion were: (1) app stores and smart mobile OS are only components of the smart mobile device and the spending on apps is small compared to the costs of a smart mobile device; (2) a user’s choice of an app store is determined by its choice of a smart mobile device and the corresponding mobile OS; (3) a user cannot, for technical reasons, install an app store that has not been developed for that OS; (4) app stores and smart mobile OSs are separate products satisfying different user needs; (5) Google gives access to Android without the Play Store; and (6) there are several players that offer only one of these products (e.g., Aptoide, LG Electronics, Opera, SFR and Yandex offer

237 For a discussion of the importance of multi-homing on market definition, see J-U Franck and M Peitz, “Market Definition And Market Power In The Platform Economy,” Centre on Regulation in Europe, May 2019. 238 Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017, Section 5. 239 Case AT.40099, Google Android, Commission Decision of 18 July 2018.

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an app store but not a smart mobile OS). 240 This conclusion forms an important part of Google’s appeal Finally, in Google AdSense, the Commission defined two markets for: (1) general search services; and (2) online search advertising constitute. 241 It accepted that these were two different but interlinked sides of a general search engine platform: online search advertising involves the matching by search advertising platforms of user queries with relevant search ads. But its analysis concluding that the market for online search advertising constitutes a distinct product market was based on fairly traditional single market product substitution analysis (e.g., offline versus and online advertising, online search advertising versus online non-search advertising). There is virtually no consideration of the economic implications of the price structures and levels across the two market sides. To be clear, the issue is not that the Commission should necessarily put complementary products on two market sides into a single market: market definition, after all, is mainly about product substitution. But as discussed above in the context of aftermarkets and tying, there is a well-developed body of economic literature on how market definition should be applied in situations where there are two potentially inter-dependent products. In the case of multi-sided markets, there is an equally well-developed body of literature explaining how pricing structure and pricing levels on one market side can affect the other and, therefore, market definition. 242 The Commission thus far has taken virtually no account of this in Article 102 TFEU cases. As discussed in Chapter Four (Dominance), this omission makes it all the more important that, when it comes to assessing dominance, the traditional indicators such as market shares are not given undue weight in the case of multi-sided markets without also considering both the constraints within the market defined under Article 102 TFEU and the out-of-market constraints, notably competition from alternative business models or platforms. Whilst scant consolation, the situation under US antitrust decisional practice currently fares no better either. As explained above, the US Supreme Court found that Amex compete in a single multi-sided market in Ohio v Amex. 243 The Court’s opinion was motivated by Amex’s particular multi-sided business model, whereby it intermediates between merchants and cardholders. This precedent was recently quoted in US v Sabre and Farelogix, 244 where the District Court concluded that while Sabre (a Global Distribution System that intermediates between airlines and travel agents) and Farelogix (a technology provider that is sold to airlines so that they can establish direct connections between airlines and travel agents) compete in practice, they do not compete as a matter of law, since Sabre operates a multi-sided business whereas Farelogix is a one-sided business.

Ibid., paras. 299-305. Case AT.40411, Google Search (AdSense), Commission Decision of 20 March 2019, Section 6.2. 242 See sources at footnote 232 supra. See also DA Crane, “Market Power Without Market Definition,” 90 Notre Dame L. Rev. 31 (2014). 243 Ohio v. Am. Express Co., 138 S. Ct. 2274 (2018). 244 US District Court, District of Delaware, US v Sabre and Farelogix, C.A. No. 19-1548-LPS, (April 2020). 240 241

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This ruling demonstrates the problems of delineating markets according to the business model employed by the firms whose conduct is being analysed. Because firms with different business models often impose a competitive constraint on each other, a market definition that segregates firms according to their respective business models is bound to be under-inclusive. At the very least, these potential competitive constraints have to be assessed at the stage of dominance. But the concern of course is that market definition is supposed to define the most immediate price and non-price constraints. If these are defined narrowly under market definition, the scope to bring them back in under dominance may, in practice, be more restricted. “Free” services and non-price competition and market definition. Multi-sided platforms raise a specific issue concerning how to define relevant markets when products or services are free. As discussed above, the usual test for market definition is whether a small but significant non-transitory increase in price (SSNIP) would be profitable for the firm concerned. This test uses data on prices and sales volumes to assess whether a hypothetical monopolist could profitably increase the prices of the products in the candidate market by 5–10% during a sustained period of time. But this test cannot be applied, easily or at all, to a zero price on one side of the market or, more generally, where quality is the key dimension of competition. This issue has led policy-makers and competition authorities to focus on quality-related vectors of competition as a means to define relevant markets (and likewise the degree of independence from normal competitive forces for purposes of dominance). For example, search engines compete on producing relevant and useful search results and returning such results with the minimum delay or latency. But using quality as a metric for market definition is not without its issues. One obvious problem is how to define quality for areas that are not susceptible to a simple cardinal. For example, whilst the latency of search results can be measured in time, there is no single, objective definition of a relevant and useful search result, still less what degree of (ir)relevance users might tolerate before getting fed up and switching to something else. 245 As the OECD notes: 246 “Identifying a single exhaustive definition of quality is a challenging endeavour. Quality is a multidimensional concept that encompasses, inter alia, the durability, reliability, location, design and aesthetic appeal, performance and safety of a product. Product choice can also be treated as a quality attribute, although it remains dissociable from the individual product itself. In essence, quality is a relative concept, insofar as the level of quality found in any one product is defined by reference to the quality levels of other products. Quality incorporates a significant element of subjectivity, because certain quality aspects may be valuable only to some consumers, or more valuable to some than others. Consumers may also disagree as to ranking of product characteristics that are each viewed as desirable to a certain extent. Accordingly, while some quality attributes are certain, objective and observable (for example, the engine power of a car), others are subjective, unobserved and dependant [sic] upon the perceptions of consumers (for example, the prestige associated with a particular automobile marque). The multifaceted and indistinct nature of quality thus complicates the task of Likewise, even if latency can be measured in time, it may be unclear how much latency users might tolerate before switching. For one thing, that would depend on the alternatives and their speed. 246 See Organisation for Economic Co-operation and Development, The Role and Measurement of Quality in Competition Analysis (28 October 2013), Executive Summary, p.6. 245

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providing a robust definition of this concept.”

In place of the SSNIP test, the significant non-transitory decrease in quality test (SSNDQ) test has been proposed. 247 The SSNDQ test is similar, as the name itself suggests, from a functional perspective, to the SSNIP. It seeks to measure whether an undertaking could permanently and profitably decrease the quality of the product or service it offers for free to consumers (but which it monetises in a different way) or if this will be defeated by users switching to a different product or service. The OECD summarises the concept of the test as follows: 248 “The primary question…is whether ‘a change in the performance attributes of one commodity would induce substitution to or from another. If the answer is affirmative, then the differentiated products, even if based on alternative technologies, ought to be included in the relevant product market.’ Rather than the five percent price increase that is typically used in the SSNIP test, the authors propose a 25 percent decrease in a major performance attribute for their SSNDQ test. So the idea is that if an existing manufacturer were to reduce quality to that extent, holding all else equal, and no substitution to other products occurs, then the first type of product is a relevant market. If substitution takes place, then the other products are in the relevant market, too.”

As its proponents themselves concede, applying this test in practice is not without its challenges. Indeed, in a submission to the OECD, the Commission itself noted that “[a]lthough quality considerations play an important role in the definition of relevant markets or closeness of competition, the difficulties with a precise definition and quantification of quality do not speak in favour of using quality parameters instead of price in economic-driven tools such as the SSNIP test.” 249 In short, measuring the volume effect of a price increase under the SSNIP test is in principle much easier than assessing the impact of a hypothetical quality change on switching under the SSNDQ. Commission practice on quality-based assessments in multi-sided markets. The Commission’s application of quality-based assessments of market definition in multisided markets under Article 102 TFEU bears out many of the above difficulties and controversies. In Google Android, the Commission found Google dominant in markets for: (1) the licensing of smart mobile OSs; (2) Android app stores; and (3) general search services. In reaching this conclusion, it applied the SSNDQ test and other qualitative assessments when considering demand-side substitutability. 250 The most controversial aspect of this conclusion was the suggestion that the market was confined to licensable smart mobile OSs. In reaching this conclusion, the Commission This was first mentioned by R Hartman, D Teece, W Mitchell, and T Jorde, “Assessing Market Power in Regimes of Rapid Technological Change,” 2 Industrial and Corporate Change 317 (1993), albeit not, at the time, in the context of digital platforms (which did not then exist). More recent articles include A Ezrachi and ME Stucke, “The Curious Case Of Competition and Quality,” Oxford Legal Studies Research Paper No. 64/2014 and D Mandrescu, “The SSNIP Test and Zero-Pricing Strategies: Considerations for Online Platforms,” European Competition and Regulatory Law Review, 2018, 2(4), p. 244. 248 Organisation for Economic Co-operation and Development, The Role and Measurement of Quality in Competition Analysis (28 October 2013), Executive Summary, p.15. 249 Ibid., European Union Contribution, p.80. 250 Case AT.40099, Google Android, Commission Decision of 18 July 2018, para. 286. 247

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concluded that non-licensable smart mobile OSs, such as iOS and BlackBerry OS, do not belong to the same product market as licensable smart mobile OSs. 251 Given that Google was for practical purposes the only real major global licensor of licensable smart mobile OSs, the Commission’s conclusion on market definition effectively made the conclusion of dominance unavoidable. In reaching this conclusion, the Commission made a number of points. First, the Commission noted that “OEMs cannot obtain a licence to use iOS or BlackBerry OS because Apple and BlackBerry do not grant licences to third parties” and that “neither Apple nor BlackBerry has licensed or announced its intention to license its smart mobile OS to any third party.” 252 But this is trite: if one defines a candidate market for licensable OSs, by definition non-licensable products are not a substitute. This point thus assumes what the Commission must prove. Second, whilst the Commission accepted that “non-licensable mobile OSs may exercise a degree of constraint on Google’s position…because of possible competition between iOS/BlackBerry devices and Google Android devices both at the level of users of smart mobile devices and of app developers,” it concluded overall that they were an “insufficient indirect constraint,” which confirmed that Apple’s iOS should not be included in the relevant market for licensable smart mobile OSs. 253 This is the most controversial of the Commission’s conclusions, and forms an important part of Google’s appeal. To most people, it is surprising to conclude that Android OS smart phones would be considered not to compete with Apple iOS smart phones. These two “ecosystems” are engaged in intense competition in respect of their OS performance, quality, and innovation through rapid and successive updates trying to outdo each other. Indeed, it is clear that the quality of the OS is one of, if not the, most important aspects of quality in a smart phone, so to suggest that users would pay insufficient regard to quality differences seems surprising. Equally, the notion that two of the world’s largest and most profitable companies would be unable to exercise a material constraint on each other in an area of direct overlap seems surprising. Third, the Commission makes various claims about Google’s ability to degrade Android, thus addressing SSNDQ-type issues. 254 But the Commission is notably vague about what exactly a deterioration of quality is or how should it be interpreted. Instead, it alludes to various possibilities for degradation but provides no benchmark against which they can be compared or tested. For example, proponents of the SSNDQ have argued for a 25% quality degradation test. 255 By contrast, the Commission proposes no cardinal or other benchmark at all. Equally, the notion that “users of Google Android devices are not sensitive to variations in the quality of their smart mobile OS and would not change their device purchasing behaviour in the event of a small but significant,

Ibid. para. 238. Ibid. paras. 239-240. 253 Ibid. paras. 242-243. 254 Ibid., paras. 267, 483, 487, 549, and 552. 255 See R Hartman, D Teece, W Mitchell, and T Jorde, “Assessing Market Power in Regimes of Rapid Technological Change,” 2 Industrial and Corporate Change 317 (1993). 251 252

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non-transitory deterioration of the quality of Google Android” 256 seems dubious. The amount of public, free information on the relative performance of and improvements in smart phone OSs is overwhelming, and it can only logically exist in such form and scale if users are interested in it. Fourth, the Commission argues the Android users face a degree of “lock-in” in seeking to switch to iOS, including “the need to download and purchase existing apps for the new smart mobile OS, the need to learn and become familiar with a new interface and the need to transfer a large amount of data through often inconvenient and imperfect mechanisms.” 257 But, as discussed in Section 3.4.2 above, it is necessary but not sufficient to point to switching costs when considering potential “lock-in” issues. Other issues that need to be considered include, e.g., whether consumers factor in these issues at the point of purchasing the smartphone and whether mobile operators facilitate switching through subsidised handsets, ratios of new to existing customers, etc. Fifth, the Commission disregards the point that Android is an open source licence which allows licensees to develop their own versions of Android. Accordingly, even if Google sought to degrade Android, the limitless availability of non-degraded versions from non-Google sources would make it pointless to do so. Finally, the Commission did not apply the SSNIP test. It stated that “the Commission considered user switching behaviour in the event of a small but significant, nontransitory deterioration of the quality of Google Android because Google is unlikely to increase the price of Google Android, given that its business model is based on OEMs accessing Google Android on the basis of a royalty-free licence.” 258 The Commission added that: (1) the SSNIP test is not the only method available to the Commission when defining the relevant product market; (2) the Commission is required to make an overall assessment of all the evidence and there is no hierarchy between the types of evidence that the Commission can rely upon; and (3) a SSNIP test would not have produced a different outcome because OEMs cannot switch to non-licensable smart mobile OSs, regardless of the magnitude of a potential price increase or quality degradation in licensable smart mobile OSs. 259

Ibid., para. 487. Ibid., paras. 522-523. 258 Ibid., footnote 488. 259 Ibid. paras. 264-266 (citing Case T‑699/14, Topps Europe Ltd v Commission EU:T:2017:2). 256 257

Chapter 4 DOMINANCE 4.1

INTRODUCTION

The central importance of dominance under Article 102 TFEU. Once the relevant market on which the allegedly dominant undertaking operates is defined, its potential dominance falls to be assessed. Establishing dominance is an essential pre-requisite under Article 102 TFEU. Being dominant is not itself contrary to Article 102 TFEU. 1 However, if dominance is not proven, no abuse can be made out, regardless of the anticompetitive effects of the conduct in question. This is an important point of distinction from other legal regimes that sanction unilateral conduct. For example, under Section 2 of the United States Sherman Act 1890, a firm that is not yet dominant may commit a violation if its conduct would lead to monopolisation or, in the case of attempted monopolisation, there is a dangerous probability that it would succeed in doing so. Thus, at least in theory, a firm with a small market share could violate Section 2 so long as there was a dangerous probability that its attempt to monopolise would eventually succeed. In contrast, it is essential under Article 102 TFEU to establish dominance at the time of the alleged abuse. The fact that a non-dominant firm’s conduct might, if left unchecked, lead to dominance in future is irrelevant. 2 The basic legal concept of dominance. Dominance in law implies that a firm has a high degree of immunity from the normal disciplining forces of rivals’ competitive reactions, consumers, and other market disciplining forces. The working definition established in United Brands is that dominance “relates to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers.” 3 This test was cited with approval in Hoffmann-La Roche, although the Court of Justice added the caveat that “such a position does not preclude some competition … but enables the undertaking … if not to determine, at least to have an appreciable influence on the conditions under which that competition will develop, and in any case to act largely in disregard of it so long as such conduct does not operate to its detriment.” 4 It is immediately obvious that the distinction between “some competition” but not enough to avoid a finding of dominance is hard to draw in practice.

1 Case 322/81, NV Nederlandsche Baden-Industrie Michelin v Commission [1983] ECR 3461, para. 10 (“[A] finding that an undertaking has a dominant position is not in itself a recrimination.”). 2 See, however, the discussion of “potential competition” in relation to Case C-307/18, Generics (UK) Ltd and others v CMA, EU:C:2020:52 in Section 3.2.4 of Ch. 3 (Market Definition). 3 Chiquita, OJ 1976 L 95/1, confirmed on appeal in Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, para. 65. 4 See Vitamins, OJ 1976 L 223/27, confirmed on appeal in Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 39. See also United Brands, ibid., para. 113.

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The basic economic concept of dominance. The economic concept of dominance does not fully correspond with the above legal definition. In economics, the notion of dominance is broadly associated with the concept of market power. A firm enjoys a dominant position if it has significant market power, i.e., if it is able to charge prices significantly above competitive levels or restrict output (or innovation) significantly below competitive levels for a sustained period of time. However, a firm may enjoy significant market power (i.e., setting supra-competitive prices), even if it cannot behave to an appreciable extent independently of its competitors, customers, and ultimately consumers. That is, for example, the case of all firms operating in oligopolistic markets. Their pricing policies are constrained both by the prices set by actual and potential competitors and the behaviour of their customers, who in most cases will cut down their consumption in response to a price increase. Strictly speaking, only a monopolist operating in a market protected by insurmountable barriers to entry and facing a completely inelastic demand would be able to behave independently of its competitors, customers, and consumers. The term “dominance” is also sometimes used in the economic literature to describe a situation in which a firm with market power (the “dominant” firm) competes with a number of smaller, price-taking firms (which comprise the so-called “competitive fringe”). 5 The dominant firm has the ability to set the market price, which is accepted by all members of the competitive fringe. But it cannot be said to be capable of behaving independently of rivals and consumers, because it must take into account the aggregate capacity of the competitive fringe. The dominant firm enjoys market power because the competitive fringe cannot produce enough output to clear the market. However, its power to raise prices is restricted to its residual demand, i.e., the portion of market demand that cannot be satisfied by the fringe. The different types of dominance. Different types of dominance are considered in this chapter. The first, and simplest, situation is when a single firm is dominant as a seller. Section 4.2 treats this concept in detail. A second concept is “collective dominance”—a situation that arises in oligopolistic markets when firms are interdependent and realise that competing with each other would ultimately be self-defeating and, hence, behave “as if” they had coordinated their behaviour in the marketplace. Coordination of this kind can give rise to dominance and is discussed in Section 4.3. A degree of market power may also exist on the buying side. Indeed, as discussed in Section 4.4, buyer power may itself rise to the level of dominance. Certain decisions and cases under Article 102 TFEU have mentioned a concept of “super-dominance”—a situation in which a firm is a nearmonopolist. The relevance of this concept is discussed in Section 4.5. Section 4.6 deals with the question of dominance in so-called multi-sided markets, where the dominance assessment usually involves greater complexity than in single-sided markets. Finally, Section 4.7 addresses the requirement of a dominance in “substantial part of the common market” under Article 102 TFEU. This, strictly speaking, is not about dominance but a jurisdictional question for activating Article 102 TFEU. In practice, it is rarely if ever a standalone problem.

See GJ Stigler, “The Dominant Firm And The Inverted Price Umbrella,” Journal Of Law And Economics (1965) (Vol. 8) 167. 5

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SINGLE FIRM DOMINANCE 4.2.1

Basic Approach

Need for comprehensive assessment in the specific market context. Dominance cannot be assessed on the basis of a single factor or checklist of factors. Market power is not an absolute term but a matter of degree, and the degree of market power will depend on the circumstances of each case. For this reason, EU Court judgments and Commission decisions emphasise that a firm’s ability to behave independently of competitive constraints must be assessed in light of all relevant market circumstances: 6 “In general a dominant position derives from a combination of several factors which, taken separately, are not necessarily determinative. In order to find out whether ... an undertaking [holds] a dominant position on the relevant market it is necessary first of all to examine its structure and then the situation on the said market as far as competition is concerned.”

Such an examination requires a “comprehensive survey” of the competitive conditions on the relevant market before making any determination as to dominance. 7 This comprehensive survey aims to assess the firm’s degree of market power and determine whether that amounts to a dominant position. This means taking fully into account all of the influences that strengthen or weaken its market position, its advantages and disadvantages, and constraints on its competitive behaviour in the relevant market. Although the measurement of dominance cannot be approached in a mechanical fashion, the decisional practice and case law have established a reasonably well-defined series of steps to assess dominance. The first is to measure the relative strength of the firms on the relevant market based on their market shares. The second broad step is to assess whether entry or expansion by rival firms is sufficiently easy for them to contest the market share of the leading firm. The ability of buyers to off-set seller power should also be analysed. Finally, all of these elements should be cross-checked against the evidence of actual competition on the market.

4.2.2

The Starting Point: Market Shares

Generally. Market share data are the first and, in many cases, most important element in the assessment of dominance, since, assuming the market has been properly defined, and that market shares are not so volatile as to be questionable indicators, they are an easily available proxy for the measurement of the market power enjoyed by firms. Both the market share of the firm under investigation and the market shares of its rivals on the same market must be examined, i.e., a relative dimension. There is also a temporal dimension, since dominance implies lasting power not transience. The calculation of the market shares of particular undertakings is only possible once the relevant market on which the undertakings operate is identified. A firm’s market share is calculated on the basis of sales generated by the undertaking on the relevant product and

Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, paras. 66–67. 7 See Opinion of Advocate General Roemer in Case 6/72, Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 251, para. 262. 6

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geographic market. 8 The importance of a correct market definition is therefore obvious. If the market is correctly defined, a market share calculation may prove very useful and may even allow a presumption of dominance if market shares are sufficiently high. In contrast, an ill-founded market definition will make market share calculations meaningless. Assigning market shares. There is no single correct approach to assigning market shares. In most cases, volume or value data will suffice. The Notice on market definition sets forth a number of basic points. 9 First, the total market size and market shares should be calculated on the basis of the most readily-available information (e.g., companies’ estimates, studies commissioned to industry consultants and/or trade associations). Volume data will often be available and may constitute a first point of reference. In Clearstream, the market share in the market for primary clearing and settlement services under German law was based on the number of securities deposited at Clearstream facilities. 10 In Wanadoo, market shares were based on the number of broadband internet subscribers signed up to the company. 11 In TACA, shares of the market for maritime transport services between North America and Europe were based on the volume of transported container cargo. 12 Volume of the mail order trade, calculated in terms of the number of parcels delivered, was the basis of the market share findings in Deutsche Post. 13 In Google Shopping, after arguing that several methods of calculating market shares by volume were available, including per number of queries, users, page views or number of sessions, the Commission looked at page views 14 and site visits 15 to establish Google’s share of the national markets for general search services. The Commission used a different method for the purpose of assessing shares in the worldwide market (excluding China) for Android app stores in its decision in Google Android, calculating the share of smart mobile devices using Android on which a given app was pre-installed 16 together with the share of a given Android app store on the basis of the number of apps downloaded via that store. 17 Second, in cases of differentiated products, sales in value and their associated market shares will usually better reflect the relative position and strength of each supplier. A

8 Commission Notice on the definition of the relevant market for the purposes of Community competition law, OJ 1997 C 372/5, para. 53 (“The definition of the relevant market in both its product and geographic dimensions allows the identification of suppliers and the customers/consumers active on that market. On that basis, a total market size and market shares for each supplier can be calculated on the basis of their sales of the relevant products in the relevant area.”). 9 Ibid., Part IV (calculation of market shares). 10 Clearstream (Clearing and settlement), OJ 2009 C 165/05. 11 Case COMP/38.233, Wanadoo Interactive, Commission decision of 16 July 2003 upheld on appeal in Case T-340/03, France Télécom SA v Commission [2007] ECR II-107 and on further appeal in Case C-202/07 P, France Télécom SA v Commission [2009] ECR I-2369. 12 Trans-Atlantic Conference Agreement, OJ 1999 L 95/1, on appeal Joined Cases T-191/98 and T212/98 to T-214/98, Atlantic Container Line AB and Others v Commission [2003] ECR II-3275. 13 Deutsche Post AG, OJ 2001 L 125/37, para. 32. 14 Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017, para. 277. 15 Ibid. 278. 16 Case AT.40099, Google Android, Commission Decision of 18 July 2018, para. 592. 17 Ibid. para. 593.

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similar principle applies in respect of services, where volumes do not generally convey meaningful information. Finally, for certain industries and products, volume and/or value data may not be meaningful indicators of competitive strength. Other relevant indicators might therefore include capacity, the number of players in bidding markets, units of fleet (e.g., as in aerospace), the reserves held (e.g., as in mining), the total number of the company’s products currently in use (customer base), or the company’s share of gross additions to the market (i.e., the share of new customers). An extensive decisional practice has arisen under the EU Merger Regulation in respect of using data other than volume or value for assessing market shares. 18 For example, in Mitsui/CVRD/Caemi, the Commission used publicly-available capacity data of the iron ore suppliers active on the market to calculate market shares. 19 When considering the merger of a number of banks the Commission used league tables to establish the market positions of the investment banks in question because market shares were too difficult to determine. 20 In bidding markets, the Commission has sometimes looked at the market share data of previous years to help determine market positions. In Price Waterhouse/Coopers & Lybrand, the Commission considered it relevant to look at tender offers and bidding data over several years “in order to appraise more fully the nature and extent of the competitive process in the Big Six [accountancy] market for large companies.” 21 Finally, determining market shares in markets subject to constant technological innovation is often difficult. For example, the Commission has pointed out that “there is no reliable publicly available estimate of the size of either the Internet sector as a whole or of any relevant sub-sector.” 22 Final problematic aspects of calculating market shares include the treatment of captive production and private label sales. Captive production (i.e., output that is consumed by the supplier internally) is generally excluded by the Commission when calculating market shares on the basis that “these quantities are not available [for sale to non-integrated competitors] in the market.” 23 Private label sales—which constitute sales to retailers under whose own brands the products will be sold—are not often included with sales of the suppliers’ own branded products when considering market shares. 24 However, both sets of data may be relevant when establishing market position as discounting private label sales may underestimate a manufacturer’s market strength if it is the main or only source of supply for private label products. Need for caution with market shares. The Commission recognises that market shares are not conclusive evidence of dominance and therefore not a proper substitute for a comprehensive examination of market conditions. Thus, the Guidance Paper states that market shares “provide a useful first indication” but that the Commission will also 18 See N Levy and C Cook, European Merger Control Law: A Guide To The Merger Regulation, Matthew Bender/Lexis Nexis, Ch. 9 (Market Share Calculation and Assessment). 19 See Mitsui/CVRD/Caemi, OJ L 92/50. 20 Credit Suisse Group/Donaldson, Lufkin & Jenrette, OJ 2000 C 348/13. 21 Price Waterhouse/Coopers & Lybrand, OJ 1999 L 50/27, paras. 85–94. 22 WorldCom/MCI, OJ 1999 L 116/1 para. 95. 23 Du Pont/ICI, OJ 1993 L 7/13 para. 30. 24 Case T-290/94, Kaysersberg v Commission [1997] ECR II-2137, para. 174.

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“interpret market shares in the light of the relevant market conditions, and in particular of the dynamics of the market and of the extent to which products are differentiated.” 25 The Court of Justice expressed a similar view in Hoffmann-La Roche, acknowledging the importance of market shares in the assessment of dominance, but also their limitations: 26 “The existence of a dominant position may derive from several factors which, taken separately, are not necessarily determinative but among these factors a highly important one is the existence of very large market shares. [Nevertheless,] a substantial market share as evidence of the existence of a dominant position is not a constant factor and its importance varies from market to market according to the structure of these markets, especially as far as production, supply and demand are concerned. [In addition,] the relationship between the market shares of the undertakings involved in the concentration and of its competitors, especially those of the next largest … [is] significant evidence of the existence of a dominant position.”

These statements make sense. 27 First, market definition and market shares are simply a proxy for measuring market power: they cannot be decisive in themselves. Second, experience with market definition under Article 102 TFEU has shown that it is more art than science, in particular given the reluctance to embrace the use of quantitative techniques and the corresponding over-reliance on qualitative evidence. High shares in markets defined in this way should not be enough to show dominance. Third, high market shares may not confer much market power where rival firms offer products that are differentiated in characteristics or branding. Market dynamics also matter. Market shares will be more important in mature or declining markets than markets characterised by rapid growth and technological change. Fourth, computing market shares may in certain circumstances be extremely complex, which in turn may limit their robustness in terms of the implications for dominance. 28 Finally, the most important point is not the existence of high market shares, but whether such shares are likely to confer lasting market power.29 A proper assessment of entry barriers is critical for a robust dominance assessment. If barriers to entry are low, firms with very high market shares may have no market power. If they are high (e.g., due to the existence of exclusive or special rights), firms with even modest shares may have market power. As discussed in detail below, the need to identify

25 See Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings (hereinafter, the “Guidance Paper”), OJ 2009 C 45/7, para. 13. 26 Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, paras. 38–40, 48. See also Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, paras. 66–67. 27 See D Geradin, P Hofer, F Louis, N Petit, N Walker, “The Concept Of Dominance,” Global Competition Law Centre Research Papers On Article 102 TFEU, College of Europe, July 2005, p. 15. 28 For example, the existence of demand interdependencies in multi-sided markets has potentially significant implications for the assessment of dominance. As explained by Evans and Schmalensee, computing market shares for multi-sided firms is an extremely complex exercise. This is because a multisided platform’s power depends on its shares on all sides of the market and those shares need not be equal. Furthermore, it is not possible to calculate value-based market shares when one of the products is offered for free or at a subsidised price, since that price does not reflect the value received by the user. See DS Evans and R Schmalensee, “The Antitrust Analysis Of Multi-Sided Platform Businesses,” in R Blair and S Sokol, (eds.), Oxford Handbook On International Antitrust Economics, Oxford University Press, 2013. 29 See Guidance Paper, para. 15.

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material barriers to entry and not over-rely on market shares is particularly acute in high technology markets. For all the foregoing reasons, the Commission is therefore required to, and generally does, carry out a “comprehensive survey” of the competitive conditions on the relevant market before making any determination as to dominance, even in cases involving high market shares. Accordingly, in assessing dominance, elements such as market entry, exclusive rights, capacity utilisation, maturity of the market, and technical and financial resources may factor in the assessment. For instance, an undertaking with a high market share may be effectively constrained by another firm without a large market share or by actual or potential competitors. 30 Moreover, countervailing buying power may negate a dominant position. In cases where competition is dynamic, such as bid markets or industries with high innovation, market shares are subject to frequent fluctuation and may be unreliable as indicators of dominance. General market share indicators. Although market shares cannot be mechanically assessed, the decisional practice and case law allow some generalisations to be made about the relative importance of certain market share levels. In general, very high shares (i.e., in excess of 70%) raise a strong presumption of dominance. Large market shares (i.e., between 50% and 70%) raise a weaker presumption of dominance. Shares between 40% and 50% require particularly close examination of the facts and do not raise presumptions as to the presence or absence of dominance. Finally, shares below 40% have, in all but exceptional cases, been regarded as incapable of supporting a dominance finding. But it bears emphasis that all of these statements are, at most, presumptions, and not a proper substitute for a detailed fact-based assessment of the market and the practices at issue. The EU practice in this regard differs materially from the treatment of monopolisation conduct under US law, where monopolisation concerns have usually only been found when market shares exceed 70%. 31 Many commentators therefore argue that

30 See Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 41 (“An undertaking which has a very large market share and holds it for some time, by means of the volume of production and the scale of the supply which it stands for—without those having much smaller market shares being able to meet rapidly the demand from those who would like to break away from the undertaking which has the largest market share—is by virtue of that share in a position of strength which makes it an unavoidable trading partner and which, already because of this secures for it, at the very least during relatively long periods, that freedom of action which is the special feature of a dominant position.”) (emphasis added). 31 See RE Bloch, HG Kamann, JS Brown, and JP Schmidt, “A Comparative Analysis Of Article 82 And Section 2 Of The Sherman Act,” paper presented to the International Bar Association 9th Annual Competition Conference, 21-22 October 2005, European University Institute, Fiesole, p. 12 (“In contrast, U.S. courts tend to require higher levels of market share in order to find monopoly power. A 70 percent market share generally is the dividing line above which a firm may be found to have monopoly power; below this, courts typically do not find monopoly power to exist absent particular market structures that are likely to confer the ability to raise prices or exclude competitors. Historically, U.S. courts considered a predominant share of the market to give rise to an inference of monopoly power. This approach more recently has been discarded in favour of an analysis that considers other market conditions in conjunction with market share, the most important of which is the existence or lack of barriers to entry. Thus, U.S. courts have held that a market share of 100 per cent does not necessarily establish monopoly power absent a showing that the respective market is protected by entry barriers. In this respect, U.S. law under Section 2 seems less restrictive than Article [102] abuse of dominance standards.”).

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a significant problem with Article 102 TFEU is that the threshold for intervention is too low. 32 a. Market shares exceeding 70%. Very high market shares are, “in themselves,” save in exceptional circumstances, evidence of the existence of a dominant position. 33 In AAMS, the General Court found, unsurprisingly, that a trader with 100% share of the market for wholesale distribution of cigarettes held a de facto monopoly and thus held a dominant position. 34 A share of over 70% is generally considered as strong evidence of a dominant position. Indeed, as a practical matter, most Article 102 TFEU cases have involved undertakings with very high market shares. Hoffmann-La Roche concerned a firm with markets shares of 70–90% in several vitamins, which was deemed “so large that they prove the existence of a dominant position” 35 In Hilti the Court of Justice upheld the Commission’s view that market shares of between 70% and 80% were so high as not to require further evidence to establish dominance. 36 The same situation arose in TetraPak, where the undertaking concerned held a market share of around 90%. 37 In Telefónica the Commission found that Telefónica was: (1) dominant in the Spanish wholesale regional broadband access market where it was the only operator, and (2) dominant in the Spanish wholesale national broadband access market, because it had held a market share constantly above 84%. 38 Likewise, in Tomra, the Commission concluded that Tomra was dominant because its market shares in Europe had continuously exceeded 70% prior to 1997 and 95% after 1997 39 while finding Intel to be dominant in an overall x86 CPU market because it consistently held very high market share of, or around, 80% 40. Finally, in Google Shopping the Commission found that Google had a market share of above 90% in all but three EEA states on the market of general search services in 2016, 41 while concluding in Google Android that Google had a share of above 96% on the worldwide market (excluding China) for licensable smart mobile OSs. 42

32 Ibid. (“Thus, one of the shortcomings of the current interpretation of Article [102] is that the threshold of what constitutes market dominance is set too low, i.e., 50 percent market share, and meeting this threshold, without more, immediately suggests dominance. This has significant ramifications from a policy standpoint in terms of discouraging efficiency-enhancing conduct that is not unlawful.”). 33 See Tetra Pak/Alfa-Laval, OJ 1991 L 290/35. 34 See Case T-139/98, Amministrazione Autonoma dei Monopoli di Stato (AAMS) v Commission [2001] ECR II-3413, para. 52. 35 See Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 59. 36 Case T-30/89, Hilti AG v Commission [1991] ECR II-1439, para. 92, on appeal Case C-53/92P, Hilti AG v Commission [1994] ECR I-667. 37 See Tetra Pak II, OJ 1992 L 72/1, on appeal Case T-83/91, Tetra Pak International SA v Commission [1994] ECR II-755, para. 109, and confirmed in Case C-333/94 P, Tetra Pak International SA v Commission [1996] ECR I-5951. See also Joined Cases C-395/96 P and C-396/96 P, Compagnie Maritime Belge Transports SA, Compagnie maritime belge SA and Dafra-Lines A/S v Commission [2000] ECR I-13655. 38 See Case COMP/38.784, Telefónica, Commission decision of 4 July 2007. 39 See Tomra, OJ 2008 C 219. 40 See Case COMP/C-3/37.990, Intel, Commission decision of 13 May 2009. 41 Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017, para. 280. 42 Case AT.40099, Google Android, Commission Decision of 18 July 2018, para. 446. See also Case AT.40153, E-book MFNs and related matters (Amazon), Commission Decision of 4 March 2017, where the Commission found Amazon’s market share for the distribution of English language e-books in the whole of the EEA to have been between 80% and 100% in the period 2011-2015 (para. 59).

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b. Market shares between 50% and 70%. Large market shares are also likely to raise a presumption of dominance. For example, in Michelin I, market shares of 57% and 65% were considered, in the absence of any countervailing indications, sufficient evidence of dominance. 43 In AKZO, the Court of Justice went as far as to establish a rebuttable presumption of dominance based on market shares in excess of 50%. 44 At the same time, however, the Court also referred to the relevance of all other economic evidence on the market when establishing market power. 45 Likewise, the Commission carried out comprehensive examinations of competitive conditions in the affected markets before reaching a conclusion as to dominance, emphasising that: 46 “Market share, while important, is only one of the indicators from which the existence of a dominant position may be inferred. Its significance in a particular case may vary from market to market according to the structure and characteristics of the market in question. To assess market power for the purposes of the present case, the Commission must consider also the relevant economic evidence [in addition to market share data].”

In Telefónica, the Commission found that Telefónica enjoyed a dominant position in the retail broadband market with a market share of around 55% in terms of the number of end users and above 60% in terms of revenues. 47 c. Market shares between 40% and 50%. A share between 40% and 50% is not conclusive evidence of the presence or absence of dominance, but requires the assessment of additional factors for confirmation. In Hoffmann-La Roche, the Court of Justice overturned the Commission’s finding of dominance on the vitamin B3 market because its market share of 43% did not by itself “constitute a factor sufficient to establish the existence of a dominant position,” since there was insufficient corroborative support from other factors. 48 d. Market shares below 40%. Shares below 40% have, in general, not supported a finding of dominance, barring other supporting factors. 49 Indeed, the Guidance Paper Case 322/81, NV Nederlandsche Baden-Industrie Michelin v Commission [1983] ECR 3461. See ECS/AKZO, OJ 1985 L 374/1, upheld on appeal in Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3359, para. 60. 45 Ibid., paras. 59–61. 46 See ECS/AKZO, OJ 1985 L 374/1, paras. 68–69. See also Napier Brown/British Sugar, OJ 1988 L 284/41; and Case T-36/91, Imperial Chemical Industries plc v Commission [1995] ECR II-1847. Likewise, the Commission has in several cases approved mergers that involved very high market shares. See, e.g., Alcatel/Telettra, OJ 1991 L 122/48 (81% share of transmission equipment and 84% share of microwave equipment in Spain); Fiat Geotech/Ford New Holland, OJ 1991 C 118/14 (58% share in the Italian combine harvester market); Case IV/M.72, Sanofi/Sterling Drug, Commission decision of 10 June 1991 (74% share of the cold preparations market in the Netherlands); Procordia/Erbamont, OJ 1993 C 128/07 (85% share of Irish sales of urological preparations and 78% share of Italian sales of local anaesthetic); and Electrolux/AEG, OJ 1994 C 187/07 (70% of sales of certain major domestic appliances in Scandinavia). 47 See Case COMP/38.784, Telefónica, Commission decision of 4 July 2007. 48 See Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 58. See also, in the context of merger control, Kesko/Tuko, OJ 1997 L 110/53, confirmed on appeal in Case T-22/97, Kesko Oy v Commission [1999] ECR II-3775. 49 See Virgin/British Airways, OJ 2000 L 30/1, paras. 91–94, upheld in Case T-219/99, British Airways plc v Commission [2003] ECR II-5917. The Commission found that British Airways was dominant with 43 44

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now states that “the Commission considers that low market shares are generally a good proxy for the absence of substantial market power,” and suggests a 40% threshold in this connection. 50 Special circumstances would generally be required to substantiate a finding of dominance below a 40% market share. 51 For example, in Magill, the Commission found that three broadcasters had a factual and legal monopoly over the supply of their respective copyright-protected television listings information, notwithstanding the fact that no single undertaking accounted for more than 33% of the total televisions listings information. 52 Market shares below 30% are, however, extremely unlikely to create dominance, but there is no presumption that a market share below 30% offers a “safe harbour.” But, clearly, significant barriers to entry would be required to substantiate dominance at such low market share levels. Very low market shares are considered definitive indicators of the absence of dominance. Thus, in SABA II, a market share of 10% was considered to be conclusive evidence of the absence of dominance. 53 Rivals’ market shares. A finding of dominance requires evidence that a firm’s competitors are unable to constrain its market behaviour by acting as a viable alternative source of supply to customers. The competitive constraint exerted by rivals is therefore a critical part of the assessment of dominance and market shares are highly relevant in this connection. 54 In general, where the Commission has found the market share difference between the “dominant” firm and its next largest competitor to exceed 20%, it has considered there to be a greater likelihood of dominance. This consideration has been given greater weight when the gap between the leading firm and its nearest competitor has remained stable over a significant period of time. 55 In Telefónica, the Commission relied on a smaller market share gap, however. It referred to the “fact that Telefónica’s market share was more than 11 times bigger than that of its largest competitor” for several

a share of 39.7% of the relevant market. On appeal, the General Court confirmed that in the circumstances of the case, a share of 39.7% is “to be regarded as large”—in particular where that share “constitutes a multiple of the market shares of [the] main competitors” (para. 211). The following factors were also considered as indicative of British Airways’ dominance: (1) its world-ranking in number of passengerkilometres flown and the range of its transport services and hub network (para. 212); (2) the fact that the services operated by British Airways to and from the United Kingdom airports had the “cumulative effect of generating the purchase by travellers of a preponderant number of British Airways tickets through travel agents in the United Kingdom, and, correspondingly, as many transactions between British Airways and those agents” (para. 215); and (3) the fact that British Airways is an obligatory business partner of travel agents (para. 217). 50 Guidance Paper, para. 14. 51 Guidance Paper, ibid. 52 Magill TV Guide/ITP, BBC and RTE, OJ 1989 L 78/43, confirmed on appeal in Case T-69/89, Radio Telefis Eireann (RTE) v Commission [1991] ECR II-485, Case T-70/89, British Broadcasting Corporation and BBC Enterprises Ltd (BBC) v Commission [1991] ECR II-535, and Case T-76/89, Independent Television Publications Ltd (ITP) v Commission [1991] ECR II-575, and further confirmed in Joined Cases C-241/91 P and C-242/91 P, Radio Telefis Eireann and Independent Television Publications Ltd (RTE & ITP) v Commission [1995] ECR I-743. 53 SABA’s EEC distribution system, OJ 1983 L 376/41. 54 See Case T-102/96, Gencor Ltd v Commission [1999] ECR II-753, para. 202 (quoting Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 48). 55 See, e.g., Du Pont/ICI OJ 1993 L 7/13, para. 4; Aérospatiale-Alenia/de Havilland, OJ 1991 L334/42, para. 28; Shell/Montecatini, OJ 1994 L 332/48, paras. 61–62; and MCIWorldCom/Sprint, OJ 2003 L 300/1.

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years to support its conclusion that Telefónica enjoyed a dominant position in the national wholesale access broadband market. 56 The Commission will not only consider the individual market shares of the allegedly dominant firm’s rivals, but will also look at their cumulative share value to determine whether or not they collectively generate sufficient competition on the market which prevents the undertaking under investigation from acting independently of them. In British Airways/Virgin, the General Court held that there was a substantial gap between the market share of British Airways (BA) and both the market share of its closest rival and the cumulative shares of its five main competitors in the period between 1992 and 1998. 57 In 1992, the difference in market shares between BA and its nearest competitor, British Midland, was 42.4%. Its closest competitor over the entire period was American Airlines in 1996 when it held 7.6% of the market, i.e., BA’s market share was still 32.9% greater. The difference between BA and the cumulative share value of its five closest competitors varied between 21.8% and 34.4%. These differences were seen as sufficiently substantial to support a finding of dominance. The relative weight to be attached to rivals’ market shares relative to the firm under investigation should not, however, be overstated. The point is not so much their market share, but whether they can quickly expand production to meet demand. In HoffmannLa Roche the Court of Justice explained that even a “very large market share” does not confer dominance if “competitors with much smaller shares” are “able to meet rapidly the demand from those [customers] who would like to break away from the undertaking which has the largest market share.” 58 Particularly in markets characterised by excess capacity, even competitors with small shares may be able to constrain any efforts by the leading firm to reduce output or raise prices, indicating that, notwithstanding a high share, the leading firm is not dominant. Market share evolution. The evolution of the market shares of competitors should also be carefully considered. This is true in general but especially in markets for new products and services and a fortiori in high technology markets where market shares can change rapidly. The position of a market leader with very high but declining market shares is very different from that of a dominant firm with high and stable market shares. Temporary leadership does not reflect lasting market power, much less the ability to act independently of consumers and competitors, especially if the high market shares do not translate into high price-cost margins. In practice, the Commission has not always paid attention to the dynamics of market share, both when assessing dominance and effects. In British Airways/Virgin, BA’s market share was 39.7%, which is already borderline in terms of credible dominance. But the critical point was that it had dropped from around 45% during the period under investigation, with rivals’ shares increasing by corresponding amounts. The Commission did not conduct any serious examination of the reasons for this market share drop, and its

See Case COMP/38.784 Telefónica, Commission decision of 4 July 2007, para. 236. Case T-219/99, British Airways plc v Commission [2003] ECR II-5917. 58 Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 41. 56 57

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implications for the dominance assessment. Instead, it focused on a series of points that were equally true whether the market share was 39.7% or 45%. 59 More recently, in two Qualcomm decisions, 60 Qualcomm’s very high shares in 3G and 4G chipsets—at the time two emerging products—were considered indicative of a position of dominance even when they had been declining sharply over time. This approach was curious because, when it came to the question of abuse in one of the decisions, the Commission excluded from its price-cost test “quarters at the beginning of a product’s lifecycle in which the product had not yet reached a sufficient scale of production and the average variable cost was therefore unusually high, thus not providing a meaningful cost benchmark for a price-cost test.” 61 It seems odd to accept a lack of steady state when it comes to abuse issues but not to take account of instability, or, even, stable decline, when it comes to dominance. Market shares in high technology markets. In high technology markets, there is, in general, more reason to be concerned about barriers to entry and less reason to place too much stock in market shares. In fast-growing sectors characterised by short innovation cycles large, market shares may sometimes turn out to be ephemeral and not necessarily indicative of a lasting dominant position. Several factors may contribute to this. First, most digital goods can be distributed worldwide in milliseconds with no transport costs. Second, the incremental costs of scaling up digital product volumes are close to zero for established operators, thus leading to potentially extreme returns to scale. Third, the scope to catalogue digital information is also virtually limitless. Fourth, consumer uptake of new products or new kinds of products can be dramatic. Witness the growth of Facebook from a public launch in 2006 to over 1 billion users by 2012, and now over 2.5 billion. More recently, during the Covid-19 health crisis, Zoom’s daily active user base grew by 67% per cent in the first three months of 2020. Finally, where network effects are present, the speed by which enormous market power can be acquired and lost can be remarkable. Some or all of the above features may also be true of multi-sided platform markets, particularly network effects. In the case of multi-sided platforms that compete for “attention”—such as search engines or social media platforms who offer free services to one side of the market to then monetise by selling online advertising—there is also another important potential feature which could make their positions susceptible to rapid change and, therefore, current market shares of less significance when it comes to assessing dominance (albeit the assessment of barriers to entry may then become more important). Where competition occurs to gain users’ attention, the sources of potential competitive threats are subject only to the limits of human imagination and addiction. For example, it was not self-evident that Angry Birds, Candy Crush, and posting pictures of your supper (Instagram) would be among the most effective attention-grabbing tools in recent years in the digital world. But the point is that, in such markets, radically different out-of-market options may displace current platforms. By contrast, in most other markets, including non-platform innovation markets, the lines of potential competition tend to be

See points listed at footnote 49 supra. Case AT.40220, Qualcomm (Exclusivity Rebates), Commission Decision of 25 January 2018; and Case AT.39711, Qualcomm (Predation), Commission Decision of 18 July 2019. 61 Case AT.39711, Qualcomm (Predation), Commission Decision of 18 July 2019, para. 940. 59 60

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more linear. For example, a pharmaceutical molecule can only be replaced by another molecule or, maybe, biotechnology. The Commission seems to accept the above points in theory, but they do not appear to have had much impact on its practice in relation to the conclusions to be drawn from market shares in high technology markets. The Commission has obviously accepted the point made by the EU General Court in Cisco that in recent and fast-growing sectors characterised by short innovation cycles, large market shares may sometimes turn out to be ephemeral and not necessarily indicative of a dominant position. 62 The Commission has quickly added, however, that: (1) “the fact that an undertaking may enjoy high market shares in a fast-growing market cannot preclude the application of Article 102 [TFEU];” 63 (2) even “the existence of lively competition on a particular market does not rule out the possibility that there is a dominant position on that market, since the predominant feature of such a position is the ability of the undertaking concerned to act without being materially constrained by this competition in its market strategy and without for that reason suffering detrimental effects from such behaviour;” 64 and (3) another important factor for assessing dominance “is the existence of barriers preventing potential competitors from having access to the market and actual competitors from expanding their activities on the market.” 65 In the case at hand, it considered “large shares” held over a four-year period to be a “good indication” of competitive strength. 66

4.2.3

Barriers To Entry And Expansion

Overview. It has long been recognised that the prospect of new entry or expansion by existing rivals may constrain the commercial behaviour of the leading firm and therefore preclude dominance. A firm with a high market share is much less likely to be able to behave independently of competitors, customers, and consumers in a market where entry or expansion barriers are low. When the likelihood of new entry or expansion by existing firms in the market is high, incumbent firms will be constrained by the fear that increased prices would lead to actual or potential rivals expanding output in response to price rises. On the other hand, significant entry/expansion barriers make it easier for a leading firm

62 Case T-79/12, Cisco Systems, Inc. and Messagenet SpA v Commission, EU:T:2013:635, para. 69, cited in Case AT.39711, Qualcomm (Predation), Commission Decision of 18 July 2019, para. 260. The EU Courts have confirmed, however, that the same cannot be said of a fast-growing market that “does not show signs of marked instability during the period at issue and where a rather stable hierarchy is established:” see Case T-340/03 France Telecom v Commission, [2007] ECR-II 22, paras. 107-108. 63 Qualcomm (Predation), ibid. 64 Qualcomm (Predation), ibid., para. 261. 65 Qualcomm (Predation), ibid., para. 262. 66 Qualcomm (Predation), ibid. para. 268. See, to similar effect, Case AT.40411, Google AdSense, Commission Decision of 20 March 2019, para. 231; Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017, para. 274 (“strong and stable market shares…and there has been no effective entry in any EEA country during that period.”); Case AT.40099, Google Android, Commission Decision of 18 July 2018, para. 445; and Case AT.40220, Qualcomm (Exclusivity Rebates), Commission Decision of 25 January 2018, para. 306.

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to increase prices or adopt strategic exclusionary actions. 67 Assessing barriers to entry and expansion is thus an essential second step in identifying a dominant position. 68 4.2.3.1 Definition of barriers to entry Basic definition. Barriers to entry have been defined as “factors which prevent or hinder companies from entering a specific market.” 69 Entry barriers may result for instance from a particular market structure (e.g., industry with high sunk costs, brand loyalty of consumers to existing products) or the behaviour of incumbent firms. Governments can also in practice be a source of entry barriers, for example through licensing requirements and other regulations. There is some disagreement among economists about what should be considered as a barrier to entry. A number of different positions can be identified: 1.

Bain. The seminal work of Bain, published in 1956, defined barriers to entry as factors that allow established firms to “elevate their selling prices above the minimal average costs of production and distribution … without inducing potential entrants to enter the industry.” 70 These factors include, among many others, economies of scale and scope, capital requirements and product differentiation. According to Bain, those entry barriers determine the number of firms in the industry, the prices that obtain in equilibrium and the welfare enjoyed by consumers. This view has been criticised on several levels. 71 First, the number of firms in the industry is determined by more than just those factors. In many industries, for example, high concentration is not the consequence of entry barriers but of vigorous competition. Second, many of the factors that Bain treats as determinants of industry structure and performance, such as the economies of scale or scope or the degree of product differentiation, are not exogenous but can be altered by investment. In industries where competition requires investment and the creation of new products, concentration is typically high and prices are often above marginal cost, and yet consumer’s welfare is maximised. In sum, the factors listed by Bain as barriers to entry do not tell us much about: (a) the actual market power of the industry players; or (b) the satisfaction of consumers given market outcomes.

2.

Stigler. In 1968, Stigler defined a barrier to entry in narrower terms: a barrier to entry is a cost advantage that an incumbent firm enjoys compared to entrants. That is “a cost of producing … which must be borne by a firm which seeks to

See XXIst Report on Competition Policy (1991), pp. 85–86. See, e.g., Case 6/72, Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 215, paras. 29–37 (Court of Justice annulled the Commission’s finding of dominance due to the Commission’s failure to examine supply-side substitution); and SCA/Metsä Tissue, OJ 2002 L 57/1, para. 93. 69 See European Communities, Glossary of Competition Terms (2003). 70 JS Bain, Industrial Organisation, John Wiley (1968), p. 2. See also JS Bain, Barriers To New Competition, Harvard University Press (1956), p. 3. 71 See DW Carlton, “Why Barriers To Entry Are Barriers To Understanding,” American Economic Review Papers And Proceedings (2004), 466–470. 67 68

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enter the industry but which is not borne by firms already in the industry.” 72 In the absence of such differential cost advantage the incumbent would be unable to earn supra-competitive returns: any attempt to raise prices above costs would be beaten by entry. The key, therefore, lies in the existence of asymmetries between established competitors and potential entrants: a barrier to entry exists only if the potential entrant’s long run costs after entry are greater than those of the incumbent. 73 It follows that economies of scale cannot give rise to barriers to entry unless the cost functions of entrants and incumbents are dissimilar. Likewise, according to Stigler’s definition, and unlike Bain’s, capital requirements are not a barrier to entry unless the incumbent never paid for them. The problem with Stigler’s definition is that in some cases an incumbent may be able to earn supra-competitive rents even if it enjoys no cost advantage over entrants. Suppose that the incumbent invests in a new plant and commits itself to producing so much output that no other firm is able to enter at a profit. Then entry is blocked even if both the entrant and the incumbent incur the same sunk investment costs. 3.

Bork. A few years later, Bork proposed an even narrower definition than Stigler’s. He argued that defining barriers to entry as including anything that makes it difficult for a new firm to enter the market is too broad. In his opinion, economic and technical barriers merely represent the realities of doing business (e.g., sunk costs of entry) or the superior efficiency of the incumbent firm relative to rivals (e.g., due to economies of scale or scope or network effects). The only obstacles to entry that should be of interest from an antitrust perspective are what he denotes as “artificial” barriers to entry such as, for example, price predation. 74

4.

More recent definitions. More recently, other economists have proposed alternative definitions. For example, Fisher defined as a barrier to entry any factor that prevents entry when it would be socially beneficial. 75 Von Weizsacker defined as an entry barrier any differential cost advantage that prevented an efficient allocation of resources. Both Fisher and Von Weiszacker had in mind a total welfare standard (i.e., a standard which aggregates both consumer welfare and industry profits). 76 The number of firms in an industry may often exceed the socially optimal under a total welfare standard: this is because the increase in consumer welfare that results from greater rivalry is not enough to offset the inefficient duplication of fixed costs. 77 In such an industry,

GJ Stigler, “Barriers To Entry, Economies Of Scale And Firm Size,” in GJ Stigler, The Organisation Of Industry, Irwin (1968), p. 67. 73 RP McAfee, HM Mialon and MA Williams, “What Is A Barrier To Entry?,” American Economic Review Papers And Proceedings (2004), 461-465. 74 See, e.g., R Bork, The Antitrust Paradox: A Policy At War With Itself, Basic Books (1978), p. 310. 75 FM Fisher, “Diagnosing Monopoly,” Quarterly Review of Economics and Business (1979) Vol. 19, 7-33. 76 C Von Weizsacker, “A Welfare Analysis Of Barriers To Entry,” Bell Journal of Economics, (1980) (Vol. 11), 399-420. 77 NG Mankiw and MD Whinston, “Free Entry And Social Inefficiency,” RAND Journal Of Economics (1986) (Vol. 17), 48-58. 72

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some of the entry barriers identified by Bain and Stigler could prove to be welfare increasing. Which of these definitions, if any, should be adopted in the assessment of dominance under Article 102 TFEU? The practice under Article 102 TFEU is to look at all the relevant factors that might limit entry or expansion and so delay, deter, or prevent actual and potential rivals from effectively competing with the incumbent firm and hence may result in a loss of consumer welfare. Since dominance can be regarded as the ability of the incumbent to maintain supra-competitive prices for a sustained period of time without being disciplined by existing rivals or new entrants to the market, any circumstances that bar entry or prevent expansion, and hence leave supra-competitive prices unchecked, are considered relevant to the assessment of dominance. 78 It follows immediately that Bork’s narrow focus on “artificial” barriers to entry is unjustified, as well as Fisher’s and Von Weiszacker’s interesting definitions based on a total welfare standard. Stigler’s definition is also problematic from the viewpoint of Article 102 TFEU. Consider the following example. 79 An entrant faces a sunk cost of entry F, which is smaller than the sunk cost of entry borne by the incumbent a few years ago. If F is sufficiently high, the entrant may not find it privately profitable to enter the market even when the incumbent charges supra-competitive prices. Since there is no cost advantage for the incumbent, there is no barrier to entry according to Stigler’s definition. And yet entry is delayed and consumer welfare is diminished. Therefore, it appears that the economic definition of a barrier to entry that best suits Article 102 TFEU is Bain’s: any factor that protects the market power of the incumbents and allows them to charge inefficiently high prices. However, as discussed above, this does not mean that all the factors identified by Bain are proper barriers to entry. For example, scale economies do not constitute a barrier to entry unless the incumbent can pre-commit to maintain its pre-entry output level, which is possible if, for example, the incumbent possesses a locked-in customer base. In sum, the right mix appears to be Bain’s definition with Stigler’s theoretical rigour. Practice under Article 102 TFEU. Although, the Commission and EU Courts do not limit themselves to any particular framework in assessing barriers to entry or expansion when considering potential competition, it is useful in light of the existing case law to distinguish different types of potential barriers to entry and expansion: (1) characteristics inherent in the relevant market; (2) characteristics of the allegedly dominant firm; and (3) conduct of the allegedly dominant firm. They will consider the entirety of the applicable circumstances and conclude whether, on balance, effective entry and/or expansion is possible. If not, a finding of dominance is very likely, (absent countervailing buyer power (see below)).

78 This expansive approach to defining barriers to entry has been criticised. See S Turnbull, “Barriers To Entry, Article 86 And The Abuse Of A Dominant Position: An Economic Critique Of European Community Competition Law,” European Competition Law Review (1996) (Vol. 96), 102; and D Harbord and T Hoehn, “Barriers To Entry And Exit In European Competition Policy,” International Review Of Law And Economics, (1994) (Vol. 14), 422. 79 R Schmalensee, “Sunk Costs And Antitrust Barriers To Entry,” American Economic Review Papers And Proceedings (2004), 471-477.

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4.2.3.2 Characteristics inherent in the relevant market Legal or administrative barriers to entry. Legislation and other state measures are often a source of barriers to entry. Market regulation can constitute an insurmountable entry barrier if the number of participants in the market is limited by licensing or exclusive rights, since new players cannot enter, either at all or without an incumbent firm exiting the market. Examples include State monopolies, authorisation or licensing requirements, and intellectual property. a. State monopolies. Assuming they are acting as an “undertaking” for purposes of EU competition law, 80 public monopolies or undertakings vested with special or exclusive rights to operate in a particular market will usually be considered dominant under Article 102 TFEU. In practice, State monopolies have been an important source of entry barriers in the EU, since Member States have historically entrusted services such as telecommunications, energy and transport to State-owned entities. Certain barriers to entry have been reduced through liberalisation and accompanying regulation designed to promote a move towards full competition, but statutory monopolies holding dominant positions have been found, inter alia, in the markets for telecom services, 81 the provision, maintenance and repair of telecom equipment, 82 the operation of railway infrastructure, 83 postal delivery, 84 recruitment services, 85 and a State tobacco distribution monopoly. 86 b. Authorisation or licensing requirements. The requirement to obtain authorisation or a licence to enter a particular market can constitute an absolute or significant barrier to entry. In Clearstream, the Commission found that the defendant bank had infringed Article 102 TFEU by refusing to supply cross-border securities clearing and settlement services and by applying discriminatory prices. 87 Clearstream’s dominant position in the market of the provision of primary clearing and settlement services for securities issued according to German law was guaranteed by legislative provisions which only allowed recognised central securities depositories to provide clearing and settlement services, rendering it a de facto monopoly. German law required new entrants to the market to obtain authorisation from the Frankfurt Stock exchange. The Commission concluded that the Frankfurt Stock Exchange would not support any new entry because clearing and settlement were subject to significant economies of scale and scope and network effects. In Standard and Poor’s, a commitments decision under Article 9, the Commission concluded that Standard and Poor’s (S&P) had a dominant position on the issuance of US ISIN numbers, because the ISO standard 6166 designated S&P as the only issuer of ISINs in the US. It also concluded that S&P had a dominant position for first-hand electronic See Ch. 1 (Introduction, Scope of Application, and Basic Framework), Section 1.3 above. Case 41/83, Italy v Commission (British Telecommunications) [1985] ECR 873. 82 Case C-202/88, France v Commission (Telecommunication terminals) [1991] ECR I-1223; and Case C-18/88, Régie des télégraphes et des telephones (RTT) v GB-Inno-BM SA [1991] ECR I-5941. 83 See GVG/FS, OJ 2004 L 11/17, paras. 82-85 and Case AT.39813, “Baltic Rail”, Commission Decision of 2 October 2017, para. 162. 84 Case C-320/91, Paul Corbeau [1993] ECR I-2533. 85 Case C-41/90, Klaus Höfner and Fritz Elser v Macrotron GmbH [1991] ECR I-1979. 86 Amministrazione Autonoma dei Monopoli di Stato, OJ 1998 L 252/47, upheld on appeal in Case T139/98, Amministrazione Autonoma dei Monopoli di Stato v Commission [2001] ECR II-3413. 87 Clearstream (Clearing and settlement), OJ 2009 C 165/05. 80 81

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distribution and licensing of US ISINs via data feeds due to its monopoly on the market for the allocation of ISINs according to the ISO standard 6166. 88 c. Intellectual property rights. Intellectual property rights may also prevent expansion and entry, or at least make it more difficult. For example, patent protection in the pharmaceutical sector is exceptionally strong. 89 The patent holder is often the “gatekeeper” determining the terms on which the market can be accessed, typically through patent infringement proceedings. 90 Certainly, intellectual property legislation is in practice probably the most pervasive form of entry regulation elaborated by governments. It is important to appreciate, however, that intellectual property rights do not constitute automatic entry barriers and do not necessarily imply dominance, since firms may be able to invent around them. As the Court of Justice held in Magill, “so far as dominant position is concerned … mere ownership of an intellectual property right cannot confer such a position.” 91 More precisely, the Court held that an intellectual property right would not confer a dominant position as long as competitors were able to provide close substitutes. 92 In IMS/NDC, the Commission found that rivals could not effectively invent around IMS’s copyright and, therefore, concluded that IMS held a dominant position. 93 However, the decision was later withdrawn on the basis that rivals could in fact lawfully invent around the copyright. 94 Intellectual property rights were also considered to give rise to barriers to entry in Qualcomm (Exclusivity Rebates) and Qualcomm (Predation). 95 In particular, the Commission considered that Qualcomm had a competitive advantage vis-à-vis its chipset rivals, since their products could not be used without infringing Qualcomm’s standard essential patents and Qualcomm did not license such patents to its competitors (though it also does not enforce its patents against them). The Commission’s position here follows

Case COMP/39.592, Standard and Poor’s, Commission decision of 15 November 2011. See also the protection of Standard Essential Patents (SEPs), e.g. Case AT.399939, “SAMSUNG Enforcement Of UMTS Standard Essential Patents,” Commission Decision of 29 April 2014 and Case AT.39985, “Motorola – Enforcement of GPRS Standard Essential Patents,” Commission Decision of 29 April 2014. 90 AstraZeneca, OJ 2006 L 332/24, paras. 519-525, upheld on appeal in Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, paras. 270-272 and in Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. 91 Joined Cases C-241/91 P and C-242/91 P, Radio Telefis Eireann and Independent Television Publications Limited (RTE & ITP) v. Commission [1995] ECR I-743, para. 46. See also, Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, paras. 270-272, where the General Court held that the legal actions that AstraZeneca was entitled to instigate against its competitors for patent infringement was evidence that it exerted significant pressure on its competitors, which was, in itself, a relevant indicator of a dominant position. It was not necessary to show that the settlement agreements were abusive in order to find that they constituted evidence of dominance. This was upheld by the Court of Justice in Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770, paras. 186-187. 92 Case 40/70, Sirena S.r.l. v. Eda S.r.l, [1971] ECR 69, para. 16; Case 78/70, Deutsche Grammophon v. Metro [1971] ECR 487, para. 16. 93 IMS Health/NDC, OJ 2002 L 59/18 (interim measures). 94 See NDC Health/IMS Health: Interim measures, OJ 2003 L 268/69. 95 Case AT.40220, Qualcomm (Exclusivity Rebates), Commission Decision of 25 January 2018; and Case AT.39711, Qualcomm (Predation), Commission Decision of 18 July 2019. 88 89

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closely the theory of harm in FTC v Qualcomm. 96 The Commission also focused on Qualcomm’s practice of agreeing cross licences with other holders of intellectual property rights in the relevant standards, where Qualcomm requests and obtains the right of passthrough of the other party’s intellectual property rights to Qualcomm's chipset customers, i.e., grant-back. This was found to be a barrier to entry and expansion because competing chipset suppliers were, according to the Commission, unable to offer a similar level of pass-through rights. 97 d. Other regulatory barriers. Planning and licensing laws that impose limits on the number of retail outlets restrict the expansion possibilities of existing competitors and entry prospects for new retailers. Regulatory protections derived from pharmaceutical laws during the exclusivity term prevent entry of generic products. 98 Furthermore, tariff and non-tariff barriers can give advantages to incumbent firms. 99 Regulation may also impose objective standards on all competitors. If such standards do not apply equally and/or are costlier to meet for entrants than for incumbent firms, then they may constitute a barrier to entry. Economic barriers to entry. In many cases the source of restrictions on entry and expansion is not legal or administrative, but is inherent in the economic characteristics of the relevant market. Examples include sunk costs of entry, economies of scale or scope, and network effects. a. Sunk costs of entry. Sunk costs are costs that a firm must incur to enter a market but that are not recoverable upon exit of the market. A high level of sunk costs will constitute a barrier to entry and will therefore stifle potential competition. Sunk costs may be either exogenous or endogenous. Examples of exogenous sunk costs are investments in facilities and machines that are needed to enter a specific market and that cannot be used for other purposes. For example, in United Brands, the Court of Justice noted that “the particular barriers to competitors entering the market are the exceptionally large capital investments required for the creation and running of banana plantations.” 100 In Clearstream, the Commission identified sunk costs, such as investment in information technology development and human resources, at an estimated cost of €156 million. 101 As a new entrant would be required to set up complex and costly systems—without the assurance that it could provide orderly or economically viable services—sunk costs contributed to high entry barriers. Endogenous sunk costs include expenditures for research and development, quality improvements, and advertising that are necessary to compete against existing firms in the relevant market. The level of such costs will be determined by the particular strategy of the incumbent firms. For example, in Intel, the Commission highlighted that any new entrant would require significant expenditure to 96 Case No. 17-CV-00220-LHK, Federal Trade Commission v Qualcomm, US Northern District of California, 21 May 2019. The case is on appeal. 97 See, e.g., Case AT.39711, Qualcomm (Predation), Commission Decision of 18 July 2019, Section 11.4.2. 98 AstraZeneca, OJ 2006 L 332/24, paras. 526-527, upheld on appeal in Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805 and in Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. 99 See Guidance Paper, para. 17. 100 Case 27/76 United Brands v Commission [1978] ECR 207, para. 122. 101 Clearstream (Clearing and settlement), OJ 2009 C 165/05, para. 214.

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develop the required know how to design competitive x86 CPUs to Intel and because Intel had substantial intellectual property right protection over x86, “a potential entrant will thus require either a license from Intel, or an enormous combination of ingenuity, time and capital committed to the seemingly impossible task of creating a non-infringing x86 instruction set.” 102 Likewise in Telefónica, the Commission identified significant sunk costs for new operators seeking to offer regional broadband access services on the basis of Telefónica’s unbundled local loops. 103 Markets with endogenous sunk costs typically exhibit high degrees of concentration. Furthermore, concentration does not necessarily increase as the industry grows (i.e., they constitute “natural oligopolies”); instead product quality, R&D investment and/or advertising increase. 104 In both Google Shopping and Google Android, the Commission concluded that establishing a fully-fledged general search service engine and a smart mobile OS, respectively, require very large investments. 105 For example, in 2014 alone, Google invested more than $10 billion in its general search service, compared to $372 million invested in the same year by Yahoo! 106 b. Economies of scale/scope. A firm enjoys economies of scale in the production (and/or distribution) of a product when its average costs fall as output increases. Where a firm produces two or more products, it may also be cheaper to produce the two products than it would be to make each of them separately. In this case, the firm enjoys economies of scope. When a market exhibits significant positive returns to scale, the largest firm will have a significant advantage over firms who have not yet reached the same level of production (or distribution). That will be the case if the incumbent firm enjoys significant cost advantages due to learning-by-doing, or if its position in the market is entrenched by brand loyalty or any other switching costs. In those circumstances, economies of scale or scope may give rise to barriers to entry. In United Brands, the Court of Justice held that, among other factors, “the particular barriers to competitors entering the market are … economies of scale from which newcomers to the market cannot derive any immediate benefit.” 107 Commission decisions such as BPB Industries plc also expressly refer to the large economies of scale from which the companies benefited as a factor relevant for a finding of dominance. 108 BPB produced plasterboard for the plasterboard market in Great Britain and Ireland. It enjoyed substantial economies by producing on a large scale in integrated industrial complexes. It had extensive technical and financial resources. And as the sole producer in the relevant geographical markets, it alone benefited from the economies that flowed from the placing of plasterboard production close to its markets. These factors supported the ruling that BPB held a dominant position on the market for plasterboard in Great Britain and Ireland. Case COMP/37.990, Intel, Commission decision of 13 May 2009, paras. 129 and 855-858. See Case COMP/38.784, Telefónica, Commission decision of 4 July 2007, para. 225. 104 See J Sutton, Sunk Costs And Market Structure, MIT Press (1991). 105 Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017, para. 286; and Case AT.40099, Google Android, Commission Decision of 18 July 2018, para. 462. 106 Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017, para. 291. 107 Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, para. 122. 108 BPB Industries plc, OJ 1989 L 10/50, para. 116. 102 103

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In Telefónica, the Commission concluded that Telefónica’s market position was protected by large economies of scale in key network elements. It stated that “the greater the number of end users the lower the unit costs per line.” 109 Because Telefónica’s customer base was significantly larger than that of its competitors, the Commission considered that entrants would not be able to achieve the scale necessary to be competitive. Scale and scope economies are likely to be a major feature of many multi-sided digital platform markets, since the returns to scale and scope in such markets may be extreme. The effectiveness of the platform may also depend heavily on machine-learning effects that increase with the user base. In Google Shopping the Commission noted as follows in relation to scale and general search services: 110 “[B]ecause a general search service uses search data to refine the relevance of its general search results pages, it needs to receive a certain volume of queries in order to compete viably. The greater the number of queries a general search service receives, the quicker it is able to detect a change in user behaviour patterns and update and improve its relevance. This is supported by internal Google documents and by evidence from a number of other general search services. A general search service also needs to receive a certain volume of queries in order to improve the relevance of its results for uncommon (“tail”) queries. Tail queries are important because users evaluate the relevance of a general search service on a holistic basis and expect to obtain relevant results for both common (“head”) and uncommon tail queries. The greater the volume of data a general search service possesses for rare tail queries, the more users will perceive it as providing more relevant results for all types of queries. In that regard, there may be diminishing returns to scale in terms of improvements in relevance once the volume of queries a general search service receives exceeds a certain volume. It may also be that the lower success and relevance of a general search service can be explained by other reasons, such as the fact that it does not localise its search results in different countries, that its web index is more limited in depth, or that it is slower in updating its index in order to deliver fresh content to users. Regardless of the veracity of such arguments, however, they remain of limited relevance for the assessment of barriers to entry and expansion on the national markets for general search services because of the underlying fact that a general search service has to receive at least a certain minimum volume of queries in order to compete viably. The relevance of scale is also not called into question by the fact that in the late 1990s, Google was able to overtake the former market leaders, AltaVista and Lycos. At that time, scale was less of a critical factor because the indexing technology of general search engines was not yet able to assess user behaviour.”

c. Network effects. Network effects arise where the benefit of a good or service increases with the addition of other users. An obvious example is the telecommunications sector where the value of, say, a telephone to a user will depend, inter alia, on how many other users each user is able to speak to. Products such as a telephone or a fax machine are characterised by the existence of direct network effects: they are not only valued because of their inherent characteristics, but also due to the additional value derived from being able to interact with other users of the product. Other products, such as electronic game consoles, exhibit indirect network effects. No game platform, such as Sony’s PlayStation or Microsoft’s Xbox, can sell consoles without games to play on. But no 109 110

290.

See Case COMP/38.784, Telefónica, Commission decision of 4 July 2007, para. 226. Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017, paras. 287-

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game platform will ever convince game developers to write for its console without the prospect of an installed base of consumers. The key feature of these markets is therefore that, to succeed, competitors must get both sides of the market (consumers and software developers) on board. More recently, it is clear that, to be attractive to advertisers, search engines and social media platforms require a large user base. In Microsoft, the Commission relied heavily on network effects as evidence of high entry barriers into the client personal computer operating system market and, to a lesser extent, the server software market. 111 The regular daily use of a personal computer involves running applications on it. The overall utility that a customer derives from the operating system of a computer depends therefore on the applications he or she can use on it or expect to use on it in the future. Yet software vendors write applications to the operating systems that are most popular among users. Therefore, the more popular an operating system is, the more applications will be written to it and the more applications are written to an operation system, the more popular it will be among users. The Commission concluded that, among other things, these (indirect) network effects guaranteed the dominant position of Microsoft, as they constituted a significant entry barrier to potential competitors. Thus, costs and other impediments resulting from network effects, faced by customers switching to a new supplier may also constitute a barrier to expansion or entry. 112 The Commission also considered network effects to be a barrier to entry in both Google Shopping and Google Android. In Google Shopping, the Commission found that a substantial number of users of general search services derive a benefit from search advertisements, thus giving rise to a direct network effect. In relation to indirect network effects, the Commission stated as follows: 113 “The indirect network effects stem from the link between the attractiveness of the online search advertising side of a general search engine platform and the revenue of that platform. The higher the number of advertisers using an online search advertising service, the higher the revenue of the general search engine platform; revenue which can be reinvested in the maintenance and improvement of the general search service so as to attract more users…Google generates substantial revenues from its online search advertisement business. In the years 2013-2016 its advertising revenues rose from USD 50.6 billion to USD 79.4 billion.”

In Google Android, the Commission made a somewhat similar point, concluding that app developers have strong incentives to concentrate their efforts on Android, and not develop apps for other licensable smart mobile OSs, since no other licensable OS has the same reach as Android. 114 Switching costs: generally. A barrier to entry may also exist if customers face high enough costs when switching suppliers. In some cases, these switching costs are exogenous, such as the costs of information, learning, or transaction costs. In others, they are the result of the technological or commercial choices of the incumbents. In IMS/NDC, 111 Microsoft, OJ 2007 L 32/23, paras. 448 and 515-517, upheld on appeal in Case T-201/04, Microsoft v Commission [2007] ECR II-3601. 112 Guidance Paper, para. 17. 113 Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017, para. 296. 114 Case AT.40099, Google Android, Commission Decision of 18 July 2018, paras. 465-468.

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for example, the Commission concluded that German pharmaceutical companies were economically dependent on the so-called “1860 brick structure” used by IMS to classify the sales data they used in their marketing and remuneration decisions, and that it would not be viable for them to switch to data provided in another structure. 115 In Microsoft, the Commission referred to the fact that Microsoft was fully aware that it could behave independently of its end-customers due to the high costs of switching to alternative operating systems. 116 And in some other cases, incumbent firms rely on long-term contracts with customers to make it difficult for rivals to find a sufficient number of customers able to switch supplier to render expansion or entry profitable. 117 The effect of switching costs on the likelihood of entry is, however, ambiguous. Academic literature has shown that switching costs can, under certain circumstances, actually be conducive to entry, even though the conventional wisdom points in the opposite direction. 118 As explained by McSorley et al., switching costs deter entry when most consumers are captive and their switching costs are high. Entry may also be difficult when switching costs are low, because in this case the incumbents are likely to fight entrants in order to retain their clients and avoid losing market share. However, switching costs can actually facilitate entry into the market, albeit on a limited scale, when switching costs are neither too high nor too low and firms cannot price discriminate between lockedin and uncommitted consumers. 119 In those cases, incumbents may find it optimal to focus on exploiting their locked-in customer base, leaving to entrants those consumers with low (or no) switching costs. And entrants may prefer to operate at a low scale, leaving incumbents to exploit their bases of captive consumers, rather than invest in the development of a large customer base, which may trigger a price war with the incumbents and force them to exit the market. 120 Switching costs: multi-homing. In platform markets, the Commission typically relies on evidence of “multi-homing” by users on two or more platforms rather than the mere theoretical ability to switch. In Google Shopping, the Commission concluded that, notwithstanding the technical ability of users to switch between different general search services, only a minority of users in the EEA that use Google’s general search service as their main general search service use other general search services. The Commission had regard to a survey covering France, Germany, Italy, Spain, and the United Kingdom, which defined as a multi-homer a user that conducts at least 5% of all of its queries on at least two separate general search services. On this basis, it found that the multi-homing rates ranged from 12% to a maximum of 21%. 121 The Commission also found that IMS Health/NDC, OJ 2002 L 59/18 (interim measures). Microsoft, OJ 2007 L 32/23, para. 463, upheld on appeal in Case T-201/04, Microsoft v Commission [2007] ECR II-3601. See also, Case COMP/39.530, Microsoft (Tying), Commission decision of 16 December 2009, para.25-28. 117 See Guidance Paper, para. 17. 118 See C McSorley, AJ Padilla and M Williams, Switching Costs, DTI-OFT Discussion Paper No. 5, (2003) and references therein. 119 See PD Klemperer, “Entry Deterrence In Markets With Consumer Switching Costs,” Economic Journal, (1987) (Vol. 97), 99, at p. 117. 120 See PD Klemperer, “Price Wars Caused By Switching Costs,” Review Of Economic Studies, (1989) (Vol. 56), 405. 121 Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017, paras. 306307. 115 116

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because of the strength of the Google brand, users’ trust in the relevance of search results provided by Google. Consequently, a significant number of users are unlikely to multihome even if Google were to degrade the quality of its general search service. 122 A similar conclusion was reached in Google Android, which also partly concerned general search services. 123 Closed ecosystems as a barrier. Competition law usually deals with “basic” systems combining primary products with secondary products. 124 The digital economy has, however, brought about systems that are significantly more complex, involving a number of products and services that are closely interlinked, called “ecosystems.” Depending on their accessibility, ecosystems are usually divided into open and closed ecosystems, where the open ecosystem is, by contrast with the closed one, also accessible to other product makers or system developers and not just to the system owner itself. Both open and closed ecosystems can have pro-competitive and anti-competitive effects depending on the circumstances. 125 Apple, for example, has a closed ecosystem for its iOS smartphones whereas Google’s Android is a free open-source licence. In Amazon, the Commission held that, through its Kindle e-book reader, Amazon operates a closed ecosystem that locks in customers and represents a barrier to entry or expansion in the market for the distribution of e-books: 126 “The ability of e-book readers to drive sales and lock-in customers: with its Kindle e-book reader, Amazon operates a closed "ecosystem" (or walled garden"). Customers who own a Kindle can use that e-book reader only for ebooks purchased in Amazon's Kindle store. Moreover, e-books bought in the Kindle store cannot be read on other e-book readers, although they can be read on various e-reading devices such as tablets or smartphones (including tablets and smartphones that are not manufactured and sold by Amazon under its own brand) through the Kindle app (so-called ‘multi-homing’). This results in a situation in which customers that have already purchased Kindle e-books may face costs in switching to another e-book platform, due to the need to acquire an additional e-book reader and the inability to transfer the library of e-books purchased in Amazon's Kindle store to a different e-book reader. Whereas the closed Kindle ecosystem may not represent an insurmountable barrier to entry and/or expansion in the market for the distribution of e-books (since multi-homing on different devices seems to be a common practice amongst e-book readers), it does reinforce Amazon's market power vis-à-vis its competitors since consumers willing to move to another platform are likely to face switching costs and may therefore effectively remain locked into Amazon's closed ecosystem.”

4.2.3.3 Characteristics specific to the allegedly dominant firm Overview. Entry or expansion by competitors may also be difficult when the allegedly dominant firm possesses one or more competitive advantages over its actual and potential Ibid., para. 312. Case AT.40099, Google Android, Commission Decision of 18 July 2018, Section 9.5.3. 124 See, e.g., Case C-333/94 P, Tetra Pak International SA v Commission [1996] ECR I-5951. 125 See, for example, H Kaiser, “Are ‘Closed Systems’ an Antitrust Problem?,” Competition Policy International, Spring 2011, Vol. 7, No. 1; D Wall and A Reeves, “The Pro-competitive Value of Closed Platforms & Walled Garden: Some Thoughts in Response to Tim Wu,” Competition Policy International, Spring 2011, Vol. 3, No. 2; J Zittrain, “The Future of the Internet and How to Stop It,” New Haven, London: Yale University Press, 2008; and SK Mehra, “Paradise is a Walled Garden? Trust, Antitrust and User Dynamism,” George Mason Law Review, 18 (4), 889–952 126 See Case AT.40153, E-book MFNs and related matters (Amazon), Commission Decision of 4 March 2017, para. 65(2). 122 123

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rivals. Examples include access to key inputs or special knowledge, vertical integration, brand recognition or other forms of product differentiation, and financial strength and performance. Access to key inputs or special knowledge. In every market, firms need certain inputs in order to compete. Significant entry barriers exist if incumbents have privileged access to such inputs. Exclusive or preferential access to such inputs may give a firm an absolute, or at least a significant, advantage over rival firms. Numerous examples of this type of entry barrier exist in the decisional practice and case law. An early example was Commercial Solvents, 127 where the dominant company controlled the supplies of aminobutanol and nitropropane—the essential raw materials for the production of ethambutol—in Europe. Other examples include the various port cases where the incumbent firm’s control over the port infrastructure made it an essential trading party in that port. 128 Thus, in Sea Containers/Stena Sealink, 129 the port of Holyhead was considered to have unique advantages over Liverpool for ferry travel between Ireland and Great Britain. A firm’s significant advantage over rivals may also result from superior technology or knowledge. In cases such as Hilti 130 and Michelin II, 131 account was taken of the “indisputable technological lead” of the dominant firms over rivals. Similarly, in United Brands, the Court of Justice considered that potential competitors could not expect to reach the level of the incumbent’s advanced research and development in drainage systems, improving soil deficiencies, and combating plant disease and that this constituted an effective barrier to entry. 132 Finally, in Amazon 133 the Commission held that Amazon, through its exclusivity agreements with self-published authors, had exclusive access to a catalogue of e-books in high demand, preventing, at the same time, the access of any competitors to these successful titles. 134 Spare capacity. If the allegedly dominant firm is able to increase its output at short notice because it has spare production capacity, it may be in a position to deter any potential competition. Thus, in Hoffmann-La Roche, the Court of Justice accepted that the company’s over-capacity was a relevant factor to the issue of dominance. 135 An incumbent’s threat of a price war or expansion of output in response to a new entry on the market may therefore amount to a sufficient barrier to entry to support a finding of dominance. Dominance also usually implies that actual and potential rivals lack sufficient capacity to meet total market demand. But even when rivals have spare capacity, it may Joined Cases 6/73 and 7/73, Istituto Chemioterapico Italiano S.p.A. and Commercial Solvents Corporation v Commission [1974] ECR 223. 128 See, e.g., Port of Rødby, OJ 1994 L 55/52; ACI—Channel Tunnel, OJ 1994 L 224/28; European Night Services, OJ 1994 L 259/20; Eurotunnel, OJ 1994 L 354/66; Ijsselcentrale, OJ 1991 L 28/32; and Irish Continental Group CCI Morlaix-Port of Roscoff, XXVth Competition Policy Report (1996), para. 43. 129 Sea Containers v Stena Sealink (Interim measures), OJ 1994 L 15/8. 130 Hilti, OJ 1988 L 65/19, para. 69. 131 Case T-203/01, Michelin v Commission [2003] ECR II-4071, paras. 183-184. 132 Case 27/76, United Brands v Commission [1978] ECR 207. 133 Case AT.40153, E-book MFNs and related matters (Amazon), Commission Decision of 4 March 2017. 134 Ibid. para. 65. 135 Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461. 127

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be so expensive to employ that these costs constitute a barrier to expansion. For instance, the costs of introducing another shift in a factory may constitute a barrier to expansion. Vertical integration. Vertical integration may give a firm significant advantages over non-integrated firms. 136 Benefits of vertical integration include lower transaction costs (e.g., no/less need to write and enforce contracts with outsiders), secure supply of inputs, correcting market failure (e.g., ensuring uniform quality), and avoiding government rules (many government rules, e.g., antitrust, do not apply to a single entity but only to bilateral or multilateral relations between independent firms). But it is not axiomatic that vertical integration is advantageous and much less that it constitutes a barrier to entry. Vertical integration may actually increase costs when the market is more efficient than the vertically-integrated firm’s own operations. Costs may also arise because of the difficulty of managing a larger firm. Because of the possible mixed effects of vertical integration, the decisional practice and case law have mainly relied on vertical integration only when it was clear that the fact of integration conferred a material advantage on one firm over non-integrated rivals. Typically, this concerned exclusive or privileged access to raw materials or other inputs, 137 particularly in relation to scarce resources. In Commercial Solvents, 138 Commercial Solvents’ control over the European production of aminobutanol and nitropropane made it an essential trading party for non-integrated rivals interested in the production of ethambutol. The same general point can be made about several cases in which a duty to deal has been considered under Article 102 TFEU. 139 For example, in Telefónica, the Commission found that Telefónica’s dominant position in the retail broadband market was due in part to its ability to control the conditions of entry and expansion in the ADSL part of the retail market by virtue of its vertical integration and, therefore, its control over wholesale inputs. 140 On the output side, a highly developed distribution and sales network which may include a dense outlet network, established distribution logistics or wide geographical coverage may also impede potential competition. In United Brands, the dominant firm’s activities in the various stages in bringing bananas to the market supported the finding that it held 136 For an overview of the costs and benefits of vertical integration, see DW Carlton and JM Perloff, Modern Industrial Organisation, Pearson Addison Wesley (2005) (4th edn.), pp.396-400. 137 See e.g., Case COMP/38.233, Wanadoo, Commission decision of 16 July 2003, paras. 232-235 (upheld on appeal in Case T-340/03, France Télécom SA v Commission [2007] ECR II-107, para.116118; upheld on further appeal in Case C-202/07 P, France Télécom SA v Commission [2009] ECR I2369). Wanadoo received the preferential treatment from the incumbent telecommunications operator, France Télécom, in the form of a bespoke national and regional IP routing facility. This facility allowed Wanadoo to expand its coverage in a faster and less costly manner than its rivals. In addition, Wanadoo was given real-time access to information allowing potential customers’ addresses to be linked up with France Télécom’s corresponding distributors, so that Wanadoo was able to inform any interested customers within a very short period of time whether the area within which they lived was covered by an ADSL service. The Commission held that the above technical advantages directly resulted from the vertical integration between Wanadoo and France Télécom. 138 Joined Cases 6/73 and 7/73, Istituto Chemioterapico Italiano S.p.A. and Commercial Solvents Corporation v Commission [1974] ECR 223. 139 See e.g., Case COMP/39.525, Telekomunikacja Polska, Commission decision of 22 June 2011, paras. 678-682. See also Ch. 10 (Refusal to Deal). 140 See Case COMP/38.784, Telefónica, Commission decision of 4 July 2007, para. 255.

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a dominant position, particularly in light of the fact that its rivals did not share the same levels of integration. 141 The Court of Justice noted that United Brands’ integration was evident at each of the stages from the plantation to the loading on wagons or lorries in the ports of delivery and after those stages, as far as ripening and sale prices were concerned. 142 United Brands even extended its control to ripener/distributors and wholesalers by setting up a complete network of agents. At the production stage, it owned large plantations in Central and South America. At the carriage by sea stage, United Brands was the only undertaking that was capable of carrying two thirds of its exports by means of its own banana fleet. For packaging and presentation, United Brands had at its disposal factories, manpower, plant and material which enabled it to handle the goods independently. All of these factors were found to guarantee United Brands’ commercial stability and well-being. Brand recognition. The incumbent’s ownership of well-known brands may constitute a barrier to entry in fast-moving consumer goods markets. This may be because brand loyalty makes it difficult for new entrants to compete on the market. 143 Or because the incumbent brand has acquired “must stock” status. 144 Or it may, simply be difficult to enter a market where experience or reputation is necessary to compete effectively with, as yet, unknown brands. 145 Note, in particular, that the advertising and marketing required to compete with established brands are often sunk costs, which cannot be recovered in the case of exit from the market. In Intel, the Commission asserted that “Intel’s strong must-stock brand and the resulting product differentiation provide it with additional market power.” 146 It concluded in Google Shopping that, because of the strength of the Google brand, users’ trust in the relevance of the results the search engine provides and are thus unlikely to use other general search services. 147 Financial and economic strength as an indicator of dominance. The position under Article 102 TFEU on the relevance of the financial and economic power of the incumbent firm as indicators of dominance is so far ambiguous. In Hoffmann-La Roche, the Court of Justice held that the fact that Hoffmann-La Roche was the world’s largest vitamin manufacturer, that it was at the head of the largest pharmaceuticals group in the world,

141 Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, para. 113. 142 Ibid., paras. 70–81. 143 See, e.g., Kimberly-Clark/Scott, OJ 1996 L 183/1, para. 87; and The Coca-Cola Company/Carlsberg A/S, OJ 1998 L 145/41, para. 72. See also Coca-Cola/Amalgamated Beverages GB, OJ 1997 L 218/15, para. 137; and Guinness/Grand Metropolitan, OJ 1998 L 288/24, para. 52. 144 See Case COMP/37.990, Intel, Commission decision of 13 May 2009, paras. 870-873. 145 See e.g., AstraZeneca, OJ 2006 L 332/24, paras. 542, upheld on appeal in Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, paras. 270-272 and in Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770, paras. 186-187. 146 Case COMP/37.990, Intel, Commission decision of 13 May 2009, para. 881. 147 Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017, para. 312. See also Case AT.40026, Velux, Commission Decision, of 14 June 2018, in which it was argued that the brand Velux was so well established in the market that its name became a synonym for a roof window, a product which it produces (para. 41).

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and that it had the largest turnover, had no bearing on the finding of dominance. 148 This makes sense, since overall size is not strong evidence of dominance in a particular market. However, economic and financial power—the so-called “deep pockets” argument—has occasionally been a factor used to corroborate a finding of dominance under Article 102 TFEU. In Continental Can, the Commission took into account in finding dominance that the undertaking’s parent company, Continental, was the world’s largest producer of metal cans, enjoyed large turnover and profits, and employed 62,000 staff. 149 Moreover, the German subsidiary under investigation was the largest producer of metal cans in Europe and employed 13,000 people. Its nearest competitor in Germany only employed 1,600 people. 150 And, finally, its economic and financial strength facilitated easier access to finance than its competitors could expect. 151 Similarly, in BPB Industries, the Commission stated that it was necessary to consider “not only the position of BPB in the market but also its technological and financial resources” when deciding whether or not the undertaking dominated the market. 152 In Solvay, the Commission took into account the undertaking’s manufacturing strength and the fact that it had plants in six different Member States in its assessment of dominance. 153 Finally, in AstraZeneca, the Commission compared AstraZeneca’s financial strength, resources and specialisation in the pharmaceutical sector with those of the two main competitors in the relevant market in considering dominance. 154 There is some basis for the view that access to finance may be relevant in considering dominance. This is the case when: (1) access to finance is relevant to the competitive process in the industry under review; (2) there are significant asymmetries between competitors in terms of their internal financing capabilities; and (3) particular features of the industry make it difficult for firms to attract external funds. If capital markets were perfect, new entrants with profitable investment projects would be able to finance their entry and expansion in a market at no disadvantage. The financial strength of the incumbent firm should not be relevant. However, capital markets do not work efficiently as a result of, among other factors, asymmetries of information. 155 And in any event, even if potential competitors can obtain finance to facilitate their entrance or expansion on the market, they must still bear the costs of obtaining the capital necessary to do so. Practical realities mean that an undertaking that possesses considerable economic and financial strength will find it easier to fund its risky projects, by means of both internal and external resources, than a company that does not. The financial strength of the incumbent may therefore represent a barrier to entry. Case 85/76, Hoffmann-La Roche v Commission [1979] ECR 461, para. 47. See Continental Can Company, OJ 1972 L 7/25, para. 12. 150 Ibid. 151 For example, under the EU Merger Regulation, the Commission has noted that an existing firm with strong financial backing would have greater market power because it would be better able to endure a protracted price war than new competitors. See Hutchison/RCPM/ECT, OJ 2003 L 223/1, para. 95. 152 BPB Industries, OJ 1989 L 10/50, para. 115. 153 Soda-ash, OJ 2003 L10/10. 154 AstraZeneca, OJ 2006 L 332/24, paras. 565-566, upheld on appeal in Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, paras. 286 where the Court held that AstraZeneca’s superior financial resources to those of its competitors was such as to reinforce its market position in relation to them. 155 See JS Bain, Barriers To New Competition, Harvard University, 1956. 148 149

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Profitability. Whether and to what extent profitability and dominance have a positive correlation has been the subject to enormous debate among economists. 156 The most that can be said is that the empirical relationship between performance and market structure is not clear. Serious measurement problems have affected the reliability of most studies. And accounting profits do not reflect economic profits except under the most unrealistic assumptions. 157 As two critics note “there is no way in which one can look at accounting rates of return and infer anything about relative economic profitability or, a fortiori, about the presence or absence of monopoly profits.” 158 Notwithstanding the lack of clarity on the precise relationship between profits and market structure, profits have been relied upon as a factor contributing to dominance in certain Article 102 TFEU decisions and cases. In Microsoft, for example, the Commission considered that the financial performance of the undertaking was consistent with its near monopoly position. Its profit margin was approximately 81%, which was considered high by any measure and reinforced the conclusion that Microsoft held a dominant position. 159 In Intel, Intel’s operating margins were found to be comparable to those of Microsoft. The Commission implied that such level of profitability confirmed that Intel held substantial market power. 160 In contrast, Dell and HP had operating margins of 9% and 4%, which was held were “a priori, not indicative of substantial market power.” 161 It is clear, however, that lack of profitability is not a contra-indication of dominance. A dominant firm that faces a sudden decline in demand may continue to operate even if it makes losses. Indeed, losses may be necessary for certain abusive conduct, such as predatory pricing. Thus, in Michelin I, the Court of Justice rejected the argument that since Michelin was running losses, it was not dominant. The Court pointed to the overall economic strength of the undertaking and its ability to engage in research and investment. 162 It referred to “the advantages which [Michelin] may derive from belonging to groups of undertakings operating throughout Europe or even the world ... Amongst those advantages was the lead which the Michelin group has over its competitors in the matters of investment and research and the special extent of its range of products.” The Court correctly decided that a lack of profits may be temporary and says little about the overall firm’s ability to exert market power. The undertaking’s own assessment of its position. The undertaking’s own assessment of its position as evidenced by internal documentation may be taken into account when considering dominance. In BBI/Boosey & Hawkes the Commission relied upon internal For a summary of the main contributions, see DW Carlton and JM Perloff, Modern Industrial Organisation, Pearson Addison Wesley, 2005 (4th edn.), Ch. 8. See also R Bork and G Sidak, “The Misuse Of Profit Margins To Infer Market Power,” Journal of Competition Law & Economics, Volume 9, Issue 3, September 2013, Pages 511–530. 157 See FM Fisher and JJ McGowan, “On The Misuse Of Accounting Rates Of Return To Infer Monopoly Profits,” American Economic Review (1983) (Vol. 73), 82. 158 Ibid., 90. 159 Microsoft, OJ 2007 L 32/23 para. 464. Upheld on appeal in Case T-201/04, Microsoft v Commission [2007] ECR II-3601. 160 Case COMP/37.990, Intel, Commission decision of 13 May 2009, para. 880. 161 Ibid., para. 879. 162 Case 322/81, NV Nederlandsche Baden-Industrie Michelin v Commission [1983] ECR 3461, paras. 54–55. See also Hilti, OJ 1988 L 65/19, para. 69. 156

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documents in which the supplier stated that its musical instruments were the “automatic first choice” of all top brass bands. 163 However, it does not follow that internal documentation which claims that the undertaking is not dominant will be given the same attention. 4.2.3.4 Conduct of the allegedly dominant firm Abusive behaviour as evidence of dominance. Conventionally, the Commission must first prove that an undertaking holds a dominant position on the relevant market and then prove abuse of that dominance. The conduct of a firm in the market normally relates to the issue of abuse, and not to the assessment of dominance. However, the Commission and EU Courts have sometimes taken behavioural facts into account when assessing dominance. In United Brands, the Court of Justice held that, in assessing dominance, “it may be advisable to take account if need be of the facts put forward as acts amounting to abuses without necessarily having to acknowledge that they are abuses.” 164 In both Michelin cases, the Commission relied on Michelin’s allegedly abusive practices as indicators of market power, noting that “as is often the case in situations such as that being examined here, the finding of a dominant position is supported inter alia by the evidence relating to the abuse of that position.” 165 Finally, in Hilti, the Commission referred to the commercial behaviour of the undertaking as being “witness to its ability to act independently of, and without due regard to, either competitors or customers.” 166 The firm was found to hold a dominant position as its behaviour, and the economic consequences which followed, would not normally be present if a company faced real competitive pressure. In Intel, the Commission concluded, citing Hoffmann-La Roche, that Intel’s use of loyalty-enhancing rebate schemes indicated “the existence of dominant position, rather than negate[d] it.” 167 Relying on abusive conduct as evidence of dominance is problematic in certain respects. First, this approach runs the risk of being circular. A company may be found dominant due to its conduct; and dominance and the “special responsibility” can in turn lead to conduct itself being catalogued as anticompetitive without any evidence on actual abusive character. If used at all, this approach should therefore be a complement rather than a substitute for the careful analysis of market conditions in the assessment of dominance. Second, this approach is mainly useful for exploitative abuses. For instance, if it can be shown that excessive prices persist for long periods and the market resists change, dominance is a likely explanation. Most firms, dominant or not, can engage in practices BBI/Boosey & Hawkes, OJ 1987 L 286/36. See also Case AT.39899, “Licensing Of Intellectual Property Rights For Football Collectibles,” Commission Decision of 15 July 2014, where the Commission argued that the presentations prepared by the undertaking in question (Panini) for a number of investment banks were not representative of the market conditions but were instead meant to make the company look as appealing as possible (para. 48). 164 See Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, paras. 82–84. 165 Bandengroothandel Frieschebrug BV/NV Nederlandsche Banden-Industrie Michelin, OJ 1981 L 353/33, para. 35; PO–Michelin, OJ 2002 L 143/1, paras. 198–99. 166 Eurofix-Banco v Hilti, OJ 1988 L 65/19, para. 71, upheld on appeal in Case T-30/89, Hilti AG v Commission [1991] ECR II-1439, and on further appeal in Case 3/92 P, Hilti AG v Commission [1994] ECR I-667. 167 Case COMP/37.990, Intel, Commission decision of 13 May 2009, para. 910. 163

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that may be regarded as exclusionary abuses, such as exclusive dealing, predatory pricing, and loyalty discounts. They are probably less likely to be successful if they are not dominant, but the point is that simply observing such practices proves nothing about dominance. For example, relying on conduct such as price reductions as evidence of dominance could have the paradoxical effect of discouraging firms, fearful of being held to be dominant, from competing on the merits. 168 Third, relying on possible abuses as evidence of dominance could lead to a false inference in the case of collective dominance where the conduct of one firm might amount to cheating and dismantling the collusive oligopoly rather than evidence of abuse. Perhaps for all these reasons, the Guidance Paper does not list the market behaviour of the undertaking under investigation as an indicator of dominance.

4.2.4

Countervailing Buyer Power

Overview. The negotiating positions and commercial practices of key buyers in the relevant market inevitably affect the state of competition therein and consequently will have an influence on whether or not a supplier can be deemed dominant. Indeed, the notion of buyer power is provided for in the seminal case-law definition of dominance: a dominant firm must be able “to behave to an appreciable extent independently of its competitors and customers and ultimately of consumers.” 169 In other words, if a supplier’s competitive behaviour is significantly constrained by its customers, it cannot be dominant. Definition of buyer power. The OECD has defined buyer power as “the ability of a buyer to influence the terms and conditions on which it purchases goods.” 170 Thus, if buyers are able to influence the terms and conditions on which they acquire goods, then suppliers in that market are ipso facto not able to act independently of their customers. Buyer power is a matter of degree, and it may be that only one of several buyers in a given market is able to exert significant buyer power. It may also be that even a monopoly seller facing a monopsony purchaser lacks dominance. 171 Thus, the relevant test for buyer power in relation to the dominance assessment is whether one or more customers in the relevant market are able to appreciably influence the prices or other terms on which they acquire goods and, in so doing, to materially constrain the commercial independence of the allegedly dominant supplier. If they are so able, then under the EU Courts’ definition of dominance, that market cannot have any dominant suppliers. Both in the merger context and under Articles 101 and 102 TFEU, the Commission has increasingly recognised the role of buyer power as a countervailing force limiting the market power of suppliers and shifting the balance of negotiating leverage in many markets from suppliers towards customers. Indeed, as many markets become more See R Whish, Competition Law, Butterworths (1993) (3rd edn.), p. 368. Case 322/81, NV Nederlandsche Baden-Industrie Michelin v Commission [1983] ECR 3461, para. 30 (emphasis added). 170 OECD Roundtable on Buying Power of Multiproduct Retailers (2000) 1 OECD Journal of Competition Law and Policy. For a similar definition, see M Bloom, “Retailer Buyer Power,” in B Hawk (ed.), 2000 Fordham Corporate Law Institute, Juris Publishing Inc. (2001), p. 399. 171 See K Binmore and D Harbord, “Bargaining Over Fixed-To-Mobile Termination Rates: Countervailing Buyer Power As A Constraint on Monopoly Power,” Journal Of Competition Law And Economics (2005) (Vol. 1(3)), 449-472. 168 169

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concentrated, it stands to reason that buyers will also acquire more purchasing power. Buyer power can result in a “neutralisation” 172 or offsetting of the effects of supplier dominance or concentration, i.e., “removing the possibility of suppliers exercising market power.” 173 In Italian Flat Glass the General Court reproached the Commission for not having “even attempted to gather the information necessary to weigh up the economic power of the three [allegedly collectively dominant] producers against that of Fiat, which could cancel each other out.” 174 Strong buyer power constrains suppliers’ ability to raise prices, 175 and in many cases obliges suppliers to lower prices. By contrast, in Irish Sugar, it was held that, in a situation where a supplier holds a dominant position, the presence of one or more large customers is not capable of affecting the dominant position of the supplier where the demand side is composed of a number of customers that are not equally strong and which cannot be aggregated. 176 Assessment of buyer power. To assess buyer power, the Commission will examine a number of factors to assess whether customers’ influence over the commercial negotiating process constrains their suppliers in their exercise of market power. In the first place, the relevant procurement market must be defined. The procurement market comprises those demand sources to which suppliers may realistically sell their products. 177 Second, the concentration of customers in the relevant procurement market will be examined. This is the most important factor in assessing the extent to which a market is likely to be influenced by buyer power. 178 Customer concentration is significant both in absolute terms (i.e., the percentage of demand accounted for by the largest buyer or buyers) and relative to concentration on the supply side. 179 In assessing demand-side concentration in procurement markets, the Commission has typically looked at the percentage of purchases of the relevant products accounted for by the largest customers in the market. It should be noted, however, that even where individual demand-side market shares are relatively small, buyer concentration could also be generated by the presence of centralised “buying groups.” 180

UPM-Kymmene/Haindl, OJ 2002 L 233/38. Enso/Stora, OJ 1999 L 254/9, para. 97. 174 Joined Cases T-68/89, T-77/89 and T-78/89, Società Italiana Vetro SpA, Fabbrica Pisana SpA and PPG Vernante Pennitalia SpA v Commission [1992] ECR II-1403, para. 366. 175 M Bloom, “Retailer Buyer Power,” in B Hawk (ed.), 2000 Fordham Corporate Law Institute, Juris Publishing Inc. (2001), p. 409. 176 Case T-228/97 Irish Sugar v Commission, [1999] ECR-II 246, paras. 97-98. 177 J Lücking, “Retailer Power In EC Competition Law,” in B Hawk (ed.), 2000 Fordham Corporate Law Institute, Juris Publishing Inc. (2001), p. 473. 178 See Buyer Power And Its Impact In The Food Retail Distribution Sector Of The European Union, report prepared for the European Commission by Dobson Consulting, 13 October 1999, p. 32. 179 In various merger cases, and in a wide variety of markets, the Commission has found that buyer power played a significant role in constraining suppliers’ behaviour and made unlikely the possibility of supplier dominance in cases where demand-side concentration was equal to or greater than supply-side concentration. See, e.g., Case COMP/M.2072, Philip Morris/Nabisco, Commission Decision of 16 October 2000, para. 25 (demand-side concentration ratio 50–60%; supply-side 40–50%); Enso/Stora, OJ 1999 L 254/9, para. 84 (demand-side and supply-side concentration equal on the liquid packaging board market, with top three accounting for close to 100% of the market). 180 See National Sulphuric Acid Association, OJ 1989 L 190/22. 172 173

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Third, retailer practices will be considered. Evidence of buyer power includes delisting or threatening to delist branded suppliers’ products or demanding payments or other conditions that do not benefit the supplier correspondingly. Other issues such as the retailers’ share of the supplier’s turnover and whether or not retailers have a private or “own brand” label are also considered relevant in assessing buyer power. In addition, the Commission may compare the switching costs for the supplier if it had to switch retailers with the costs for the retailer if it had to switch suppliers. Fourth, and most importantly from the viewpoint of economic analysis, the Commission may compare the switching costs for the supplier if it had to switch retailers with the costs for the retailer if it had to switch suppliers. That is, it may compare the outside options open to suppliers and customers, respectively. The economics of bargaining is a wellestablished field in modern economic theory. It deals with the question of what determines the bargaining outcome and the relative bargaining power of the involved parties. A basic insight of bargaining theory is that the bargaining power of a party is fundamentally determined by its outside options, i.e., by the set of alternatives available to that party in case the negotiations break down. 181 Large customers will have significant buyer power when they have multiple outside options while their suppliers have few. The outside options of buyer are given by, but not restricted to, the firms established in the market. Large buyers may be able to sponsor entry, either alone or in cooperation with other buyers. 182 In Intel, the Commission rebutted Intel’s claim that the discounts it offered OEMs were driven by buyer power by noting that Intel was an unavoidable trading partner for OEMs and, hence, a must-stock brand. Thus, the Commission concluded that OEMs had no outside option when negotiating with Intel. 183 Similarly, in the two Qualcomm cases, the Commission reached the somewhat surprising conclusion that OEMs like Apple—at times the richest company in economic history—did not possess sufficient countervailing buyer power as respects Qualcomm chipset sales. 184 If the analysis of these factors reveals that sufficient buyer power exists so that the supplier cannot act independently of its customers, the supplier will not be found dominant for the purposes of Article 102 TFEU. The key overall point is that buyers’ response to price increases by the allegedly dominant firm paves the way for effective new entry or leads existing suppliers in the market to significantly expand their output so

See, e.g., J Sutton, “Non-cooperative Bargaining Theory: An Introduction,” Review Of Economic Studies (1982) (Vol. 53), 709-728; K Binmore, A I Rubinstein, and A Wolinsky, “The Nash Bargaining Solution In Economic Modelling,” RAND Journal Of Economics (1986) (Vol. 17), 176-88; A Muthoo, Bargaining Theory With Applications, Cambridge University Press (1999); and MJ Osborne and A Rubinstein, Bargaining And Markets, Academic Press (1990). 182 See UK Competition Commission, Deutsche Börse AG, Euronext NV and London Stock Exchange plc., November 2005, paras. 5.115 to 5.124. 183 Case COMP/37.990, Intel, Commission decision of 13 May 2009, para. 892. 184 Case AT.40220, Qualcomm (Exclusivity Rebates), Commission Decision of 25 January 2018, Section 10.5; and Case AT.39711, Qualcomm (Predation), Commission Decision of 18 July 2019, Section 11.5. 181

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as to defeat the price increase. In other words, the strong buyers should not only protect themselves, but effectively protect the market. 185 Examples of buyer power. Examples of buyer power have commonly arisen in two sectors: grocery retailing and pharmaceuticals. In both sectors, sellers typically face powerful buyers using sophisticated procurement techniques. In the retailing sector, increased concentration on the buyer side has led to a handful of major large-scale purchasers of food and groceries in most Member States. Indeed, concerns in respect of supermarket buyer power have been expressed within the EU and elsewhere. 186 The pharmaceutical sector is perhaps even more conducive to buyer power, since manufacturers typically face a single purchasing entity—the State—which often has express price regulation or profit cap powers. The relevance of buyer power in these two sectors is discussed in detail below, although it should be noted that these sectors are by no means unique. Other examples which are claimed to have focused on the issue of buyer power range from the timber industry and the meat-packing industry, 187 to the very sophisticated cash trading and derivatives trading exchanges. Buyer power thus needs to be examined in its specific market context. a. Grocery retailing. A good example of buyer power is the grocery industry. As the Commission explains: 188 “Manufacturers are more and more dependent on distributors and grocery retail for getting their products to the consumers. Since the shelf space for new products is limited, conflicts arise between the increasing number of new product launches and the retailers’ objective [of] profit optimisation. This conflict has resulted in retailers asking for listing fees (key money) or for discount schemes which sometimes go beyond possible cost savings of the manufacturers. Given the pressure on shelf space, products which are not in a number one or two position increasingly run the risk of being delisted and replaced by large retailers’ own brands.”

The effect of this strong buyer power is to “[prevent] manufacturers from exploiting their position as fully as they could do if they were faced with a less concentrated retail sector … [and] force manufacturers to reduce investment in new products or product improvements, advertising and brand building, eliminate secondary brands and weaken primary brands while strengthening the position of private-label (store) brands, and in the process cause wholesale prices to small retailers to rise, further weakening them as competitors.” 189 Moreover, “buyer power also gives a trader considerable influence over the choice of products which come to market and hence are obtainable by consumers. Products which are not bought by a dominant buyer have practically no chance of

See Guidance Paper, para. 18. AA Foer, “Introduction To Symposium On Buyer Power And Antitrust,” Antitrust Law Journal, (2005) (Vol. 72(2)), 505. 187 See SC Salop, “Anticompetitive Overbuying By Power Buyers,” Antitrust Law Journal, (2005) (Vol. 72), 669 for a discussion of these examples. 188 Commission’s Green Paper on Vertical Restraints, para. 233, available at http://www.europa.eu.int/comm/competition/antitrust/96721en_en.pdf. 189 Buyer Power and Its Impact in the Food Retail Distribution Sector of the European Union, report prepared for the European Commission by Dobson Consulting, 13 October 1999. 185 186

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reaching the final consumers as the supplier lacks alternative outlets. Lastly, the dominant buyer determines the success or otherwise of product innovations.” 190 Even large suppliers may be constrained by buyer power. For example, in Enso/Stora, the Commission found that buyer power on the liquid packaging board market removed the possibility of suppliers exercising market power (despite these suppliers having up to 70% share of the relevant market). 191 This is particularly true with respect to manufacturers’ “non-core” brands: “a large supplier’s bargaining hand is weakened since even though they own powerful brands, they also rely on the retailer for sales of their secondary brands (e.g. those that compete with own label brands).” 192 b. Pharmaceuticals. Buyer power is of particular relevance to the pharmaceutical sector because there is frequently a highly concentrated demand side, whether in the form of a single buyer, such as a national health authority, or of a few powerful purchasers, such as clinics or hospitals, that often have sufficient leverage against the suppliers to affect price. Under the EU Merger Regulation, the Commission has examined buyer power of various actors in the vertical supply chain for pharmaceuticals. For example, in Behringwerke/Armour Pharmaceutical, 193 the Commission confirmed the relevance of buyer power in the Factor VIII plasma products market. There, the highly concentrated nature of the demand side would render access to the market easier for new entrants. The Commission stated that, “the structure of the demand side in plasma-derived products, in particular in factor VIII, in Germany, nonetheless allows smaller or new entrants to achieve a position in the market.” 194 Accordingly, the Commission held that the demand side in Factor VIII exercised buyer power that would constrain the behaviour of the joint venture. 195 National law precedents also widely recognise the existence of buyer power among State purchasing entities. In Difar, the Spanish Competition Authority concluded that certain manufacturers did not have a dominant position, based, inter alia, on the facts that the “national health system had an enormous purchasing power;” and that the overall regulatory framework precluded the independent behaviour of manufacturers. 196 The Competition Service thus concluded that there was no effective way for manufacturers to develop a truly independent commercial policy without taking account of competitors or consumers. Similarly, in Cofares/Organon, 197 the Spanish Competition Tribunal stated that, when assessing dominance, regard must be given to the powerful bargaining positions on the demand side. In particular, “the monopoly position of the national health system must be underlined, due to the fact that its purchases from laboratories, accounting only for the sales through pharmacies, form approximately three quarters of the volume Rewe/Meinl, OJ 1999 L 274/1, paras. 72–74. Enso/Stora, OJ 1999 L 254/9, para. 74. 192 M Bloom, “Retailer Buyer Power,” in B Hawk (ed.), 2000 Fordham Corporate Law Institute, Juris Publishing Inc. (2001), p. 399. 193 Case No.IV/M.495, Behringwerke/Armour Pharmaceutical, Commission decision of 3 April 1995. 194 Ibid., para. 34. 195 Ibid., para. 36. 196 Case R 388/01, Difar, rejected by the Spanish Competition Service on 27 April 2001, upheld on appeal by the Tribunal for the Defence of Competition on 5 December 2001 (translation from original). 197 Resolution of the Tribunal for the Defence of Competition File R.547/02, Cofares/Organon of 22 September 2003, p. 9. 190 191

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of sales of these laboratories (73.8% in 2000) having regard to all the prescribed medicines.” 198 The strength of the bargaining power of the Spanish national health system was also referred to in Laboratorios Farmaceuticos, 199 where the Tribunal for the Defence of Competition emphasised that the administrative fixing of prices eliminates an essential characteristic of market dominance which is the possibility to determine the price. Buyer power arguments have also been rejected by the Commission and national authorities. In Genzyme 200 the UK Competition Appeal Tribunal undertook a comprehensive analysis of the effects of the countervailing buyer power of the National Health Service. Genzyme argued that the buyer power of the NHS, the fixing of prices under the PPRS 201 and the Department of Health’s price fixing powers all exert a measure of control over the supplier that prevents any alleged abuse. 202 The Tribunal held that the NHS exerted insufficient buyer power due to the fact that there was only one drug, Cerezyme, available to treat Gaucher’s disease. Further, the conduct of Genzyme, which in the past had been able to ignore NHS requests to supply Cerezyme separately from homecare services and to maintain its prices, was evidence of the lack of buyer power and “the hallmark of dominance.” 203 With regard to prescribing Cerezyme, the Tribunal noted that the actual decision to do so is taken locally by clinicians on medical grounds. Thus, in practice, once the clinician takes the decision, the NHS has little option but to fund the product. Therefore, the Tribunal concluded, “even though the NHS is the only purchaser of Cerezyme, its bargaining position is relatively weak in the face of Genzyme’s monopoly in the supply of the drug.” 204

4.2.5

Evidence Of Actual Competition On The Relevant Market

Need to examine actual competition on the market. Analysis of market shares, barriers to entry and expansion, and the effects, if any, of countervailing buyer power are obviously essential steps in the analysis of dominance. But they are ultimately only proxies for identifying the existence of dominance. It is also critical that these elements are corroborated by an analysis of actual competition on the relevant market. Evidence of actual competition on the market may prove that a particular undertaking cannot exercise dominance. As the Court of Justice noted in Hoffmann-La Roche, the “fact that an undertaking is compelled by the pressure of its competitors’ price reductions to lower its own prices is in general incompatible with that independent conduct which is the

198

Ibid. Resolution of the Tribunal for the Defence of Competition File R.488/01, Laboratorios Farmacéuticos of 5 December 2001, p. 2. 200 Genzyme Ltd v The Office of Fair Trading [2004] CAT 4. 201 The PPRS system is one of an overall control on profits, based on a permitted rate of return from a company’s NHS business as a whole, across its range of licensed medicinal products. 202 Genzyme, above, para. 178. 203 Ibid., para. 255. 204 Ibid., para. 250. 199

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hallmark of a dominant position.” 205 At the same time, the EU Courts have consistently held that a finding of dominance does not preclude the existence of some competition. 206 How much competition is needed to preclude a finding of dominance is not clear. The Court of Justice has held that a dominant firm must be able to disregard, or at least, materially disregard, competitive pressure that exists. 207 But this is imprecise, since, in the short-term at least, even firms with a small market share will, unless switching costs are zero, be able to act with a degree of independence from customers and rivals. The key element of dominance is that the dominant firm acts successfully as a price setter and its rivals as price takers. 208 The allegedly dominant firm must therefore be shown to have appreciably more influence over pricing than rivals, such that rivals are effectively forced to follow its prices. If a firm has been able to consistently behave as a price leader, and to impose significant price increases or alter its strategy with impunity or success, this will be regarded as a strong indication of dominance. For example, in Soda-Ash/ICI, the Commission cited the firm’s “traditional role as price leader” and its ability to maintain higher prices in a national market where it had a 93% share than in neighbouring Member States where its share was lower as factors indicating dominance. 209 Markets that are characterised by frequent new product introductions, entry by new competitors, unstable market shares or declining shares of leading suppliers, anticipated demand growth, and shifting consumer behaviour or preferences are likely to be less conducive to dominance on the part of a single firm or group of firms than mature, stagnant markets in which sales or market shares can only be gained at the expense of existing competitors. 210 Indeed, demand growth and a continuous influx of new products is also strong evidence of a market that is competitive. 211 The fact that rivals might win sales at certain accounts, or that the dominant firm is forced to cut its price to win some marginal sales, is not conclusive evidence of the absence of dominance. Rivals’ ability to set prices, and the allegedly dominant firm’s ability to act Ibid., para. 71. Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 39. See also Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, para. 113. 207 Ibid., para. 39. 208 See DW Carlton & JM Perloff, Modern Industrial Organisation, Pearson Addison Wesley, (2005) (4th edn.), p. 110. 209 Soda-Ash–Solvay, ICI, OJ 1991 L 152/1, paras. 6, 45, and 48. See also ECS/AKZO, OJ 1985 L 374/1, para. 69 (Commission considered relevant the fact that AKZO had been able even during periods of economic downturn to maintain its overall margin by regular price increases and/or increases in sales volume). 210 See, e.g., Tetra Pak I (BTG licence), OJ 1988 L 272/27, para. 44 (Commission found that the milk market was mature with little or no room for overall expansion and the technical life for the related equipment in the relevant market was in excess of 10 years, making it difficult for newcomers to enter since, in order to sell their products, they had to either compete in the limited market for renewing old equipment or persuade dairies to replace existing equipment); and Eurofix-Bauco v Hilti, OJ 1988 L 65/19, para. 69. 211 See Case COMP/M.2276, The Coca-Cola Company/Nestlé/JV, OJ 2001 C 308/13. para. 38 (Commission concluded that even though the joint venture would account for 85–95% of iced tea sales in Spain, competitive concerns did not arise because the iced tea segment was nascent, and over the coming years was expected to grow and the number of choices and competitors to increase). 205 206

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with a degree of independence from rivals’ pricing, must also be more than merely marginal or transitory. Evidence that the allegedly dominant firm has been forced to make successive price cuts in response to rivals and still has not gained market share should, however, offer a good prima facie indication of a lack of dominance. In contrast, if the firm with the highest market share has been unable to impose significant price increases, or if it realises low margins, over an extended period, this suggests strongly that the firm is not dominant. Beyond these generalisations, however, there is no precise benchmark which determines the amount of competition necessary to rule out a finding of dominance. Each case requires a thorough analysis of market dynamics. In Intel, for example, the Commission concluded that the “fact that prices in a market may be falling is not in itself inconsistent with the existence of a dominant position.” 212 In particular, it considered that Intel was dominant despite evidence of falling prices because, according to the Commission, the microprocessor industry is characterised by rapid technological progress and, because of it, falling prices are an intrinsic characteristic of this industry. 213

4.3

COLLECTIVE DOMINANCE 4.3.1

Introduction

Collusion and EU competition law generally. Express agreements between horizontal competitors that fix prices and output or allocate markets constitute the most serious violation of EU competition law. Such agreements are unlawful under Article 101(1) and cannot benefit from exemption under Article 101(3). Article 101 TFEU also prohibits “concerted practices” between undertakings or associations of undertakings which have as their object or effect the prevention, restriction or distortion of competition. Concerted practices do not have all the elements of an express agreement, but “arise out of coordination which becomes apparent from the behaviour of the participants.” 214 It is well-established in economics, however, that rival sellers may be able to coordinate their activities without entering into agreements or other forms of communication that amount to a concerted practice. In oligopolistic markets, they may be able to coordinate their activities where each oligopoly member realises that competing with other members would ultimately be self-defeating. The absence of effective competition within an oligopoly, and between the oligopoly and other firms on the relevant market, is sometimes referred to as “collective dominance,” “joint dominance,” “coordinated effects,” or “tacit collusion.” Many economists prefer the term “tacit collusion,” on the basis that it more Case COMP/37.990, Intel, Commission decision of 13 May 2009, para. 907. Ibid., para. 908. 214 See Case 48/69, Imperial Chemical Industries Ltd v Commission (Dyestuffs) [1972] ECR 619, para. 65. The terms “agreement” and “concerted practice” have strong similarities: they are “intended to catch forms of collusion having the same nature and are only distinguishable from each other by their intensity and the forms in which they manifest themselves.” See Case C-49/92 P, Commission v Anic Partecipazioni SpA [1999] ECR I-4125, paras. 131 and 115–118. For example, in the case of concerted practices, independent firms can remove market uncertainty by making advance price announcements or complaining about rivals’ pricing activities. If the rival firm responds with similar price rises of its own, or accepts the rivals’ complaints and adjusts its prices accordingly, then, in the absence of any other legitimate explanation for parallel conduct, a concerted practice may be found. In contrast, in the case of agreements, the same ends are achieved through express contacts. 212 213

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accurately captures the economic insight that a tight oligopoly can behave in a similar way to a cartel. But this phrase is somewhat confusing to lawyers, who tend to view “collusion” as requiring either an actual agreement or a concerted practice. The application of Article 102 TFEU to tacit coordination. Article 102 TFEU states that the prohibition on abuse of dominance applies to “one or more undertakings,” thus potentially allowing for the possibility that collective dominance could fall under the prohibition on abuse of dominance. Recognising the potential for economic harm as a result of the failure to tackle tacit coordination, and the limitations of merger control laws in this regard, 215 the Commission and EU Courts have for some time accepted that firms may be collectively dominant for the purposes of Article 102 TFEU. 216 This possibility was first mentioned in 1988 in the context of firms that were structurally linked, 217 which led to an erroneous view that such links were necessary in collective dominance cases. This misconception was clarified in subsequent cases, but doubt remained as to the precise legal conditions for collective dominance under Article 102 TFEU, and in particular how they related to an extensive decisional practice and case law developed under the EU Merger Regulation. More recent case law and guidance have for practical purposes assimilated the treatment of collective dominance under both areas of law, with the result that, certain inevitable differences aside, the basic principles are the same. 218

215 Mergers and acquisitions that create or strengthen situations of collective dominance are of course subject to mandatory merger control laws in the EU and elsewhere. But merger control laws can only tackle the problem of collective dominance as and when transactions happen to arise: many anticompetitive oligopolies never lead to merger activity, not least because the merging firms know that a favourable outcome is unlikely. The absence of an effective enforcement tool for dealing with tacit collusion represents a potential major lacuna in the treatment of collusion. Indeed, many respected commentators argue that the economic harm from tacit collusion is at least as serious as express collusion, and possibly more given the fact that companies know that explicit cartels are per se illegal. See R Posner, Antitrust Law, Chicago Press (2001) (2nd edn.). 216 This represents a major difference with Section 2 of the US Sherman Act, where situations of jointly-held monopolies are not caught. See, e.g., P Areeda and H Hovenkamp, Antitrust Law, Little, Brown and Company (1996), para. 810. 217 Case 247/86, Société alsacienne et lorraine de télécommunications et d'électronique (Alsatel) v SA Novasam [1988] ECR 5987, paras. 21–22. The Court of Justice did not respond to this invitation from the Commission, since the issue was not raised by the referring court. 218 The policy objectives of EU merger control and Article 102 TFEU also differ in certain respects. Merger control seeks to prevent structural changes from occurring on markets that would lead to substantially less competition, in particular by creating dominance (whether single firm or collective). In other words, it seeks to prevent long-term changes in market structure. Article 102 TFEU is neutral on the issue of dominance and also has a narrower focus in terms of dealing with market activity. It does not concern structural changes to a market, but strategic conduct within a market that limits production to the prejudice of consumers (as well as exploitative acts that take advantage of existing dominance). This raises the question of whether the standard for intervention is, or should be, different under the EU Merger Regulation and Article 102 TFEU. There are good arguments that the standard should be higher under the EU Merger Regulation than under Article 102 TFEU. One obvious reason is that merger control is by nature predictive whereas Article 102 TFEU concerns know past or present market conditions. Authorities are almost certainly more likely to get more merger decisions wrong than abuse of dominance cases. One study puts the rate of error in merger decisions as high as one in four. See T Duso, D Neven, and LH Röller, “The Political Economy Of European Merger Control: Evidence Using Stock Market Data,” CEPR Discussion Paper 3880 (April 2003). A more compelling reason perhaps is that the cost of

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Although the concept of collective dominance has now become relatively well established under Article 102 TFEU, and case law has in principle recognised the possible application of Article 102 TFEU to tacit collusion, tacit collusion has thus far not been found to be a sufficient element on which to base a finding of dominance. 219 As a result, some still doubt that Article 102 TFEU can actually, in practice, be applied to tacit collusion, arguing that it remains an underdeveloped tool for these purposes, failing to enable the Commission to successfully deal with the challenges inherent in trying to prove tacit collusion. 220 Moreover, the Commission’s position on the enforcement of Article 102 TFEU in situations of collective dominance is somewhat unclear. The 2005 Discussion Paper discussed collective dominance in some detail and made clear that tacit coordination could itself suffice to show collective dominance. 221 However, the more recent Guidance Paper, outlining the Commission’s enforcement priorities under Article 102 TFEU, only mentions in passing the notion of collective dominance, and focuses instead on single firm dominance. 222 It also says nothing about abuses of collective dominance. It would therefore appear the collective dominance and its abuse are (currently) not a Commission enforcement priority. Of course, the Guidance Paper does not, at least formally, bind national competition authorities and it probably exercises an even lesser constraint on national courts. 223 Article 102 TFEU also remains directly applicable and collective dominance is recognised under the EU Courts’ case law. So collective dominance may continue to play a role at a national level.

4.3.2

The Economics Of Collective Dominance

Overview. Collusion allows firms to exert market power and artificially restrict competition. It may arise when firms act through an organised (explicit) cartel or when firms act in a non-cooperative way to maintain supra-competitive prices; that is, when wrongly-prohibiting a merger is, in general, likely to be higher than wrongly finding an abuse where there is none, since it has a lasting structural effect on the market. These differences should not, however, be overemphasised, since any assessment of collective dominance under both sets of rules involves complex economic assessment and judgment rather than purely factual analysis. And Airtours makes clear that the EU Courts will apply a high standard for intervention in merger cases too, requiring “convincing evidence” of collective dominance. See Case T-342/99, Airtours plc v Commission [2002] ECR II-2585, para. 63. On the policy issues, see generally J Temple Lang, “Oligopolies And Joint Dominance In Community Antitrust Law,” in B Hawk (ed.), 2001 Fordham Corporate Law Institute, Juris Publishing Inc. (2001), pp. 269–359; and D Geradin, P Hofer, F Louis, N Petit, and N Walker, “The Concept Of Dominance,” Global Competition Law Centre Research Papers On Article 102 TFEU, College of Europe, July 2005, p. 35. 219 For an outline of the development of the case-law, and the impact of merger control decisions in developing the concepts, see N Petit, “The Oligopoly Problem In EU Competition Law,” available at: http://ssrn.com/abstract=1999829. 220 See R Gjendemsjo, EJ Hjelmeng and L Sorgard, “Abuse of Collective Dominance: The Need for a New Approach,” 36 World Competition 355 (2013) and F Mezzanotte, “Using Abuse of Collective Dominance in Article 102 TFEU to Fight Tacit Collusion: The Problem of Proof and Inferential Error,” World Competition, 33 (2010). 221 DG Competition discussion paper on the application of Article82 of the Treaty to exclusionary abuses, December 2005 (hereinafter the “Discussion Paper”), paras. 43-50. 222 Guidance Paper, para. 4. 223 On the binding effect of the Guidance Paper, see Ch. 2 (History, Development, and Reform).

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collusion emerges tacitly through repeated market interactions. 224 For many years, economists believed that tacit collusion was not merely a possibility in concentrated industries, but rather an inevitable outcome. 225 The consensus at the time was that the line between “tacit collusion” and “interdependent action without collusion” was blurred. 226 This led one economist to conclude that “to legislate against oligopoly and against quasi-agreements [i.e., tacit coordination] is less promising than some optimists may have believed … not much is gained by trying to group oligopolists as if they were not aware of their individual influence on each other’s policies.” 227 This laissez faire attitude to oligopoly behaviour changed after the publication of Stigler’s model of oligopoly in the 1960s. He understood that, although all members of an oligopoly would benefit if they could coordinate their conduct to maximise joint profits, “if any member of an oligopoly can secretly violate it, he will gain larger profits than by conforming to it.” 228 Spontaneous coordination will emerge only in oligopolistic industries where the incentives to deviate are low or where deviations are easy to detect and punishments are sufficiently strong. It thus became clear that that oligopolistic interaction does not necessarily equate to coordination, thus re-establishing the dividing line between unilateral oligopolistic interaction and tacit collusion. In other words, not all oligopolies are uncompetitive. Following this insight, economic theory focused attention on the identifying the set of circumstances where the members of an oligopoly would be able to coordinate their strategies so as to maximise joint profits. Using the tools of game theory, 229 modern oligopoly theory has shown that tacit collusion between firms is likely when two basic cumulative conditions are satisfied: 230 (1) firms have the incentive to avoid competing, i.e., to raise their profitability; and (2) they have the ability to do so, i.e., tacit agreement is feasible. These basic conditions in turn give rise to a number of more specific criteria, including: (a) the need for firms have common interests in reaching tacit agreement; (b) the need for low transaction costs in reaching a tacit agreement; (c) the ability of the participating firms to effectively impose their agreement on their customers; and (d) difficulties of defecting from the (tacitly) agreed course of action. 4.3.2.1 Firms have the incentive to avoid competing The need for firms to have common interests. Firms’ interests must be aligned to reach tacit agreement. For example, an incumbent firm with a large customer base and 224 See J Friedman, “A Non-Cooperative Equilibrium For Supergames,” International Economic Review, (1979) (Vol. 20(1)), 147–56. For an up-to-date, non-technical summary of modern oligopoly theory and its implications for antitrust law, see GJ Werden, “Economic Evidence On The Existence Of Collusion: Reconciling Antitrust Law With Oligopoly Theory,” Antitrust Law Journal, (2004) (Vol. 71), 719. 225 See EH Chamberlain, The Theory Of Monopolistic Competition, Harvard University (1933). 226 JS Bain, Industrial Organisation, Harvard University Press (1968), p. 315. 227 See W Fellner, Competition Among the Few, AA Knopff (1949), pp. 309-310. 228 See G Stigler, “A Theory Of Oligopoly,” Journal Of Political Economy, (1964) (Vol. 72), 46. 229 For a basic introduction, see DG. Baird, RH Gertner and RC Picker, Game Theory And The Law, Harvard University Press (1994). 230 See M Ivaldi, B Jullien, P Rey, P Seabright, and J Tirole, “The Economics Of Tacit Collusion,” IDEI, Toulouse, Final Report to DG COMP. March 2003. See also KN Hylton, Antitrust Law: Economic Theory And Common Law Evolution, Cambridge University Press (2003).

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significant goodwill would have very little incentive to enter into tacit coordination with a competitor who entered the market much later and with no reputation in the market. The incumbent may want the entrant to agree to high prices, but this makes little sense for the entrant, because it effectively makes it impossible for the entrant to grow its share for the duration of the agreement. The entrant may want to agree to split the market, but such an agreement will likely be turned down by the incumbent as it may see no reason to concede market share given its vast competitive advantage. The parties will have common interests if their strategic goals are sufficiently aligned. This can arise in a variety of factual settings, but most commonly occurs where: (1) some members of the oligopoly have financial interests in competitors, whether or not they involve control (cross-ownership); (2) absent those structural links, they are sufficiently alike (symmetry); and (3) no firm acts as a “maverick.” Only if firms have common incentives to maintain or raise prices (and by a similar amount) will tacit collusion be possible. a. Cross-ownership. When company A has a financial interest in company B, its strategic decisions take into account not just their impact on the profits of company A, but also the impact on the profits of company B. In other words, the effect of crossownership is to align the incentives of companies which otherwise are rivals in the market place. 231 b. Symmetry. If firms (or their products) are substantially different, there may be no common price that is acceptable to all parties. That is, collusion is less likely if there are important asymmetries amongst competitors. 232 Factors that may give rise to asymmetries include the following: 1.

Different cost structures. Tacit collusion is less likely when cost asymmetries among undertakings are high, given that industry profit maximisation results in different output and profit levels for the members of the cartel and may require the exit of some of its participants. 233

2.

Differences in market shares. Tacit collusion is less likely in markets where there remain significant differences in the market shares (or customer bases) of the different competitors. 234 This applies a fortiori when there are some economies of scale or indivisibilities in production, given that those firms with

231 See D O’Brien and S Salop, “Competitive Effects Of Passive Minority Equity Interest: The Reply,” Antitrust Law Journal, (2001) (Vol. 69), 611 and references therein. 232 Kühn shows that if a firm is large enough relative to the rest of the market it cannot credibly participate in a collusive scheme. Furthermore, he shows that firms have no incentive to induce slight asymmetries through mergers since this is profit reducing. See KU Kühn, “The Coordinated Effects Of Mergers In Differentiated Products Markets,” CEPR Discussion Papers 4796 (2004). 233 See A Jacquemin and ME Slade, “Cartels, Collusion And Horizontal Merger,” in R Schmalensee and RD Willig (eds.), Handbook Of Industrial Organisation, North-Holland (1989), p. 418. See also J Harrington, “The Determination Of Price And Output Quotas In A Heterogeneous Cartel,” International Economic Review, (1991) (Vol. 32(4)), pp. 767–92; R Rothschild, “Cartel Stability When Costs Are Heterogeneous,” (1999) 17(5) International Journal Of Industrial Organisation, (1999) (Vol. 17(5)), pp. 717–34. 234 See Case IV/M.355, Rhône Poulenc/SNIA II, OJ 1993 C 272/04; and Case IV/M.358, Pilkington Techint/SIV, OJ 1994 L 158/24.

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lower market shares will seek efficiency improvements. And it is also a more important factor when firms have excess capacity that they seek to put into productive use. 3.

Heterogeneous products and asymmetric product lines. Tacit collusion is less likely when firms compete with differentiated products, 235 or when their products lines differ in size and scope. For example, a high quality producer is less likely to seek an agreement with a less competitive, low quality producer than with a competitor offering the same quality as the latter represents a bigger competitive threat.

4.

Asymmetric growth prospects. A growing firm will usually have little or no incentive to cooperate with a declining firm, and may prefer the latter to exit the market as quickly as possible. 236

c. Absence of “maverick” player(s). Coordination is much less likely in the presence of a “maverick,” i.e., a firm that declines to follow the industry consensus and thereby constrains effective coordination. A maverick can be identified by certain characteristics, such as excess capacity and aggressive pricing and non-pricing conduct (e.g., advertising), etc. 237 A firm with these characteristics is likely to deviate from any consensus or tacit agreement among firms, thus hindering coordination in the marketplace. A maverick would grow its market share at the expense of its competitors, thus disrupting any attempts to stabilise the market into tacitly agreed quotas. Sales growth—in an otherwise stable market—is thus a good indicator of maverick behaviour. 4.3.2.2 Reaching and maintaining a tacit agreement is feasible Negotiating an agreement involves low (transaction) costs. The cost of reaching tacit coordination must be relatively small. Several factors determine the costs of negotiating an agreement. In the first place, the market must be relatively concentrated: the costs of negotiating an agreement rise rapidly with the number of parties involving the negotiation. Collusion (whether explicit or tacit) is therefore more likely in highly

235 However, note that a collusive agreement may be difficult to sustain in a market with differentiated products. See in this regard, TW Ross, “Cartel Stability And Product Differentiation,” International Journal Of Industrial Organization, (1992) (Vol. 9), 453–69; and S Martin, “Endogenous Firm Efficiency In A Cournot Principal-Agent Model,” Journal Of Economic Theory, (1993) (Vol. 59(2)), 445–50. 236 A difference in growth prospects also affects the sustainability of the collusive agreement, as the firm with declining demand has a large incentive to deviate today (when its demand is high) and has no fear of future punishments (when its demand is low). See JE Harrington, “Collusion Among Asymmetric Firms: The Case Of Different Discount Factors,” International Journal Of Industrial Organisation, (1989) vol. 7, 289–307. 237 See Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings, OJ 2004 C 31/5, para. 42 (defining a “maverick” as a firm “that has a history of preventing or disrupting coordination, for example by failing to follow price increases by its competitors, or has characteristics that gives it an incentive to favour different strategic choices than its coordinating competitors would prefer.”). See also JB Baker, “Mavericks, Mergers And Exclusion: Proving Coordinated Effects Under The Antitrust Laws,” New York University Law Review, (2002) Vol. 77, 166 (“But when firms differ, any firm that is nearly indifferent between coordination and cheating will constrain efforts by its rivals to make coordination more effective. Such a firm is the industry’s maverick.”).

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concentrated markets. 238 Second, a stable market is necessary for the proper functioning of a collusive agreement. If the market conditions change frequently over time, it becomes very difficult, if not impossible, for suppliers to co-ordinate their behaviour. 239 Dynamic and innovative markets are therefore less susceptible to collusion. Finally, it must be possible for the firms to tacitly agree on the collusive price with relative ease. Collusive mechanisms may work for different prices that result in firms getting very different levels of profits. 240 This means that firms that are tacitly colluding may be able to sustain any price level, from the competitive price to the monopoly (or fully collusive) price. This raises questions about the likelihood of the alternative outcomes, and about how firms can manage to achieve their preferred outcome. There might be different situations that explain why a particular price is selected in a tacitly collusive equilibrium. The first reason might be habit or history: if firms have coordinated in the past on a certain collusive price, it may be risky for them to experiment and change it. 241 This is one of the reasons why past coordination is an indicator of the likelihood of future coordination in an oligopolistic market. Alternatively, firms may be able to overcome coordination problems through exchanges of information about future prices or production. 242 Firms can effectively impose their agreement on their customers. In addition to being able to reach tacit agreement between themselves, the oligopolists must be able to impose the terms of that agreement on customers. Consider two competing firms that find it in their mutual interest to set their prices at a very high level. This agreement makes sense only if their customers have no other option but to purchase the goods at that price, that is if they cannot find other suppliers selling at lower prices and, in addition, if their demands are relatively inelastic so that they cannot simply cut their consumption in response to the price increase rendering it privately unprofitable. If the parties cannot effectively impose their agreement on their customers, then the agreement is not feasible. Collusion is therefore less likely in markets where: (1) elasticity of demand is high (an increase in prices will lead consumers to switch their demand to other producers or to

238 See O Compte & P Jehiel, “Multi-Party Negotiations,” mimeo, CERAS, 2002; and M Ivaldi, B Jullien, P Rey, P Seabright, and J Tirole, “The Economics Of Tacit Collusion,” IDEI, Toulouse, Final Report to DG COMP (March 2003), pp. 12-13. 239 See Case T-342/99, Airtours plc v Commission [2002] ECR II-2585, recitals 9 and 10 and paras. 111 and 139. See also J Rotemberg and G Saloner, “A Supergame-Theoretic Model Of Business Cycles And Price Wars During Booms,” American Economic Review, (1986) Vol. 76, 38; J Haltiwanger and J Harrington, “The Impact Of Cyclical Demand Movements On Collusive Behaviour,” RAND Journal Of Economics, (1991) Vol. 26, 86–106. 240 D Abreu, “External Equilibria Of Oligopolistic Supergames,” Journal Of Economic Theory, (1984) Vol. 50(2), 285–99; D Abreu, D Pearce and E Stachetti, “Optimal Cartel Equilibria With Imperfect Monitoring,” Journal Of Economic Theory, (1986) vol. 39, 251–69; and D Fudenberg and E Maskin, “The Folk Theorem In Repeated Games With Discounting Or With Incomplete Information” Econometrica, (1986) Vol. 54(3), 533–54. 241 See W Bentley MacLeod, “A Theory Of Conscious Parallelism,” European Economic Review, (1985) Vol. 27, 25–44; and J Rotemberg and G Saloner, “Collusive Price Leadership,” Journal Of Industrial Economics, (1990) Vol. 34, 93–111. 242 KU Kühn “Fighting Collusion By Regulating Communication Between Firms,” Economic Policy, (2001) Vol. 32, 167–97, and references therein.

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reduce their consumption of the relevant products); 243 (2) there are sufficient actual or potential competitors that fall outside the coordinated behaviour (non-members can counteract the pricing policies of collusive undertakings, in particular where they are large, efficient, and have excess capacity); 244 and (3) customers exert buyer power (where buyers enjoy significant bargaining power, colluding firms will not be able to impose abusive pricing policies). 245 Defection from the tacitly-agreed course of action is difficult. Even if firms find it in their mutual interest to agree to set very high prices, and can effectively impose that agreement on customers, it must also be clear that any attempt to cut prices will be rapidly acted upon by the non-deviating oligopoly members with price reductions of their own. If price competition that might undermine the tacitly-agreed course of action can be rapidly detected, and retaliatory price cuts implemented, then the only effect of a price cut will be to lower margins for all suppliers and to leave market shares broadly unaltered. In this scenario, the logical course of action will be to refrain from competing vigorously. Absent the ability to detect and punish deviations, collusion is unlikely. More specifically, tacit collusion is feasible only if it is sustainable, which in turn requires that: (1) the parties have no incentive to deviate; and (2) defection is easy to detect and punish. If defection is easy and/or punishment threats are not credible, then the agreement is not feasible. a. Incentives to deviate. Firms’ incentives to deviate from the tacitly-agreed course of action are typically large in three situations. First, when demand elasticity is high, collusion is more difficult to enforce. This is because each firm has a strong incentive to deviate from the agreed price. If customers are very price sensitive, each firm knows that it can “steal” high volumes from its rivals simply by slightly undercutting them. 246 On the other hand, a more elastic demand makes any punishment on the deviant more severe, so the effect of demand elasticity on the likelihood of coordination is ambiguous overall. Second, collusion is less likely in those markets characterised by rapid product innovation, given that innovation constitutes another competitive tool to win market share thus making collusive agreements unstable. This applies a fortiori when the introduction of new products is not easily predictable, and existing market positions can be eroded very quickly. 247 Finally, when firms’ capacities are asymmetric, increasing the capacity of one of the firms in the dominant oligopoly increases the incentives of that firm to

See and M Ivaldi, B Jullien, P Rey, P Seabright and J Tirole, “The Economics Of Tacit Collusion,” IDEI, Toulouse, Final Report to DG COMP (March 2003), pp. 50–52. 244 The Commission took into account such considerations in Case IV/M.580, ABB/Daimler Benz Commission decision of 18 October 1995. 245 The Commission examined buyer power as a relevant factor in assessing the likelihood of tacit collusion in Case IV/M-368, Snecma/TI, Commission decision of 17 January 1994. See generally section 4.2.4 above. 246 The Commission has pointed out the inelasticity of demand as a factor facilitating collusion. See, e.g., Nestlé/Perrier, OJ 1992 L 356/1; and Mannesmann/Vallourec/Ilva, OJ 1993 C 228/17. 247 See M Ivaldi, B Jullien, P Rey, P Seabright and J Tirole, “The Economics Of Tacit Collusion,” IDEI, Toulouse, Final Report to DG COMP (March 2003), pp. 32–35. 243

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deviate and reduces the ability of its competitors to punish it, which makes collusion less likely. 248 In contrast, a firm’s incentives to deviate will be less when there are practices that facilitate adherence to a common course. For example, a firm may offer customers most favoured company (or “nation”) clauses. Such clauses can increase the cost of a deviation because they force the deviant company to apply to all of its customer base the same terms and conditions offered to the customers of rival companies (i.e., the marginal customers). Much the same disincentive can arise when a firm has a financial interest (whether active or passive) in a competitor. In that case, a deviation has two profit effects: the standard increase in the profits of the deviant company, and the reduction on the profits of the company or companies where the deviant has a financial interest. Depending on which of the two is larger, the incentives to deviate may be more or less. b. Credibility of punishment. Credible punishment threats require a number of cumulative conditions to be satisfied. First, the market must be transparent, so that deviations can be detected with immediacy. Markets in which firms’ behaviour in respect of their realised prices is transparent are more likely to be subject to collusive outcomes because it is easier for firms to monitor each other and respond rapidly to any attempt to compete aggressively. 249 Market transparency is a function of several factors: (1) concentration (concentrated markets are more likely to suffer cooperative outcomes than unconcentrated ones, as cheating is more easily spotted); 250 (2) price transparency (markets where prices are posted are more transparent than markets where prices are formed through bargaining or informal bidding processes, e.g., in auction markets, transparency is greater when the auction is organised as an open auction than as a sealedbid auction); 251 (3) price complexity (e.g., a market where firms employ many different discount schemes, varying from customer to customer, over time and from product to product is one where each competitor is unlikely to understand whether its competitors are complying with the tacit agreement or not); (4) stability of demand (markets with unstable demand are less prone to collusive outcomes because observed changes in the 248 See C Davidson and RJ Deneckere, “Horizontal Mergers And Collusive Behaviour,” International Journal Of Industrial Organisation (1984) Vol. 2, 117–32; VE Lambson, “Some Results On Optimal Penal Codes In Asymmetric Bertrand Supergames,” Journal Of Economic Theory, (1994) Vol. 64(2), 444–68; O Compte, F Jenny and P Rey, “Capacity Constraints, Mergers And Collusion,” European Economic Review, (2002) Vol. 46(1), 1–29; and H Vasconcelos, “Tacit Collusion, Cost Asymmetries And Mergers,” RAND Journal of Economics, (2005) Vol. 36(1), 39–62. 249 See G Stigler, “A Theory Of Oligopoly,” Journal Of Political Economy, (1964) Vol. 72, 44–61; and E Green and R Porter, “Non-Cooperative Collusion Under Imperfect Price Information,” Econometrica (1984) Vol. 52(1), 87–100. See also R Porter, “Optimal Cartel Trigger-Price Strategies,” Journal of Economic Theory, (1983) Vol. 29, 313–338; M Kandori, “The Use Of Information In Repeated Games With Imperfect Monitoring,” Review Of Economic Studies, (1992) Vol. 59, 561–579; O Compte, “Communication In Repeated Games With Imperfect Private Monitoring,” Econometrica, (1998) Vol. 66 597–626; M Kandori and H Matsushima, “Private Observation, Communication And Collusion,” Econometrica, (1998) Vol. 66(3), 627–52; and S Athey and K Bagwell, “Optimal Collusion With Private Information,” RAND Journal Of Economics, (2001) Vol. 32(2), 428–465. 250 See M Ivaldi, B Jullien, P Rey, P Seabright and J Tirole, “The Economics Of Tacit Collusion,” IDEI, Toulouse, Final Report to DG COMP (March 2003), pp. 12–13. 251 See PD Klemperer, “Bidding Markets,” UK Competition Commission, Occasional Paper, June 2005, and references therein.

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market are less likely to be the result of actions by rivals than external shocks to the market); 252 and (5) the extent of information exchange among competitors (firms can facilitate the detection of deviants by exchanging information on market outcomes, especially prices). 253 Second, the punishment must be credible, which means that it must be more in the interest of firms to engage in the punishment action (i.e., retaliate) than to do nothing. 254 Firms complying with the agreement may need to coordinate their behaviour to impose a punishment on the deviator. This may be very difficult when the number of firms in the collusive group is large. Finally, the punishment must be sufficiently strong. The profit loss imposed on a deviant firm through punishment must be sufficiently large to deter deviations. 255 Relevant factors include: (1) demand growth (higher demand growth increases the strength of the punishment as it makes the future profit loss from retaliation larger); 256 (2) excess capacity (retaliation may be stronger in situations of excess capacity; alternatively, it could be argued that excess capacity gives firms large incentives to cut prices, increase sales and lower costs); 257 and (3) multi-market contacts (where firms interact on two or more markets, they may punish deviations in one market by retaliating in others). 258 It is not clear, however, how the presence of switching costs affects the ability and incentive of firms to successfully sustain co-ordination. Switching costs can have effects that simultaneously pull in opposite directions. 259 252 See N Fabra, “Collusion With Capacity Constraints Over The Business Cycle,” International Journal Of Industrial Organisation, (2005) Vol. 9, 497–511. 253 See, e.g., KU Kühn and X Vives, “Information Exchanges Among Firms And Their Impact On Competition,” mimeo, IAE Barcelona (1994), prepared at request of the Directorate General for Competition of the European Commission. See also, CA Holt and D David, “The Effects Of Non-Binding Price Announcements In Posted-Offer Markets,” Economic Letters, (1990) Vol. 39(1), 307–10. Hence, formal and informal exchanges of commercially sensitive information among competitors, whether bilateral, multilateral or mediated through trade associations, must be viewed with suspicion. Information on individual prices and quantities is more helpful for firms to sustain collusion than aggregate information about demand from market studies. High frequency data and data disaggregated across markets helps detect deviations and draw inferences about demand and thus sustain collusion. See DS Evans, “Trade Associations And The Exchange Of Price And Non-Price Information” In BE Hawk (Ed.), 1992 And EEC-US Competition And Trade Law, Kluwer Law International (1998). 254 See M Ivaldi, B Jullien, P Rey, P Seabright and J Tirole, “The Economics Of Tacit Collusion,” IDEI, Toulouse, Final Report to DG COMP (March 2003), p. 6. 255 Ibid., p. 7. 256 Ibid., pp. 26–28. 257 See C Davidson and RJ Deneckere, “Excess Capacity And Collusion,” International Economic Review, (1990) Vol. 31, 521–41. 258 See D Bernheim and M Whinston, “Multimarket Contact And Collusive Behaviour,” Rand Journal Of Economics, (1990) Vol. 21(1), 1–26; WN Evans and IN Kessides, “Living By The ‘Golden Rule’: Multimarket Contact In The US Airline Industry,” Quarterly Journal Of Economics, (1994) Vol. 109(2), 341–66, P Martin and N Fernandez, “Market Power And Multi-Market Contact: Some Evidence From The Spanish Hotel Industry,” Journal Of Industrial Economics, (1998) Vol. 46 (3), 301–315. 259 The presence of switching costs can increase transparency in a mature market with switching costs as, if most customers are already locked-in to a supplier, a larger price cut may be required for customers to switch. Such price reductions are more likely to be observed by rivals and so monitoring any agreement

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4.3.2.3 Conclusion The contribution of economics to understanding tacit collusion. Modern oligopoly theory has identified a series of factors that facilitate tacit coordination, and others which make it more difficult. Some of these factors relate to the structural features of the market; others to the way oligopolists interact between themselves and with their customers. Economic theory has shown that tacit collusion is more likely when markets have certain minimum structural or behavioural aspects. Structural characteristics conducive to situations of tacit collusion include: (1) a small number of firms; (2) firms are symmetric—they have similar costs, capacities, products, growth prospects, and financial strength; (3) stable demand and cost conditions; (4) limited or no innovation activity; (5) high barriers to entry and no buyer power; (6) firms interact in multiple markets; (7) firms have financial interests in their competitors; and (8) prices are transparent or known. Behavioural factors might include facilitating practices such as the offering of most favoured company (or “nation”) clauses to customers. Many other factors are ambiguous. For example, a more elastic demand makes collusion more profitable and increases the strength of the punishment imposed on deviants, but at the same time it increases the incentives to deviate. Other ambiguous factors include switching costs, excess capacity, and demand growth. In sum, economic theory identifies the structural and behavioural factors that make tacit coordination likely. But it cannot determine with precision when tacit collusion exists. Hence, economic theory can be used to construct “negative” or “safe harbour” tests, 260 but cannot be expected to provide the tools needed to establish the existence of a collective dominant position. To meet the evidentiary hurdles in respect of collective dominance, it is necessary to investigate the conduct of the allegedly dominant oligopolists, as well as the degree of competition in the relevant market. As discussed in the next section, this is far from a straightforward task.

4.3.3

Legal Principles Governing Collective Dominance 4.3.3.1 Evolution

Overview. Although the principle of collective dominance is now relatively wellestablished under Article 102 TFEU, the applicable legal conditions have evolved significantly over the years. Earlier case law concerned firms that were united by structural links such as cross-shareholdings or other agreements. This led to a is likely to be easier. See PD Klemperer, “Markets With Consumer Switching Costs,” Quarterly Journal Of Economics, (1987) Vol. 102(2), 375–94. Switching costs also reduce the incentives to deviate. However, they also reduce the severity of punishments, as it is harder to punish the deviator by reducing price. Padilla finds that when switching costs are large, this latter effect dominates so that the presence of switching costs reduces the likelihood of tacit collusion. His model assumes complete information but the impact of switching costs on punishment mechanisms should hold whichever information set is assumed. It is not however clear that this effect would be sufficient to outweigh other pro-collusive effects under situations of imperfect information. See AJ Padilla, “Revisiting Dynamic Duopoly With Consumer Switching Costs,” Journal Of Economic Theory, (1995) Vol. 67, 520–30. On switching costs more generally, see C McSorley, AJ Padilla and M Williams, Switching Costs, Economic Discussion Paper 5, Part one: Economic models and policy implications, OFT, April 2003. 260 See KU Kühn, “Closing Pandora’s Box? Joint Dominance After The Airtours Judgment,” in M Bergman (ed.), The Pros and Cons of Merger Control, Swedish Competition Authority, 2002.

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misapprehension that structural links were necessary for collective dominance and raised the possibility that “mere” oligopolistic interdependence was not covered. Subsequent case law clarified that structural links were not essential: the key point was the absence of effective competition between the oligopolists, whether due to structural or other economic links, which led the firms concerned to behave in a coordinated fashion. The interpretation of collective dominance under EU merger control was then clarified in Airtours. 261 But it remained unclear following Airtours whether the same basic principles would also apply under Article 102 TFEU. Any doubt in this regard was removed following the judgment in Laurent Piau. 262 Thus, apart from certain inevitable differences between the two regimes, the basic principles for defining collective dominance are essentially the same under both Article 102 TFEU and EU merger control. Early case law on collective dominance under Article 102 TFEU. Early case law concerning collective dominance under Article 102 TFEU was vague and ambiguous in many respects. Though it was generally accepted that capturing situations of collective dominance was useful, there was uncertainty as to how and when it would actually apply. The first case to address collective dominance in detail under Article 102 TFEU was Italian Flat Glass in 1992. 263 The Commission found that three Italian producers of flat glass had infringed Article 102 TFEU by virtue of holding a collective dominant position as they operated in a “tight oligopoly” that enabled them to impede the maintenance of effective competition by not having to take account of the behaviour of other market participants. Though the General Court held that the Commission did not meet the requisite standard of proof—essentially because it recycled the elements of an Article 101 TFEU violation as also constituting proof of collective dominance under Article 102 TFEU—it made some broad statements on the concept of collective dominance: 264 “There is nothing, in principle, to prevent two or more independent economic entities from being, on a specific market, united by such economic links that, by virtue of that fact, together they hold a dominant position vis-à-vis the other operators on the same market. This could be the case, for example, where two or more independent undertakings jointly have, through agreements or licences, a technological lead affording them the power to behave to an appreciable extent independently of their competitors, their customers and ultimately of their consumers.”

However, the precise scope of collective dominance under Article 102 TFEU remained unclear. The confusion was two-fold. First, it was not clear whether the presence of structural links between the alleged collectively dominant oligopoly members in Italian Flat Glass was necessary or sufficient. Although the Court spoke more generally about “economic links,” this led to a degree of confusion as to whether cases exhibiting tacit coordination, but not involving structural links between the coordinating firms, were covered by the notion of collective dominance under Article 102 TFEU.

261 Case T-342/99, Airtours plc v Commission [2002] ECR II-2585. For commentary, see R O’Donoghue and C Feddersen, “Commentary On The Airtours Judgment,” Common Market Law Review, (2002), 1171. 262 Case T-193/02, Laurent Piau v Commission [2005] ECR II-209. 263 Joined Cases T-68/89, T-77/89 and T-78/89, Società Italiana Vetro SpA, Fabbrica Pisana SpA and PPG Vernante Pennitalia SpA v Commission [1992] ECR II-1403. 264 Ibid., para. 358.

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A second problem was the suggestion in certain case law that undertakings dominant on related, but separate, markets could be collectively dominant under Article 102 TFEU. Following Italian Flat Glass, it had been understood that collective dominance implied the absence of effective competition between two or more firms on the same relevant market. However, in Almelo, the issue was whether a series of regional electricity distributors in the Netherlands occupied a collective dominant position on the market for the public supply of electricity to local distributors. 265 Although the Court of Justice cited the correct basic principle for collective dominance—that the undertakings must be linked in such a way that they adopt the same conduct on the market 266—the case appeared to concern undertakings that were dominant on a series of different sub-national markets rather than a group of firms active on the same relevant market. Similarly, in La Crespelle, the Court of Justice appeared to consider that the establishment of local monopoly artificial insemination centres that were territorially limited but together covered the entire territory of France might create collective dominance. 267 Both cases caused confusion as to whether Article 102 TFEU recognised a broader concept of collective dominance than had generally been understood in economics and merger control rules. Towards clearer reliance on “economic links” leading to tacit collusion. Developments in the application of collective dominance under the EU merger regulation during the 1990s had significant consequences for clarifying the interpretation of collective dominance under Article 102 TFEU. Gencor concerned the legality of a decision adopted by the Commission under the EU Merger Regulation which prohibited a particular merger in the platinum industry on the grounds that it would lead to the creation of a duopoly market conducive to a situation of oligopolistic dominance. 268 On appeal, it was argued that the Commission had failed to prove the existence of “links” between the members of the alleged duopoly within the meaning of Italian Flat Glass, i.e., structural links. The General Court responded by stating, inter alia, that there was no support for the notion that “economic links” were restricted to structural links between the undertakings concerned: 269 “[T]here is no reason whatsoever in legal or economic terms to exclude from the notion of economic links the relationship of interdependence existing between the parties to a tight oligopoly within which, in a market with the appropriate characteristics, in particular in terms Case C-393/92, Gemeente Almelo and others v NV Energiebedrijf Ijsselmij [1994] ECR I-1477. Ibid., paras. 42 and 43. See also Case C-96/94, Centro Servizi Spediporto Srl v Spedizioni Marittima del Golfo Srl [1995] ECR I-2883; and Case C-140/94, DIP SpA v Comune di Bassano del Grappa, LIDL Italia Srl v Comune di Chioggia and Lingral Srl v Comune di Chiogga [1995] ECR I3257. 267 Case C-323/93, Société Civile Agricole du Centre d'Insémination de la Crespelle v Coopérative d'Elevage et d'Insémination Artificielle du Département de la Mayenne [1994] ECR I-5077. 268 Gencor/Lonrho, OJ 1997 L 11/30. 269 Case T-102/96, Gencor Ltd v Commission [1999] ECR II-753, paras. 276–77 (emphasis added). See also Joined Cases C-68/94 and C-30/95, France and Société commerciale des potasses et de l'azote (SCPA) and Entreprise minière et chimique (EMC) v Commission [1998] ECR I-1375, para. 221. The Court of Justice described a collective entity for the purpose of joint dominance as “one or more other undertakings which together, in particular because of the factors giving rise to a connection between them, are able to adopt a common policy on the market and act to a considerable extent independently of their competitors, their customers and also of consumers.” 265 266

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of market concentrations, transparency and product homogeneity, those parties are in a position to anticipate one another’s behaviour and are therefore strongly encouraged to align their conduct in the market, in particular in such a way as to maximise their joint profits by restricting production with a view to increasing prices. In such a context, each trader is aware that highly competitive action on its part designed to increase its market share (for example a price cut) would provoke identical action by the others, so that it would derive no benefit from its initiative. All the traders would thus be affected by the reduction in price levels … [E]ach undertaking may become aware of common interests and, in particular, cause prices to increase without having an agreement or resort to concerted practice.”

In other words, “mere” oligopolistic interdependence without structural links was covered by EU merger control rules. This corrected a misapprehension that had arisen following Italian Flat Glass that collective dominance necessarily required structural links. Gencor clarified that market structure alone could give rise to collective dominance. The same point was essentially confirmed under Article 102 TFEU in Compagnie Maritime Belge, 270 where a collectively dominant liner-shipping conference was party to anticompetitive exclusionary agreements and carried out exclusionary pricing known as “fighting ships,” and various related practices. Although Compagnie Maritime Belge was typical of other collective dominance cases under Article 102 TFEU, in that the undertakings’ coordinated interaction was made possible by agreements and structural links, and not merely by facilitating market conditions, the Court of Justice took the opportunity to make a number of more general statements on the scope of collective dominance under Article 102 TFEU. In particular, the Court clarified that structural links are not a pre-requisite under Article 102 TFEU for collective dominance: the key point is that the undertakings constitute a collective entity vis-à-vis their rivals and together hold a dominant position on the relevant market. 271 The precise reasons for those links are not important provided they are sufficient to enable the undertakings to behave in a coordinated manner and dominate the relevant market. Further clarification of the legal conditions in Airtours. An appeal in 2002 from the Commission’s merger prohibition decision in Airtours/First Choice gave the General Court the opportunity to clarify a number of principles concerning the interpretation of collective dominance under the EU merger regulation and, indirectly, Article 102 TFEU. 272 The Commission prohibited the merger of two U.K. tour operators, Airtours and First Choice. Together, Airtours/First Choice and the two other leading verticallyintegrated tour operators, Thomas Cook and Thomson, would have accounted for approximately 85% of the U.K. short-haul package holiday market. The Commission’s case was that “the resulting structure [of the market for the supply of short-haul package holidays in the United Kingdom would] create an incentive for and make it rational” for 270 Cewal, Cowac and Ukwal, OJ 1993 L 34/20, upheld on appeal in Joined Cases T-24/93, T-25/93, T-26/93, and T-28/93, Compagnie Maritime Belge Transports SA and Others v Commission [1996] ECR II-1201, and in Joined Cases C-395/96 P and C-396/96 P, Compagnie Maritime Belge Transports SA and Others v Commission [2000] ECR I-1365. 271 Joined Cases C-395/96 P and C-396/96 P, Compagnie Maritime Belge Transports SA and Others v Commission [2000] ECR I-1365, para. 45 (“The existence of an agreement or of other links in law is not indispensable to a finding of a collective dominant position; such a finding may be based on other connecting factors and would depend on an economic assessment and, in particular, on an assessment of the structure of the market in question.”). 272 Airtours/First Choice, OJ 2000 C 324/5.

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the remaining three suppliers to restrict overall capacity put onto the market and thereby ultimately increase the prices for holiday packages to above a competitive level. 273 Following an appeal by Airtours, the Court concluded that the Commission had prohibited the transaction without having proved to the requisite legal standard that the concentration would give rise to a collective dominant position. 274 The Court held that three cumulative conditions must be satisfied for a finding of collective dominance: 275 “[F]irst, each member of the dominant oligopoly must have the ability to know how the other members are behaving in order to monitor whether or not they are adopting the common policy ... [S]econd, the situation of tacit co-ordination must be sustainable over time, that is to say, there must be an incentive not to depart from the common policy on the market … The notion of retaliation in respect of conduct deviating from the common policy is thus inherent in this condition ... Third … the Commission must also establish that the foreseeable reaction of current and future competitors, as well as of consumers, would not jeopardise the results expected from the common policy.”

Thus, for collective dominance to be successful, the market characteristics must allow the members of the oligopoly to reach profitable terms of coordination and to detect and punish deviations from those terms. The Court also made it clear that new entry and the ability of non-members (or “fringe” players) to undermine successful coordination excludes successful coordination. The test laid down by the Court has since become the cornerstone of Commission decisional practice in the area of merger control, which is hardly surprising given that the Commission had given its prior agreement on the conditions for collective dominance as set out in the Airtours judgment. 276 The pronouncement of specific conditions that are each necessary to establish collective dominance marked a welcome development in the law as it provided a more structured analytical framework rather than a haphazard, non-exhaustive list of “economic links.” Assimilation of Article 102 TFEU with the Airtours conditions. It remained unclear for a period following Airtours whether the conditions for collective dominance as set out in the General Court’s judgment equally applied under Article 102 TFEU. There were and are certain inevitable differences between the two sets of rules, most notably the fact that merger control applies ex ante and Article 102 TFEU ex post. But it quickly became clear that the Commission and EU Courts regarded the basic conditions for establishing collective dominance as essentially the same under both Article 102 TFEU and merger control rules. For example, in TACA, the General Court cited Airtours with approval, even though, as in Compagnie Maritime Belge, the case concerned structural links between the firms concerned. 277 In Laurent Piau, the General Court also cited the Ibid., para. 147. Case T-342/99, Airtours plc v Commission [2002] ECR II-2585. 275 Ibid., para. 62. 276 See H Haupt, “Collective Dominance Under Article 102 TFEU And EC Merger Control In The Light Of The Airtours Judgment,” European Competition Law Review, (2002) Vol. 23(9), 434. See also M Clough, “Collective Dominance—The Contribution Of The Community Courts,” in Essays For Judge David Edwards, Hart Publishing (2003). 277 Joined Cases T-191/98 and T-212/98 to T-214/98, Atlantic Container Line AB and Others v Commission [2003] ECR II-3275, paras. 652, 654. 273 274

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Airtours conditions with full approval. 278 The matter is now beyond doubt following Impala 279 and EFIM. 280 4.3.3.2 Establishing collective dominance under Article 102 TFEU Preliminary remarks. The development of collective dominance principles culminated in the adoption of the Airtours conditions under Article 102 TFEU by the General Court. This development builds significantly on past case law. Indeed, all Article 102 TFEU decisions and judgments to date have found collective dominance only in situations in which agreements between the firms led them to behave as a collective entity. 281 Article 102 TFEU has thus not yet been applied to mere tacit collusion, which has meant that a number of issues have not been considered, either sufficiently or at all. 282 A first issue is whether a finding of structural links is relevant only to the extent it has a bearing on the Airtours conditions or whether it can independently support a collective dominance finding. The Discussion Paper had made the distinction between collective dominance based on agreements and collective dominance as a result of market interactions, i.e., mere tacit collusion. 283 But it was not clear from its elaboration of the conditions for collective dominance under Article 102 TFEU whether they applied only to tacit collusion based on market interactions or also to collective dominance resulting from agreements between the firms concerned. As noted, the Guidance Paper is more or less entirely silent on collective dominance. But the better view must be that the conditions are the same in both cases, even if, in practice, it will usually be much easier to show tacit collusion where agreements lead the firms to behave in a coordinated fashion. Indeed, structural links are primarily relevant because they facilitate the adoption of a common strategy that allows the undertakings in question to present themselves or to act together as a collective entity. It would not help consistency if two different tests were applied. Much of the confusion in this regard would be resolved if the Commission and EU Courts only applied Article 102 TFEU to collective dominance in situations in which Article 101 TFEU did not apply. Second, although market transparency is a necessary condition of tacit collusion, it should not be considered sufficient by itself. Instead, the key overall condition, as outlined in 278 Case T-193/02, Laurent Piau v Commission [2005] ECR II-209, para. 111. See also Discussion Paper, paras. 48–50. The fact that collective dominance was omitted from the Guidance Paper cannot override the case law. 279 Case C-413/06 P, Bertelsmann AG and anor. v Independent Music Publishers and Labels Association [2008] ECR I-4951. 280 Case T-296/09, European Federation of Ink and Ink Cartridge Manufacturers (EFIM) v Commission [2011] ECR II-693, paras. 73-75. 281 These cases are unlikely to be repeated in future, since they are the direct result of legislation in the liner shipping sector that, exceptionally, formerly permitted collective rate setting. The old block exemption for liner conferences has been replaced with Commission (EC) No 906/2009, bringing liner shipping and maritime tramp and cabotage services under the scope of the general procedural rules on competition law, giving the Commission jurisdiction to apply competition rules to this sector. 282 The Discussion Paper, at paras. 48-51, set out the conditions of collective dominance, which were essentially the same conditions as in Airtours. But, while it clarified a number of points, it also raised additional uncertainties (which are discussed here). That may have been the reason why the Guidance Paper has no corresponding section on collective dominance. 283 Contrast Discussion Paper, para. 45 with para. 47.

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section 4.3.2, is that the firms have the incentive and ability not to compete. They must first have the common incentives to tacitly collude. But this is insufficient unless they also have the ability to effectively reach coordinated terms and impose them on their customers. Transparency is simply one element of this condition. Finally, it is unclear what standard of proof applies to tacit collusion cases. The EU Courts have laid down strict standards for proving collective dominance under the EU Merger Regulation, requiring the Commission to produce “convincing evidence” of collective dominance. 284 But because Article 102 TFEU involves an assessment of past or present market facts the standard of proof for collective dominance should arguably be higher than under EU merger control. The conditions in Airtours are simply indicators of tacit collusion, but, without more, there is still no real proof that tacit collusion is taking place. This problem does not arise in the context of merger review, since this involves a forward-looking assessment of whether the change in market structure potentially affected by a merger would create conditions in which tacit collusion is likely to occur. In contrast, under Article 102 TFEU, there should arguably be a convincing basis for saying that tacit collusion has occurred, i.e., evidence of actual effective coordination on whatever the focal point of collective dominance is alleged to be. Condition #1: the incentives to arrive at tacit collusion. The key first condition for collective dominance is that the firms concerned have stronger incentives to reach a common understanding on a focal point of coordination than to compete. The parties will have common interests if their strategic goals are sufficiently aligned. This may be due to cross-ownership arrangements or symmetry between the firms concerned. In addition, the firms must be able to reach an effective agreement on the focal point of coordination. This requires the presence of certain market characteristics such as a high degree of concentration, a stable environment, and transparency. The decision by the Irish Commission for Communications Regulation (ComReg) in O2/Vodafone is illustrative in this regard. 285 ComReg found that O2 and Vodafone held a collectively dominant position based on a 94% combined market share. The analysis revealed that the retail mobile market is highly concentrated. There are only four licensed vertically integrated mobile operators in Ireland and Vodafone and O2 held a 94% share of subscribers at the time of the decision. Furthermore, O2 and Vodafone were relatively symmetric: there was a high level of interaction between the two firms, and they share similar levels of innovation. The market was relatively stable due to constant demand for mobile telephony services. For these and other reasons, ComReg felt that there would be sufficient incentives on the part of O2 and Vodafone to coordinate behaviour. Condition #2: the ability to sustain tacit collusion. The implementation of the common policy must be sustainable over time. This presupposes the existence of deterrent Case T-342/99, Airtours plc v Commission [2002] ECR II-2585. O2 and Vodafone had a 94% share of subscribers in the retail market for mobile communications in September 2004. “Market Analysis—Wholesale Mobile Access and Call Origination,” Commission for Communications Regulation, Document No: 04/118, para. 4.33. The decision was annulled, mainly on procedural grounds: see Decision No: 08/05 of the Electronic Communications Appeals Panel in respect of Appeal Numbers ECAP6/2005/03, 04, 05, 06, 07, 08. However, the legal principles of collective dominance and the application of the Airtours criteria were not challenged. 284 285

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mechanisms which are sufficiently severe to convince all the undertakings concerned that it is in their best interest to adhere to the common policy. In other words, the oligopolists must be able to detect deviations and retaliate in the event of deviant conduct. But an essential precondition for an effective threat of retaliation is that the market is sufficiently transparent to allow firms to detect the need for retaliation. a. Market transparency. A deviation from the common policy can only be deterred if it is detected, which in turn is only possible if the market is sufficiently transparent, so that the members of the oligopoly can observe the behaviour of their competitors or infer it from market outcomes with a high degree of certainty. Tacit collusion is not sustainable in markets which are not transparent. In Airtours, the General Court concluded that capacity coordination could not take place on the United Kingdom package holidays market, since decisions on capacity expansion were not sufficiently transparent by virtue of a complex range of variables such as destination, departure date, airport location, aircraft model, type and quality of accommodation, duration of stay and price. Transparency was not sufficient to allow each of the major tour operators to be aware of the conduct of the others, to detect any deviations from the common policy, and to confirm retaliatory measures. 286 The Court observed that, due to the large number of short-haul package holiday destinations served from various U.K. airports, thousands of different permutations would have to be monitored by the three large operators to have up-to-date information on each other’s activities. Further, it was apparent that the capacity planning process did not, as the Commission found, involve simply renewing capacity budgeted or sold in the past, but was a complex attempt to predict how demand will evolve on both a macroeconomic and microeconomic level in the future. The Court also found that the Commission had failed to prove that each member of the oligopoly would have detailed knowledge regarding the overall level of capacity (i.e., number of holidays) offered by the other members. 287 The most recent major decision on collective dominance remains Sony/BMG. 288 It shows the significant practical difficulties of proving collective dominance. The Commission examined the record music industry to determine whether or not coordination took place between the major players on the market, and if it did, whether it would be accentuated by the merger of Sony and BMG. However, the Commission could not demonstrate, to the requisite standard, that the five major players in the music record industry were involved in coordinated behaviour in any of the markets affected by the planned merger. To test this, the Commission undertook a thorough analysis of their pricing strategies, focusing on whether or not prices were parallel, whether there was price coordination, and whether or not discounts offered were aligned and sufficiently transparent to indicate coordination. It concluded that although some elements of coordinated behaviour were

Case T-342/99, Airtours plc v Commission [2002] ECR II-2585, para. 283. Ibid. 288 Case COMP/M.3333, Sony/BMG, annulled in Case T-464/04, Independent Music Publishers and Labels Association (Impala) v Commission [2006] ECR II-2289. The appeal against the General Court’s decision, based on errors made in the assessment of the evidence, was allowed in Case C-413/06 P, Bertelsmann AG and anor. v Independent Music Publishers and Labels Association [2008] ECR I-4951. 286 287

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evident, the evidence as a whole was not sufficient to establish collective dominance. The following factors were relevant: 1.

To assess whether the majors’ wholesale prices had been coordinated, the Commission first analysed the development of average net prices on a quarterly basis for the top 100 albums of each major in the five largest Member States. The Commission then analysed transaction data in real (inflation-corrected) prices (provided by the merging parties and the other majors). To ensure comparability, the Commission relied on price data for a consistent product, namely single sleeve album CDs (thereby excluding singles, maxi-singles, double albums, boxes, and enhanced albums). The Commission analysed the development of: average net prices, published prices to dealers (PPDs), gross and net price ratios, invoice discounts, and retrospective discounts.

2.

With these basic data, the Commission analysed price coordination in three steps. First, it analysed the majors’ pricing behaviour on the basis of their average wholesale net prices. As a second step, the Commission examined whether any price coordination, on the basis of a parallelism in average prices, could have been reached in using PPDs (or list prices) as focal points. Finally, the Commission analysed whether the different majors’ discounts were aligned and sufficiently transparent to allow efficient monitoring of any price coordination also on the level of net prices.

3.

The Commission then undertook these basic steps for each of the five largest countries. (Only the example of Germany is relied upon here, although the results for the other countries were substantially the same.) The different majors’ net average real prices developed within a range of approximately € 1.50 to € 2.00. The average difference between the bottom and the top of the range was € 1.81, and the maximum difference was more than € 3.00 at times. On the basis of net average real prices, the Commission thus found some parallelism and a relatively similar price development of the majors. However, these observations were as such not conclusive enough to show coordinated pricing behaviour in the past.

4.

The Commission therefore further investigated whether additional elements, namely list prices and discounts, were aligned and sufficiently transparent to provide evidence of coordination. The Commission’s analysis showed that transaction net prices were closely linked to gross list prices (PPDs) as, for both Sony and BMG, their average gross real prices and average net real prices had moved closely in parallel over the last six years, as also reflected by very stable net to gross price ratios across albums and time. However, the Commission found that the level of the different majors’ various discounts varied to some extent. On a customer-by-customer basis, the Commission found a certain degree of fluctuation and differences of 2–5% between Sony’s and BMG’s invoice discounts for most of their common top 10 customers, and of more than 5% for some customers in several years. The merging parties also submitted data showing that invoice discounts for a given customer varied over time and from album to album, and discounts for a given album varied from customer to customer. Finally, although the merging parties systematically monitored

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competitors’ prices on a weekly basis, promotional pricing was a strong feature of the market and reduced transparency. On the basis of these observations, the Commission felt unable to prove that invoice discounts were sufficiently aligned. 5.

Finally, the Commission looked at other factors to confirm the lack of price alignment. First, it noted that recorded music was homogeneous in format, but not in terms of content. This reduced transparency in the market and made tacit collusion more difficult since it required some monitoring on the level of individual albums. The Commission further noted that devices in the market that could increase transparency and facilitate the monitoring of an agreement were insufficient. Although the weekly album charts and the merging parties’ own monitoring did increase transparency to a certain extent, the Commission did not find sufficient evidence that, by monitoring retail prices or by contacts with retailers, the majors had overcome in the past the deficits as regards the transparency of discounts already identified by the Commission.

In sum, the Commission could not show that the merger between Sony and BMG would have resulted in the strengthening or the creation of a collectively dominant position because it was unable to establish that the affected market was sufficiently transparent: (1) there was evidence that the merging parties and their rivals offered secret discounts to their clients; (2) the product was heterogeneous; and (3) the various market institutions that could increase market transparency (PPDs, album charts, etc.) had not led to the degree of price and discount alignment that could be expected in a transparent market. On appeal, the General Court took the view that the Commission had taken an overly strict approach to transparency and the criteria in Airtours. It ruled that these were mainly relevant in assessing the risk that collective dominance would develop post-transaction. However, where one was assessing whether such dominance was already in existence, and whether it would be exacerbated, other criteria could be followed. In particular, close alignment of prices over a long period above a competitive level could, in the absence of a reasonable explanation, suffice to demonstrate the existence of a collective dominant position, even in the absence of firm evidence of strong market transparency. 289 This ruling was overturned on appeal. 290 The Court held that it was important to avoid a mechanical approach involving the separate verification of each of the Airtours criteria, 289 Case T-464/04, Independent Music Publishers and Labels Association (Impala) v Commission [2006] ECR II-2289, paras. 251-254. 290 Case C-413/06 P, Bertelsmann AG and anor. v Independent Music Publishers and Labels Association [2008] ECR I-4951, paras. 119-131. The General Court’s approach has, however, been followed on at least one occasion in the field of abuse of dominance. In its Telefónica decision of 11 February 2010, the Basque Competition Tribunal ruled that factors such as a close alignment of prices over a long period above a competitive level could be sufficient to prove a sufficient level of market transparency and indirectly satisfy the more formal Airtours criteria. The Basque decision is also the first, to our knowledge, that is based solely on tacit collusion under abuse of dominance laws. See also Case S/0248/10, Telefónica/Vodafone/Orange, decision of the Spanish Competition Authority of 19 December 2012, where the authority found collective dominance on the part of the main Spanish mobile operators on upstream wholesale mobile access and origination markets, as well as an abuse of dominance through

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without taking account of the overall economic mechanism of a hypothetical tacit coordination. In particular, on transparency, the assessment should not be undertaken in an isolated and abstract manner, but should involve an assessment of whether such elements of transparency as may exist on a market are, in fact, capable of facilitating the reaching of a common understanding on the terms of coordination and/or of allowing the competitors concerned to monitor sufficiently whether the terms of such a common policy are being adhered to. The core criticism of the General Court’s approach was that it did not carry an analysis of market transparency having regard to a postulated monitoring mechanism forming part of a plausible theory of tacit coordination. Specifically, the General Court placed undue reliance on a complainant’s views about discount mechanisms and transparency in circumstances where the Court accepted that the complainant “did not explain precisely what those various rules governing the grant of campaign discounts [were].” 291 b. Situations where structural links or other agreements facilitate retaliation. Retaliation mechanisms may be explicitly provided for if a written agreement exists between the parties (which would almost certainly also violate Article 101 TFEU). For example, the enforcement provisions for common tariffs in the TACA agreement were sufficient to prevent deviation. 292 Similarly, in Laurent Piau, sanctions such as warnings, fines and the withdrawal of an agent’s licence against deviating agents as set down by the FIFA Players’ Agents Regulation also amounted to sufficient deterrent mechanisms to ensure that members adhered to the common policy. 293 c. Retaliation in the absence of express mechanisms. Absent express disincentives to depart from a common strategy, firms may still have incentives to maintain coordinated behaviour. Indeed, the General Court noted in Airtours that the Commission did not have to bring evidence of the existence of a specific retaliatory mechanism. Rather it just had to show that a potential retaliatory mechanism might give incentives to firms not to deviate. 294 A robust and effective coordinating mechanism, where “each member of the dominant oligopoly is aware that highly competitive action on its part designed to increase its market share would provoke identical action by the others, so that it would derive no benefit from its initiative,” will also be sufficient deterrence to maintain the common policy over time. 295 The Court concluded, however, that the Commission had not met even this low threshold. It held that the Commission was wrong in its decision that the tour operator oligopoly enjoyed sufficient means to counteract a capacity expansion deviation by one member since the market features were such as to render effective retaliation difficult. Any charging excessive prices. The authority also found that the operators were individually dominant on the markets for termination services on their own networks, leading to higher SMS and MMS message rates for consumers. 291 Ibid., para. 131. 292 Trans-Atlantic Conference Agreement, OJ 1999 L 95/1, para. 527. 293 Case T-193/02, Laurent Piau v Commission [2005] ECR II-209. 294 For criticism of this view, see A Nikpay and F Houwen, “Tour De Force Or A Little Local Turbulence? A Heretical View On The Airtours Judgment,” European Competition Law Review, (2003) Vol. 24(5), 199. 295 Case T-342/99, Airtours plc v Commission [2002] ECR II-2585, para. 62.

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capacity expansions by other members in response to a deviation by one particular member could only take effect in the next holiday season and “late added” packages tended to be of lower quality. 296 Therefore, the retaliatory mechanisms were not sufficient to prevent firms from deviating from the common policy. Similarly, in Sony/BMG, retaliation was found to be ineffective as a disciplinary measure. The possible retaliatory mechanism against deviant action was the exclusion from, or termination of, other joint ventures between the major record companies such as the release of compilation CDs. However, since there was no evidence of exclusion or termination having occurred, the Commission found that it was not a sufficient retaliatory mechanism. d. Problems with retaliation based on threatened capacity expansion. Practical difficulties may prevent effective retaliation where the alleged mechanism is threatened capacity expansion. One difficulty concerns the ability to withdraw capacity once it has been expanded to punish deviations. Not only would the oligopolists have to collude on capacity expansion to discipline the cheating oligopolist, but they would also need to collude on the retrenchment or freezing of added capacity to keep output tight in the expectation of being able to charge above-competitive prices in the future. The oligopolists’ ability to engage in two separate instances of collusion in this way independently of normal market forces seems questionable. Again, collusion over prices will usually be easier in these circumstances, since prices can usually be decreased and increased without the need to consider any longer-term issues of retrenchment. Certain Commission decisions on collective dominance confirm some of these practical difficulties. In Mitsui/CVRD/Caemi, the Commission did not maintain its initial collective dominance concerns on capacity, but suggested that retaliation based on capacity expansion designed to punish the “cheating” oligopolist might be successful where: (1) the “punishment period” (i.e., the period of excess capacity) was relatively short-lived; (2) excess capacity can be absorbed by growing demand during the punishment period; and (3) the oligopolists are not committed to using the extra installed capacity in the long-term. 297 The logic of this reasoning seems questionable. As a general matter, it will be difficult to tailor capacity in the manner envisaged by the Commission, particularly where capacity expansion can only be done on a large scale leading to lumpy quantities and in markets where future demand is uncertain. This suggests that it will in practice be relatively difficult for the oligopolists to retaliate effectively relying only on the threat of capacity expansion. 298

Ibid., para. 204. See Mitsui/CVRD/Caemi, OJ L 2004 92/50, paras. 236–37. 298 In two linked transactions, UPM-Kymmene/Haindl and Norske Skorg/Parenco/Walsum, the Commission’s case was that, post-transaction, the oligopolists would coordinate downtimes during demand slowdowns and limiting capacity through coordination of investment in new capacity. The Commission added that the “retaliation mechanism would lie in the very threat that other oligopolists would engage in an investment race, which would result in over-capacity, in prices collapsing and ultimately in low profitability for the whole industry.” See Case COMP/M.2498, UPM-Kymmene/Haindl and Case COMP/M.2499, Norske Skorg/Parenco/Walsum, Commission decision of 21 November 2001, para. 131. The Commission subsequently abandoned these concerns because the oligopolists could and would only learn about an investment project after it had been committed to and made irreversible by the cheating member. In other words, any retaliatory threat based on capacity would lack credibility and effectiveness and would be too costly to pursue. 296 297

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e. The advantages of targeted retaliation. One issue that has not received detailed treatment in the decisional practice and case law is whether retaliation needs to be capable of being targeted at the “cheating” oligopolist. The point is that retaliation mechanisms which inflict more damage on the deviating oligopolist than on the firms adhering to the tacit agreement compliant members are easier to sustain and, therefore, more credible. Economic theory has shown that a punishment mechanism may be credible even if it is not targeted to the deviant. However, a retaliatory mechanism which involves a long punishment period and which imposes significant damage on those undertakings that did not deviate from the tacit agreement is less credible than one in which the deviant is punished more severely and the punishment period is short. The Commission’s Horizontal Merger Guidelines do not deal with the issue specifically. 299 They state that the “credibility of the deterrence mechanism depends on whether the other coordinating firms have an incentive to retaliate.” Although this does not preclude some short-term losses (e.g., through price-cutting), the Guidelines make clear that “the short-term loss [must] be smaller than the long-term benefit of retaliating resulting from the return to the regime of coordination.” 300 There are undoubtedly mechanisms that in practice can effectively target the deviating firm. One obvious method is selective price cuts, 301 which may be possible where the deviating firm has, for historical or geographic reasons, had its “own” customers. Another mechanism capable of being used for targeting concerns is the exclusion from the deviating firm from joint ventures, which was mentioned in Sony/BMG, but ultimately found not to be credible. Targeting would also be possible where the punishment takes place on another product market where the deviating firm is active. If the punishing firms are not generally active in this market, it may be possible for one or more of them to enter and take a targeted action. Finally, it seems implicit in the notion of credible targeting that the method concerned should be legal. If it concerned unlawful measures such as a collective boycott, the mechanism could hardly be said to be “credible.” f. A higher burden of proof on retaliation under Article 102 TFEU than EU merger control? It is sometimes argued that a higher burden of proof on the issue of retaliation should be required in Article 102 TFEU proceedings. 302 The argument is that the ex post nature of Article 102 TFEU requires proof of the existence of a specific retaliatory mechanism which had a deterrent effect and led the oligopolists to maintain a common line of action. In contrast, the ex ante nature of merger control means that the Commission need only identify a credible and timely mechanism and not its actual use. But it would be wrong to conclude that the absence of evidence of actual use of a retaliatory mechanism implies that no effective punishment mechanism exists: the most effective mechanism is one where the mere prospect of retaliation is so effective that no deviation actually occurs.

299 Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings, OJ 2004 C 31/5. 300 Ibid., para. 54. 301 See, e.g., Case COMP/M.3314, Air Liquide/Messer Targets, Commission decision of 16 March 2004, (selective price-cutting possible in a duopoly where contracts were relatively large). 302 See D Geradin, P Hofer, F Louis, N Petit, and N Walker, “The Concept Of Dominance,” Global Competition Law Centre Research Papers On Article 102 TFEU, College of Europe, July 2005, p. 35.

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In O2/Vodafone, the Irish telecommunications regulator concluded that a major factor deterring the use of price as an instrument of deviation was the threat of retaliation. 303 Price structures made it possible for O2 and Vodafone to distinguish between price changes that represented deviations and price changes that were compatible with tacit collusion. If one firm sought to acquire a significant increase in customers by lowering price, this would result in the other firm reacting with an identical response. The regulator considered that the most likely retaliatory response to a deviation along the price dimension, which would be immediately transparent, was via a reduction in price, as this can be effected swiftly. 304 The fact that retaliation was possible if either firm diverged from common policy was seen as a sufficient deterrent to prevent deviation from occurring. No evidence of actual use was required. In sum, it does not seem correct under Article 102 TFEU to require evidence of the actual exercise of a retaliatory mechanism: the key point is that the specific mechanism, whatever it happens to be, is sufficiently credible to constitute an effective deterrent. However, evidence that a retaliatory mechanism was used, but failed, will ordinarily be fatal to a collective dominance claim. Condition #3: inability of non-participating rivals and consumers to destabilise the tacit agreement. Tacit coordination is only sustainable if the undertakings that coordinate their behaviour do not face competitive constraints that can jeopardise the implementation of the common strategy. As in the case of single dominance, it must be analysed what is the market position and strength of rivals that do not form part of the collective entity, what is the market position and strength of buyers, and what is the potential for new entry (i.e., entry barriers). Collective dominance will not arise if such competitive constraints are able to counterbalance tacit collusion on the part of the oligopolists. Market concentration is again relevant in this connection. If the undertakings behaving as a collective entity do not have sufficient market power to behave independently of rivals and customers, it will not be possible to maintain the agreed course. In Airtours, the oligopolists would together have accounted for approximately 85% of the U.K. short-haul package holiday market. Notwithstanding this very high degree of concentration, the General Court held that smaller tour operators could exert countervailing competitive pressure on the major players in the market. It found that smaller tour operators could increase (and had increased) capacity in times of shortages of supply and were particularly interested in attractive accommodations and/or destinations that the major suppliers declined to offer. Furthermore, smaller tour operators could obtain airline seats offered by independent third parties such as overseas and low-cost carriers, scheduled and charter airlines, and did not depend on the major suppliers’ offerings in this regard. In O2/Vodafone, actual and potential market constraints were found to be insufficient to prevent O2 and Vodafone acting independently. Meteor, the only fringe competitor, had little impact on the behaviour of both firms. High market entry barriers, particularly in 303 See “Market Analysis—Wholesale Mobile Access and Call Origination,” Commission for Communications Regulation, Document No: 04/118, para. 4.92. 304 Ibid., para. 4.94

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terms of infrastructure, prevented potential competitors, such as “3”, from affecting the market. 305 For these reasons, ComReg found that both participating and non-participating rivals, as well as consumers, were unable to destabilise the tacit agreement between Vodafone and O2. In TACA, the defendants claimed that the conference was not in a dominant position by virtue of external competition. They argued that it had a significant number of competitors whose market share increased during the relevant period, that the market share of those competitors increased more than the liner conference’s did, and that the capacity offered by independent shipping lines increased following the entry on to the market of a number of different companies. 306 In deciding whether or not external competition was effective the Court considered the following factors: (1) the number of competitors of the TACA parties and the increase in their market share (competitors held a cumulative market share of no more than 20–25% and any increase was very small); 307 (2) the rate of increase in the volume of freight carried by the TACA’s competitors (the increase was not sufficient to threaten TACA’s 70–75% market share); 308 (3) insufficient competition from competing shipping lines, Evergreen and Lykes (no evidence to suggest that the two companies were capable of bringing significant external competition to bear on the TACA parties); 309 (4) TACA’s leadership in pricing matters and the role of follower played by independent competitors; 310 and (5) insufficient competition from the Canadian gateway. 311 The Court concluded after analysing these factors that actual competition was not effective. 312 It then went on to determine whether potential competition was possible on the basis of: (1) the cost of market entry (the cost of market entry was very high due to the difficulty in deploying vessels from other routes to operate on the routes in question); 313 (2) recent entry on the relevant market (though new shipping operators had entered the market, it was not likely that they would constitute a source of significant potential competition for the TACA parties); 314 and (3) whether service contracts constituted a barrier to entry (service contracts constituted a barrier to significant entry by potential competitors). 315 The Court therefore held that potential competition was also ineffective due to the high barriers to entry. New entrants would be forced to either join TACA or align their prices with the liner conference. One issue that remains unclear is how much competition between the oligopolists must be eliminated to render competition ineffective for the purposes of collective dominance. See “Market Analysis—Wholesale Mobile Access and Call Origination,” Commission for Communications Regulation, Document No: 04/118. 306 Joined Cases T-191/98 and T-212/98 to T-214/98, Atlantic Container Line AB and Others v Commission [2003] ECR II-3275, para. 953. 307 Ibid., paras. 957–63. 308 Ibid., paras. 964–68. 309 Ibid., paras. 969–78. 310 Ibid., paras. 979–81. 311 Ibid., paras. 982–87. 312 Ibid., para. 998. 313 Ibid., paras. 1013–21. 314 Ibid., paras. 1022–30. 315 Ibid., paras. 1031–36. 305

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In TACA the Commission concluded that the extent of competition between the parties to the agreement was insufficient to preclude a finding of collective dominance. The fact that the conference members were obliged under US law to file their tariffs publicly, and adhere to those fixed rates, reduced competition amongst the members as it prevented them from offering special discount rates to particular shippers. 316 Moreover, enforcement measures—which included the payment of substantial guarantees and fines for deviation from the agreement—ensured members complied with the fixed rates and thereby reduced competition. 317 Separate non-TACA vessel sharing and slot exchange agreements, to which many of the TACA members were party, further decreased opportunities for competition. 318 There was accordingly no evidence of effective competition between the parties. On appeal, the TACA members disputed the Commission’s decision and argued that it had failed to take into account evidence of competition between them, particularly in relation to price. However the Court held that a certain level of competition between the parties would not negate the possibility of a finding of collective dominance, adding that “there can be no requirement, for the purpose of establishing the existence of such a dominant position, that the elimination of effective competition must result in the elimination of all competition between the undertakings concerned.” 319 The Court did not, however, articulate a test for the level of competition that would preclude a finding of collective dominance. It simply asked whether or not competition between the parties was significant or not. In this connection, it looked at price competition between the members and concluded that common prices were essentially in place, i.e., no evidence of significant competition. 320 For non-price competition, it focused on whether or not conference members had different individual strategies regarding service contracts and again found that competition levels were not significant. 321 Since there was no evidence of internal price and non-price competition of a degree and intensity to constitute effective competition between the parties, collective dominance was made out. 322

4.3.4

Selected Issues On Collective Dominance

Abuses of collective dominance. Being collectively dominant is not illegal in itself, any more than being single firm dominant is. 323 However if collective dominance is proved, each undertaking is in principle subject to duties under Article 102 TFEU. If they abuse their collective dominance, their conduct will be deemed illegal. But considerable

Trans-Atlantic Conference Agreement, OJ 1999 L 95/1, para. 175. Ibid., para. 177. 318 Ibid., para. 197. 319 Joined Cases T-191/98 and T-212/98 to T-214/98, Atlantic Container Line AB and Others v Commission [2003] ECR II-3275, para. 654. 320 Ibid., paras. 696–711. 321 Ibid., para. 712. 322 Ibid., para. 718. 323 See Case 322/81, NV Nederlandsche Baden-Industrie Michelin v Commission [1983] ECR 3461, para. 10 (“[A] finding that an undertaking has a dominant position is not in itself a recrimination.”). In the context of collective dominance specifically, see Case COMP/38.456 Bitumen, Commission decision of 13 September 2006. 316 317

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uncertainty surrounds what abuses of collective dominance Article 102 TFEU attempts to capture. A number of comments can be made. First, while the case law suggests, correctly, that one collectively dominant company can commit an abuse even if the others do not act in a similar fashion, 324 the key point is that the conduct is the manifestation of the collective dominant position. 325 The conduct must therefore be part of a tacitly agreed course of action and not simply any (unrelated) conduct that an individual firm happens to carry out in an oligopolistic market. In practice, it is very unlikely that an exploitative abuse (e.g., excessive pricing) could be committed by one collectively dominant firm acting alone. In theory, exclusionary abuses and reprisal abuses (e.g., punishing or warning another company to discourage it from bringing an antitrust complaint or from competing aggressively) could be carried out by one firm even if the other members do not behave similarly. But there must be evidence that the conduct of one firm is part of a tacitly agreed course of action in order for it to be linked to an abuse of collective dominance. Second, it makes no sense to treat as abusive conduct that is inherent in the nature of collective dominance. For example, collective dominance usually implies that the firms concerned can interact to raise prices above a competitive level. But this, in itself, cannot be abusive, in the same way as the power over price that single firm dominance potentially implies is not abusive. Of course, the definition of single firm and collective dominance pre-supposes that firms can raise (or already have raised) prices above competitive levels. This is not ipso facto an abuse: there would need to be additional proof of excessive pricing (or some other abuse). Otherwise, dominant firms would be condemned for their mere existence, which would be impractical, to say the least. 326 Third, the most sensible rationale for abuses of collective dominance is that the firms concerned tacitly collude in a course of action to unlawfully exclude firms that do not form part of the oligopoly, thereby maintaining or strengthening their overall dominance. An example is Compagnie Maritime Belge where the firms concerned adopted See Case T-228/97, Irish Sugar plc v Commission [1999] ECR II-2969, para. 66 (The abuse “does not necessarily have to be the action of all the undertakings in question. It only has to be capable of being identified as one of the manifestations of such a joint dominant position being held. Therefore, undertakings occupying a joint dominant position may engage in joint or individual abusive conduct. It is enough for that abusive conduct to relate to the exploitation of the joint dominant position which the undertakings hold in the market.”). See also Case C-393/92, Gemeente Almelo and others v NV Energiebedrijf Ijsselmij [1994] ECR I-1477. See too J Temple Lang, “Oligopolies And Joint Dominance In Community Antitrust Law” in B Hawk (ed.), 2001 Fordham Corporate Law Institute, Juris Publishing Inc. (2000), pp. 269-359 (“[I]t would not make sense to say that behaviour by one oligopolist with anticompetitive effects was lawful as long as the others did not do the same thing, but became unlawful as soon as they did.”). 325 See German Electricity Wholesale Market, and German Electricity Balancing Market, OJ 2009 C 36/8, para. 27. 326 Whether mere participation in tacit collusion should in itself be considered anticompetitive gave rise to an interesting debate between two leading antitrust commentators. See R Posner, Antitrust Law, Chicago Press (2001) (2nd edn.) (arguing in favour of prohibiting mere tacit collusion) and D Turner, “The Definition Of An Agreement Under The Sherman Act: Conscious Parallelism And Refusals To Deal,” Harvard Law Review (1962) Vol. 75(4), 655 (arguing that this would be impractical as it would condemn mere participation in tight oligopolies and force firms to behave irrationally). The latter view is more persuasive for practical reasons. 324

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collectively low freight rates to exclude a new entrant. Collective refusals to deal falling short of an agreed boycott are also a possible example. Of course, it may be that the collectively dominant firms collude over a certain course of action, but each carry out different aspects of it. For example, they may each defend a certain area or group of customers in case of entry, with the allegedly abusive conduct only being observed on the part of one of the dominant undertakings as entry had only occurred in the area or customer group that it was supposed to defend. Predatory pricing in these circumstances may be an example of an abuse of collective dominance. But corroborating evidence of an exclusionary strategy should be required, since discounting within an oligopoly is often a sign of more competition, not less (i.e., destabilisation of the oligopoly). 327 Finally, Article 102 TFEU should not deal at all with collusive conduct that falls under Article 101 TFEU (e.g., concerted practices and agreements). To hold otherwise risks blurring the important distinction between unilateral conduct and collusion and the corresponding provisions of the TFEU dealing with these two types of anticompetitive conduct. “Vertical” collective dominance. From an economic viewpoint, collective dominance assumes that firms are active in the same relevant market and can, under certain conditions, behave in a coordinated fashion to act in a similar way to a cartel. In other words, it concerns interactions between horizontal competitors. For this reason, undertakings operating in different markets should not be considered collectively dominant. However, some confusion has been created in this regard by Irish Sugar. 328 Irish Sugar was the only processor of sugar beet in Ireland, as well as the main supplier of sugar. It also held a 51% stake in Sugar Distributors Ltd (SDL), a distributor and seller of sugar, and acquired the remaining shares in that company in 1990. While it held a 51% stake, Irish Sugar appointed half of SDL’s board, which included a number of senior Irish Sugar executives. SDL was also responsible for sales and pricing decisions and Irish Sugar and SDL had joint discussions on the problems that each faced as a result of imports and the defensive measures to be taken. Details of prices for individual customers were also discussed in meetings between representatives of SDL and Irish Sugar. There were also direct economic ties between the companies. SDL was committed to buying all its sugar from Irish Sugar. Irish Sugar paid for all consumer promotions and rebates offered by SDL to individual customers. Despite the apparently vertical nature of the relationship between Irish Sugar and SDL, the Commission concluded that the economic links between the parties “created a clear parallelism of interest of the two companies vis-à-vis third parties,” and that, under the principles set out in Italian Flat Glass, a position of joint dominance existed. 329 On 327 Ibid., para. 98 (“Companies that are collectively dominant are less likely to be able to predate because it may be difficult for the dominant companies to distinguish predation against an outside competitor from price competition between the collective dominant companies and because they usually lack a (legal) mechanism to share the financial burden of the predatory action.”). 328 Irish Sugar plc, OJ 1997 L 258/1, affirmed on appeal in Case T-228/97, Irish Sugar plc v Commission [1999] ECR II-2969 and Order of the Court of Justice in Case C-497/99 P, Irish Sugar plc v Commission [2001] ECR I-5333. 329 Irish Sugar, OJ 1997 L 258/1, para. 112.

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appeal, the General Court upheld the Commission’s joint dominance finding. Somewhat elliptically, the Court held that the case law does not “contain anything to support the conclusion that the concept of a joint dominant position is inapplicable to two or more undertakings in a vertical commercial relationship.” 330 It added that, to hold otherwise, would create a lacuna in Article 102 TFEU in respect of the abusive exploitation of a joint dominant position. The findings in Irish Sugar merit a number of comments. First, the entire premise of collective dominance is that firms are active on the same market and can behave in a coordinated fashion. This possibility does not apply to vertical relationships where the firms concerned are typically active on separate markets. Second, the relationship between Irish Sugar and SDL was not really vertical during the relevant period. The Court noted that the two companies were “active on the same market” during the period in which Irish Sugar held 51% of SDL’s shares. 331 In this circumstance, it was unnecessary for the Commission to rely on a new concept of “vertical” joint dominance: there was horizontal coordination. Finally, the correct interpretation of the relations between Irish Sugar and SDL during the period in question was probably that they constituted a single economic entity, which would have resulted in the imputation of any conduct carried out by SDL to Irish Sugar. A majority interest—which Irish Sugar had in SDL—normally raises a presumption of a single entity. It is not clear why the Commission did not proceed on this basis. Even if the Commission did not feel it could go this far, Article 101 TFEU would still have applied to most (though not all) of the conduct carried out by Irish Sugar and SDL. In other words, it is not clear why the Commission needed to rely on “vertical” collective dominance. Vertical relationships may of course be relevant to aspects of collective dominance and abusive conduct. For example, where firms interact on multiple markets, a firm active on an upstream market may use the possibility of retaliation in another market as a means of enforcing the tacit agreement. But this is simply a factor that may affect the scope for collective dominance between firms active on the same market: it is not vertical collective dominance. In terms of abuse, it would presumably be unlawful for a dominant firm to instruct another independent firm to carry out abusive acts on its behalf. 332 But this is not vertical collective dominance either. The firm is simply seeking to avoid the application of Article 102 TFEU by getting another firm to carry out abusive acts intended to benefit the dominant firm. Collective dominance could also presumably arise where horizontal competitors agree to allow an entity not active on the relevant market to organise or supervise aspects of their economic activities. But this too concerns horizontal coordination: the entity in question simply acts on behalf of the collectively dominant

Case T-228/97, Irish Sugar plc v Commission [1999] ECR II-2969, para. 63. Ibid., para. 62. 332 This reasoning could explain Case COMP/A.39.116/B2, Coca-Cola, Commission decision of 22 June 2005, in which the Commission reached the preliminary view that The Coca-Cola Company (TCCC) and its bottlers were “jointly dominant” on the basis that they had adopted a common market policy and presented themselves from an economic point of view as a collective entity in the relevant markets. The various anticompetitive practices that affected retail outlets were instigated by TCCC’s distributors/bottlers. So the bottlers could equally be said to have carried out abusive acts on behalf of TCCC. 330 331

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firms. 333 Nor does the fact that an undertaking active on a different level of trade derives some benefit from abusive conduct, and has an interest in seeing it carried out, amount to vertical collective dominance. Some abuses simply have the incidental effect of also benefiting undertakings in other markets. Finally, whilst it is true to say that vertical mergers and certain conduct that arises in the context of vertical integration can in rare cases facilitate collusion, the key point is that the collusion still occurs between horizontal competitors: the vertical element simply affords greater possibilities for collusion (e.g., if activity on another market level allows a firm to gain access to sensitive information on rivals). 334

4.4

DOMINANT BUYERS

Dominance on the buying side of the market. Though most of Article 102 TFEU case law concerns the dominant position of suppliers, it equally applies to dominant buyers. If buyer power rises to the level of a dominant position (e.g., as a result of a supermarket merger leading to a high share of retail grocery sales 335), the buyer could be subject to Article 102 TFEU proceedings if it is suspected of abusing its dominant position. Seller power and buyer power essentially the same in economics. Buyer power is simply market power on the buyer side of a market. As monopoly is to the seller context so “monopsony” is to the buyer context. In the real world (as with monopoly) such a pure case is rare, but an example might be (at least in the short-run) a small town with few other employment opportunities whose inhabitants sell their labour to a local coal mine. The coal mine is a local monopsonist of the town’s labour. The economic principles of 333 This appears to have been the reasoning applied in Case T-193/02, Laurent Piau v Commission [2005] ECR II-209. The case concerned rules enacted by FIFA, football’s governing authority, on dealings between agents, players, and football clubs. The rules in question were binding on FIFA members, including clubs. Mr. Piau complained that aspects of the rules were anticompetitive under Article 101 TFEU, as well as abusive under Article 102 TFEU due to the collective dominant position of FIFA and the football clubs. The Commission found that an exemption under Article 101(3) was appropriate and that FIFA was not in a collective dominant position. On appeal, the General Court upheld the exemption decision, but concluded that FIFA was collectively dominant together with the football clubs. However, no abuse was made out. Again, the relationship between FIFA and the clubs looked vertical in nature. This was true, in a sense, but was not the relevant legal point for purposes of collective dominance. The key point was that FIFA acted on behalf of the clubs and the clubs agreed to be bound by its decisions. The Court considered that FIFA was an “emanation” of the clubs as a second-level association of undertakings formed by the clubs (para. 112). The clubs and FIFA therefore presented themselves “as a collective entity vis-à-vis their competitors, their trading partners and consumers” (para. 113). But the coordination in question was horizontal in nature. The outcome in the case would presumably have been no different if the clubs had not agreed to act through FIFA as supervisory authority, but instead had a series of multi-lateral arrangements among themselves. The clubs, via FIFA, collectively laid down the conditions under which agents’ services were to be provided. The fact that FIFA was not itself active on the market for football agents’ services was irrelevant in circumstances in which it had assumed the power to exercise in respect of such services. FIFA effectively operated on this market through its member clubs. 334 See, e.g., Case IV/M.1327, NC/Canal+/CDPQ/BankAmerica, Commission decision of 3 December 1998; and Case COMP/M.2510, Cendant/Galileo, Commission decision of 24 September 2001. 335 See, e.g., Kesko/Tuko, OJ 1997 L 110/53 affirmed on appeal in Case T-22/97, Kesko Oy v Commission [1999] ECR II-3775. See also Case COMP/M.1684, Carrefour/Promodes.

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monopsony are ultimately the same as for monopoly, 336 except that whereas a monopolist directly reduces supply for the purpose of raising price (which reduces consumer welfare), a monopsonist indirectly achieves the same effect simply by refusing to buy more inputs. If a firm is simultaneously a monopsonist (towards input suppliers) and monopolist (towards final customers), then the situation is one of a double retraction in final supply: the welfare effect is (unsurprisingly) worse than if only one of either monopoly or monopsony existed. Examples of dominant buyers. The only reported case under Article 102 TFEU where buyer dominance was found is British Airways/Virgin. 337 The Commission found that British Airways (BA) was dominant on the United Kingdom market for the purchase of airline travel agency services, despite having a market share of less than 40%. BA appealed this finding to the General Court which confirmed the Commission’s finding. The Court relied mainly on: (1) BA’s market share as a purchaser of travel agency services in the United Kingdom; (2) the fact that that share was multiple times larger than rivals’ shares; (3) the fact that sales of air tickets handled by travel agents established in the United Kingdom represent 85% of all air tickets sold; (4) evidence that BA had unilaterally reduced agency commissions; (5) BA’s world rank in terms of international scheduled passenger-kilometres flown and the extent of the range of its transport services and its hub network; and (6) agents’ substantial dependence on BA for revenue. Taken together, the Court found that these circumstances made BA an “obligatory business partner of travel agents established in the United Kingdom.” 338 A controversial aspect of these conclusions was the fact that they included no real analysis of BA’s position on the downstream airline markets. Instead, the Commission simply aggregated all BA tickets sold through travel agents established in the United Kingdom over all routes to and from United Kingdom airports. The General Court agreed with this assessment, finding that “there is no need to assess its economic strength on that market by reference to the competition between airlines providing services on each of the routes served by BA and its competitors to and from United Kingdom airports.” 339 But this conclusion seems questionable. Demand for travel agents’ services was largely determined by conditions of competition on the downstream travel markets, since agents perform a marketing function on airlines’ behalf. Simply aggregating BA’s total ticket sales without any analysis of whether it was subject to effective constraints on individual route pairs therefore ignored the most important parameter of competition between airlines. BA’s success or otherwise on a market for the purchase of travel agency services was overwhelmingly a function of its position on the downstream travel markets. And yet no analysis was made of the relevant downstream markets.

336 See RG Noll, “Buyer Power And Economic Policy,” Antitrust Law Journal, (2005) Vol. 72, 591 (“Asymmetric treatment of monopoly and monopsony has no basis in economic analysis.”). 337 Case T-219/99, British Airways plc v Commission [2003] ECR II-5917. 338 Ibid., para. 217. 339 Ibid., para. 197.

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“SUPERDOMINANCE”

Definition. Because market power exists essentially along a continuum, concerns regarding dominance are at their most acute where a firm’s strength approaches a position of near-monopoly. Recognising this concern, a small number of decisions and judgments under Article 102 TFEU and/or equivalent provisions of national law have expressly referred to a concept of “superdominance.” The concept was first mentioned by Advocate General Fennelly in his opinion in Compagnie Maritime Belge. 340 Compagnie Maritime Belge (CMB) concerned a liner shipping conference agreement. By virtue of that agreement and other factors, the members of the conference were found to be in a collective dominant position. Advocate General Fennelly did not content himself with finding that the liner conference members were dominant in the relevant market. In view of their 90% market share, he also labelled the group “superdominant” and found that, in this circumstance, they owed a particularly onerous duty not to preclude the emergence of new competition: 341 “To my mind, Article [102] cannot be interpreted as permitting monopolists or quasimonopolists to exploit the very significant market power which their superdominance confers so as to preclude the emergence either of a new or additional competitor. Where an undertaking, or group of undertakings whose conduct must be assessed collectively, enjoys a position of such overwhelming dominance verging on monopoly ... it would not be consonant with the particularly onerous special obligation affecting such a dominant undertaking not to impair further the structure of the feeble existing competition for them to react, even to aggressive price competition from a new entrant, with a policy of targeted, selective, price cuts designed to eliminate that competitor.”

The Court of Justice did not refer to the concept of “superdominance,” but did note the quasi-monopolistic position enjoyed by the liner conference. Compagnie Maritime Belge is also notable because the Court of Justice was prepared to conclude that even prices above average total cost could be abusive where, inter alia, a position approaching a near monopoly existed. A similar fact pattern was noted by the Court of Justice in Tetra Pak II where the fact that Tetra Pak held a “quasi-monopolistic position” on the market in question was among the “special circumstances” considered by the Court when holding that the undertaking had infringed Article 102 TFEU. 342 In Irish Sugar, reference was made to the “extensive dominant position” of the undertaking when reaching the conclusion that its conduct amounted to an abuse. 343 Finally, the Commission explicitly referred to the link between an undertaking’s degree of dominance and whether or not its conduct constitutes an abuse in Football World Cup when it stated that “the scope of the parties’ responsibility must therefore be considered in relation to the degree of dominance held by the parties.” 344

340 Opinion of Advocate General Fennelly in Joined Cases C-395/96 P and C-396/96 P, Compagnie Maritime Belge Transports SA, Compagnie maritime belge SA and Dafra-Lines A/S v Commission [2000] ECR I-1365. 341 Ibid., para. 137. 342 Case C-333/94 P, Tetra Pak International SA v Commission [1996] ECR I-5951, paras. 28–31. 343 Case T-228/97, Irish Sugar plc v Commission [1999] ECR II-2969, para. 185. 344 See 1998 Football World Cup, OJ 2000 L 5/55, para. 86.

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National case law has also embraced the concept of “superdominance.” Extensive reference was made to this concept in Napp Pharmaceutical, a judgment of the Competition Appeal Tribunal in the United Kingdom: 345 “We for our part accept and follow the opinion of Mr. Advocate General Fennelly in Compagnie Maritime Belge … that the special responsibility of a dominant undertaking is particularly onerous where it is a case of a quasi-monopolist enjoying ‘dominance approaching monopoly’, ‘superdominance’ or ‘overwhelming dominance approaching monopoly’ … Napp’s high and persistent market shares put Napp into the category of ‘dominance approaching monopoly’i.e., superdominanceand the issue of abuse in this case has to be addressed in that specific context.”

It went on to state that, since Napp held well over 90% of the market share and had only one significant competitor during the period of infringement, “Napp is a superdominant undertaking in both the hospital and community segments with, in consequence, a particularly onerous responsibility not to impair further the structure of the feeble existing competition.” 346 Problems with “superdominance.” The concept of superdominance is problematic in several respects. First, Article 102 TFEU makes no reference to varying degrees of dominance and corresponding levels of responsibility. The rule is clear: all dominant companies should be free to compete by legitimate means, and none should be allowed to compete by exclusionary means. There is no obvious or identifiable reason why companies with especially high market shares should have additional duties not applicable to other (merely) dominant companies. Second, there is no basis in economics for specifying a point in a spectrum of market power in which a firm could be said to acquire “superdominance.” Economics recognises two broad concepts: the concept of a monopoly, that is where only one seller exists; and the concept of a dominant price-setting firm that faces a competitive fringe who act as price takers. 347 There is no objective economic test for determining when, outside the situation of pure monopoly, a firm could be said to possess a position of “superdominance.” Thus, not only is there no legal basis for “superdominance” in the text of Article 102 TFEU, economics provides no clear basis for saying when it might arise. Third, to the extent that the term “superdominance” implies that the responsibility of a dominant firm not to abuse its position is higher, significant uncertainty would be added to the law. Abuses which are considered contrary to Article 102 TFEU fall under three headings—exploitation, discrimination and exclusionary conduct. If “superdominance” was to impose a higher degree of responsibility on incumbent firms, the notions of abuse 345 Napp Pharmaceutical Holdings Limited Subsidiaries v the Director General of Fair Trading, judgment of 15 January 2002, para. 219. Although this judgment applied UK law, the relevant section of the UK Competition Act is virtually identical to the wording of Article 102 TFEU, and the Act, at least until the Brexit transition period ends, requires that it is to be interpreted and applied in a manner consistent with EU competition law. 346 Joined Cases C-395/96 P and C-396/96P, Compagnie Maritime Belge Transports SA, Compagnie Maritime Belge SA and Dafra-Lines A/S v Commission [2000] ECR I-1365, para. 338. 347 See DW Carlton & JM Perloff, Modern Industrial Organisation, Pearson Addison Wesley (2005) th (4 edn.), pp. 105–110.

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under each of these categories would require re-definition. A test to establish when “superdominance” exists would also be needed. Finally, the concept of superdominance in so far as it refers to very high levels of market share, seems beside the point. As discussed in Section 4.2, the main issue is not so much a firm’s market share, but whether that share is likely to persist due to barriers to entry. Firms with very high shares may have very little market power if barriers to entry are low; firms with modest shares may enjoy a high degree of market power if protected by entry barriers. The concept of “superdominance” might therefore lead to unnecessary and protectionist intervention. Conclusion. There would be several practical, legal, and economic problems if the duties imposed on dominant firms were higher when a position of “superdominance” is identified. There is significant doubt that such a position can be accurately identified in economics. Accordingly, the best way to understand “superdominance” is that it merely encapsulates an obvious practical point: undertakings with a high degree of market power usually have greater incentive and ability to abuse their dominance and, when they do, the effects are likely to be greater. This point has effectively been accepted by the EU Courts, who have recently confirmed that: (1) Article 102 TFEU does not envisage any variation in form or degree in the concept of a dominant position; and (2) the degree of market strength is, as a general rule, significant in relation to the extent of the effects of the conduct of the undertaking concerned rather than in relation to the question of whether the abuse as such exists. 348 In short, it is clear that different legal principles do not apply, but that, all else equal, it may be easier to show anticompetitive effects where a firm with a very high degree of dominance excludes actual or potential rivals.

4.6

DOMINANCE IN MULTI-SIDED MARKETS

Issue stated. As explained in Chapter Three (Market Definition), in many industries firms compete simultaneously for different groups of customers with interrelated demands. In these industries, competitors must get all sides of the market on board, which typically results in subsidising one or more consumer groups while charging others. Thus, for example, Microsoft used to subsidise app and content developers for Windows while charging consumers. In search and social media platforms, services are typically free to one market side and the platform operator monetises those services by advertisers on the other market side paying for ads. In multi-sided markets, some or all of the usual analytical tools for dominance in the case of single-sided markets are likely to apply. However, there are also typically additional matters to consider in respect of dominance in multi-sided markets. In particular, the multi-sidedness of, and interrelated demands in, such markets can have significant implications for the assessment of market power and, therefore, for the establishment of dominance. A multi-sided firm or platform with a significant share in one of the multiple sides of the business—which could, as explained in Chapter Three, constitute a relevant market in its own right—may nonetheless have no ability profitably to raise prices above See Case C-52/09 TeliaSonera Sverige [2011] ECR-1 83, paras. 79 to 81; and C-549/10 P Tomra Systems and Others v Commission, [2012] ECR-I 221, paras. 38 and 39. 348

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the competitive level for a sustained period of time. This may be the case even if the reduction in the number of customers patronising the platform and/or the intensity which with they use it were limited. The reduction of demand on one side of the business has an additional adverse effect on the profitability of a multi-sided platform, since it reduces the willingness of consumers on all other sides of the platform to deal with it. For example, a search engine with few users will be of no real interest to advertisers. In other words, a multi-sided platform may not have market power, and hence will not be dominant, even in circumstances where: (1) each side of the business constitutes a separate relevant product market, because e.g., firms operating with different business models compete for the same demand; and (2) that platform has a significant share of one of those markets and users on that side face some switching costs. Put another way, the definition of the relevant market is not some sort of “guillotine” in multi-sided market cases that prevents consideration of the impacts of out-of-market competitive constraints on the firm in question. Even if these constraints are obviously indirect, they may, depending on the facts, be powerful, and could preclude a dominant position, even if, say, the market shares in the relevant market are very high. Asymmetric dominance. Consider a two-sided platform operating in two well-defined relevant product markets, A and B. Suppose that it has a considerable share of each of the two markets. Suppose further that consumers in market A single-home, i.e., they concentrate all their purchases on a single platform, whereas consumers in market B multi-home, i.e. they patronise multiple platforms. Under these assumptions, the multisided platform may have a dominant position in market B but not in market A. Any attempt to raise prices in market A may be self-defeating because consumers in that market may all switch their whole business to a competing platform, since consumers in market B can be reached through several platforms. As a result, the multi-sided platform’s large share in market A confers no market power. On the contrary, a price increase in market B may be profitable since consumers in that market can only reach out to the platform’s customers in market A by dealing with the platform. Importantly, the platform may have market power in market B even when its share of that market is limited, which suggests that market may have to be further segmented into platformspecific relevant markets. Multi-homing, single-homing and dominance. Two further clarifications are in order. First, the above discussion does not imply that dominance will be restricted to markets where consumers multi-home. Suppose that, as above, the multi-sided platform operates in two markets, one with single-homing consumers and the other with multi-homing customers. The platform may be dominant in both markets if: (1) the single-homing consumers face considerable switching costs and, hence, would not respond to a price increase and/or a degradation of quality; and (2) the multi-homing platforms cannot profitably stop licensing the platform’s single-homing consumers. Second, a multi-sided platform may not have market power over its multi-homing customers when the reason why they shop around is because different platforms offer differentiated products, they face no significant switching or shopping costs, and/or have a clear-cut preference for variety. Decisional practice and case law. In its most recent major platform decisions—

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Shopping, 349 Android, 350 and AdSense 351—the Commission has grappled with issues of dominance in multi-sided markets. Android is the most striking example. The operating systems of two companies, Apple’s iOS and Google’s Android, account for the vast bulk of operating systems used in smartphones globally today. iOS and Android are multisided businesses which serve smartphone users and, amongst other customer groups, mobile app developers. A major issue in the case therefore was: (1) whether Google could be in a dominant position with Android given the presence of Apple iOS; and (2) the impact of the interrelated demands on the question of Google’s dominance in Android. As noted in Chapter Three (Market Definition), the Commission established two separate markets for: (1) open source (licensable) mobile operating systems (OSs) such as Google’s Android; and (2) non-licensable OSs such as Apple’s iOS. It argued that there is limited demand-side substitutability between the two, at least from the perspective of smartphone original equipment manufacturers (OEMs) as they cannot obtain licences to use iOS or other non-licensable OSs. 352 Having defined the market in this way to exclude all non-Android sources, it was trite that the Commission found that Google’s market share was extremely high (more than 85% from 2012-2016), and exceeded the levels at which dominance may be presumed under Article 102 TFEU. 353 It also found substantial barriers to entry. Developing a smart mobile OS is a costly and time-consuming process. Costs result both from the initial investment in research and development to bring a smart mobile OS to the market and the need to finance the ongoing development of the OS, its new features and releases. 354 Finally, it concluded that smartphone OEMs did not have sufficient countervailing buyer power. 355 An important argument raised by Google is that its position in respect of the Android OS is subject to strong (indirect) constraints from Apple’s iOS. Google argued that a key feature of the market which is competition for the market between different “ecosystems” of OSs. The Commission rejected this argument, for three main reasons. First, it argued that users obtain smart mobile OSs as part of a wider bundle with a smart mobile device, and take into account a range of factors other than the smart mobile OS when purchasing such a device (e.g., price of the device, battery life, quality of the device screen, quality of the camera, design of the device, and data storage available on the device), with the result that it is unlikely that users would change their purchase behaviour and switch to devices based on non-licensable smart mobile OSs in the event of a small but significant, non-transitory deterioration of the quality of Google Android. 356 This analysis seems rather confused. In the first place, the notion that users do not have 349 Case AT.39740, Google Search (Shopping), Commission Decision of 27 June 2017 (currently on appeal). 350 Case AT.40099, Google Android, Commission Decision of 18 July 2018 (currently on appeal). 351 Case AT.40411, Google Search (AdSense), Commission Decision of 20 March 2019 (currently on appeal). 352 Case AT.40099, Google Android, Commission Decision of 18 July 2018, para. 239. 353 Ibid., Table 3. 354 Ibid., section 9.3.2. 355 Ibid., section 9.3.3. 356 Ibid., paras. 483 et seq.

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material regard to inter-OS quality competition when deciding which smartphone to purchase seems questionable. But the more forceful point is that, without more, this point proves nothing. The Commission’s analysis is rooted in the small but significant nontransitory increase in price SSNIP test, which is a test for market definition but is not the test for dominance. Finally, as discussed further below, the issue is not whether a consumer who has already purchased a smart phone with Android would immediately switch to Apple iOS, but whether, at the point of purchase, the competition between Android and iOS is a material constraint on Google and, therefore, compels quality-based and other forms of competition between Apple and Google that preclude Google from acting independently from Apple. Second, the Commission relies upon: (1) the significant price differences between Google Android and iOS devices; (2) the substantial costs Google Android users would face in switching to iOS; and (3) the significant degree of loyalty shown by users to their existing smart mobile OS. 357 Point (1) is obviously a factual point, but it seems clear that there are Android and iOS smartphones across a wide spectrum of different price points. Point (2) is an empirical question but, again, the issue is not so much whether a user who has already purchased a smart phone would immediately switch, but whether, at the point of purchase, inter-ecosystem competition is sufficient constraint on Google’s OS. In this regard, there is an important dispute of fact between the Commission and Google as to the relative proportions of new to existing customers. 358 Equally, point (3) (loyalty) is part of the same switching point. Finally, the Commission argues that app developers are unlikely to stop developing for Google Android and develop exclusively for iOS. The Commission concluded: 359 “Google holds a dominant position in the worldwide market (excluding China) for Android app stores since 2011. This conclusion is based on: (1) the market shares of Google and competing Android app stores market shares …, (2) the quantity and popularity of apps available on the Play Store …, (3) the automatic update functionalities of the Play Store …, (4) the fact that the only way for OEMs to obtain Google Play Services is to obtain the Play Store … , (5) the existence of barriers to entry and expansion …, (6) the lack of countervailing buyer power of OEMs …, and (7) the insufficient constraint from app stores for non-licensable smart mobile OSs.”

Factors (1)–(6) are standard in assessments of dominance in one-sided markets. Factor (7) also plays a part in that assessment but it is of particular relevance in multi-sided markets, because it requires consideration of: (1) whether consumers in the other side(s) served by the platform (in this case smartphone users and the smartphone manufacturers (OEMs)) are locked in; and (2) whether the customers which are allegedly dominated (in this case the app developers) can discontinue their business with suppliers. 360 The

Ibid., paras. 497 et seq. Ibid., para. 551. 359 Ibid., para. 560. 360 See generally P Klemperer and J Farrell, “Coordination and Lock-In: Competition with Switching Costs and Network Effects,” in Chapter 31 in Handbook of Industrial Organisation, 2007, vol. 3, pp.1967-2072. 357 358

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Commission assessed both (1) and (2) in its decision: 361 “… the Commission concludes that app stores for non-licensable smart mobile Oss exercise an insufficient indirect constraint on Google’s dominant position in the worldwide market (excluding China) for Android app stores. First, in order to switch to the app stores for non-licensable smart mobile Oss such as Apple and BlackBerry, users of the Play Store would need to purchase a new smart mobile device as developers of non-licensable smart mobile OSs such as Apple and BlackBerry do not license their app stores. Second, users of the Play Store are unlikely to switch to Apple or BlackBerry smart mobile devices in the event of a small but significant, non-transitory increase in the price of the apps distributed on the Play Store. … Third, … Google can act in such a manner given that OEMs do not have credible alternatives to the Play Store and because those requirements would not alter the cost of Google Android devices. … …app developers would be unlikely to switch from the Play Store in the event of a small but significant, non-transitory increase in the percentage of app-related revenues because they would lose access to a large percentage of users whose smart mobile device OS is Android.”

But the Commission does implicitly acknowledge that evidence of multi-homing can contradict a finding of dominance. Thus, it concludes that Google enjoys a position of dominance in the (national) market for search services because inter alia, “only a minority of users in the EEA that use Google’s general search service as their main general search service actually use other general search services (a behaviour known as ‘multihoming’).” 362 Consumers in this market single-home in Google because, according to the Commission, none of its competitors (e.g., Bing) is in a position to impose an effective competitive constraint and barriers to entry protect Google from potential competitors. Again, these issues are contested on appeal by Google. In Shopping, the Commission also rejected an argument that Google was constrained by competition in product search by other major merchant platforms such as the Amazon and eBay marketplaces (as well as social media platforms such as Facebook). Importantly, the Commission accepted that comparison shopping services and merchant platforms both aggregate offers from different sellers and provide a search functionality to search and filter those offers based on certain criteria. 363 But it argued that they each serve a different purpose for users and for online retailers, essentially because price comparison websites did not allow consumers to conclude transactions directly but referred the user to the relevant retailer website.

Ibid., paras. 652-654, 658, and 668. Ibid., para. 709. 363 Case AT.39740, Google Search (Shopping), Commission Decision of 27 June 2017, para. 217. 361 362

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Google’s appeal challenges this conclusion. In particular, it argues that the fundamental question is not whether there are some differences between product searches on merchant platforms and other online ways of searching for products, but whether the former constrains the latter. This is a largely empirical question, which depends on whether users in fact use merchant platforms to a material extent for product searches and, if so, to what extent that constrains Google. Google argues that the answer to this question cannot start and end with market definition but requires a separate assessment of the issue of competitive constraints under dominance as well. Its basic point is that most product searches are conducted on merchant platforms—notably Amazon and eBay but also some strong national operators—and that these dwarf product searches done on price comparison service websites and Google’s own Shopping sub-domain. 364

4.7

SUBSTANTIAL PART OF THE COMMON MARKET

Broad concept of “substantial part.” The application of Article 102 TFEU requires a firm to hold a dominant position in a “substantial part of the common market.” This is a jurisdictional question rather than an economic one. It is also different from the geographic delineation of the relevant market. The latter is part of the definition of the relevant market, while the former requirement is similar to the de minimis doctrine under Article 101 TFEU, i.e., to ensure that cases of minor importance are not caught. Global or EU-wide markets are clearly “substantial.” It is also likely that a market corresponding to the entire territory of a Member State is “substantial,” in particular where the firm under scrutiny holds a statutory monopoly. 365 Issues only really arise where the volume of trade affected is very small or the conduct in question concerns a single facility in a Member State. An expansive interpretation has been applied to the concept of a “substantial part of the common market.” The Court of Justice has held that it is not the geographical dimension that matters but the relevance in terms of volume and economic opportunities. 366 For example, it has been held that the test is satisfied for single facilities such as maritime ports or airports. 367 Even small volumes of trade can be considered “substantial.” In BP for instance, the Dutch market for petrol was found to be

364 Technically, however, this appeal ground is not a direct challenge to the Commission’s dominance findings but challenges instead the Commission’s conclusions on anticompetitive effect under abuse. 365 Case 127/73, Belgische Radio en Televisie v SV SABAM and NV Fonior [1974] ECR 313, para. 5; Case T-229/94, Deutsche Bahn AG v Commission [1997] ECR II 1689; and Case T-228/97, Irish Sugar plc v Commission [1999] ECR II 2969, para. 99. The test of substantiality is also satisfied where a Member State grants a contingent series of local legal monopolies that together cover the entire Member State. See Case C-323/93, Société Civile Agricole du Centre d'Insémination de la Crespelle v Coopérative d'Elevage et d'Insémination Artificielle du Département de la Mayenne [1994] ECR I-5077, para. 17. See also Portuguese Airports, 1999 OJ L 69/31, paras. 21–22. 366 See Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114-73, Coöperatieve Vereniging “Suiker Unie” UA and others v Commission [1975] ECR 1663, para. 371. 367 Case C-179/90, Merci convenzionali porto di Genova SpA v Siderurgica Gabrielli SpA [1991] ECR I-5889, para. 15; Sea Containers v Stena Sealink—Interim measures, OJ 1994 L 15/8, para. 40; Flughafen Frankfurt/Main AG, OJ 1998 L 72/30; Case C-18/93, Corsica Ferries Italia Srl v Corpo dei Piloti del Porto di Genova [1994] ECR I-1783; Portuguese Airports, 1999 OJ L 69/31, upheld on appeal Case C163/99, Portugal v Commission [2001] ECR I-2613; Finnish Airports, OJ 1999 L 69/24; and Spanish Airports, OJ 2000 L 208/36.

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a substantial part of the common market, despite only accounting for 4.6% of the overall EU market. 368

368

1513.

Case 77/77, Benzine en Petroleum Handelsmaatschappij BV and others v Commission [1978] ECR

Chapter 5 THE GENERAL CONCEPT OF AN ABUSE 5.1

INTRODUCTION

The basic types of abuses under Article 102 TFEU. Article 102 TFEU is the major provision of EU competition law that seeks to control anticompetitive unilateral conduct, i.e., conduct that does not require the express or implied cooperation of another party. 1 It prohibits “any abuse by one or more undertakings of a dominant position within the common market…in so far as it may affect trade between Member States.” Only “abuse” is banned: creating or having a dominant position is not prohibited. 2 The term “abuse” broadly covers exclusionary or other strategic acts that are designed to extend or maintain the dominant firm’s market power, to the detriment of consumers. Exclusionary unilateral acts are “bad” in the sense that they either have no redeeming features from the perspective of consumer welfare—the welfare standard that applies under Article 102 TFEU—or possess less consumer benefit than the harm that they simultaneously cause. Broadly speaking, three types of abuses under Article 102 TFEU have been distinguished: (1) exploitative abuses; (2) exclusionary abuses; and (3) reprisal abuses. 3 Exploitative abuses are pricing and other practices that result in a direct loss of consumer welfare. In economic terms, the dominant firm takes advantage of its market power to extract “rents” from consumers that could not have been obtained by a nondominant firm or to take advantage of consumers in some other way. Excessive pricing, discussed in Chapter Fourteen, is an obvious example, but a number of abusive

This definition is only partly correct. A number of potential abuses (e.g., exclusive dealing) are expressly based on contractual arrangements. The basic distinction between cooperative arrangements and unilateral conduct is nonetheless generally useful and correct. In general, competition law is more hostile to collusive arrangements between firms than unilateral conduct. This is mainly on the assumption that competitive harm is generally more likely to occur from two or more firms agreeing to limit their respective outputs than unilateral action by one firm. Put differently, it is one thing for a firm to acquire market power through superior products or skill, but another for two or more firms to restrict competition between them in favour of cooperative arrangements that confer market power. This distinction is not necessarily hard and fast—many dominant firms may acquire a monopoly position by means other than skill and foresight (e.g., special rights from the government)—but it is correct, as a general matter, to treat the contractual acquisition of market power differently from unilateral action that resides in market power. 2 Case 322/81, NV Nederlandsche Baden-Industrie Michelin v Commission [1983] ECR 3461, para. 10 (“[A] finding that an undertaking has a dominant position is not in itself a recrimination.”). See also Joined Cases C-395/96 P and C-396/96 P, Compagnie maritime belge transports and Others v Commission [2000] ECR I-1365, para. 37. 3 Initially in C Bellamy and GD Child, European Community Law of Competition, Sweet & Maxwell (1978) (2nd edn). See also J Temple Lang, “Abuse of Dominant Positions in European Community Law, Present and Future: Some Aspects” in Hawk (ed.), Fifth Fordham Corporate Law Institute, Law & Business (1979), pp. 25–83. 1

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contractual clauses and other practices carried out by a dominant firm fall into the same category. 4 In its 2008 Guidance Paper the Commission introduced for the first time a new type of abuse: the concept of a “naked restriction.” This is said to be a practice that is so pernicious as to not require any assessment of its effects on competition. 5 The relevant context in which the concept has been applied thus far has been an exclusionary abuse in the Intel decision. 6 The Commission found that Intel restricted the commercialisation of specific AMD-based products by HP, Acer, and Lenovo by making payments to the original equipment manufacturer (OEM) in question to delay, cancel, or in some other way restrict the commercialisation of specific AMD-based products. But it does not appear that this new concept is necessarily limited only to exclusionary abuses. Presumably, if an Intel customer had challenged the clause in question—rather than AMD, a rival chip maker—the Commission would have reached a similar conclusion. This concept is not without controversy and is discussed in detail in Section 5.3 below. Exclusionary abuses—the most common and important category of abuse—concern strategic acts directed against rivals that indirectly cause a loss to consumer welfare believe they unlawfully limit rivals’ ability to compete. 7 The logic is that if rivals’ production is unlawfully limited, that may, if the limitation is serious enough and the rivals are important for the functioning of competition, have the effect of distorting competition in the sell-on market to the consumer. The key element is the loss to consumer welfare, since legitimate competition that excludes rivals is an essential component of consumer welfare maximisation. As the Court of Justice stated in Post Danmark I, it is not the function of Article 102 TFEU to “seek to ensure that competitors less efficient than the undertaking with the dominant position should remain on the market.” 8 In other words, “not every exclusionary effect is necessarily detrimental to competition.” 9 Predatory pricing—selling below some measure of cost for exclusionary reasons—is a commonly-cited example of an exclusionary abuse, although actual cases are rare (or undetected). But, as with the means of competing, the range of potential exclusionary acts is myriad and includes matters as diverse as refusal to deal, tying and bundling, price squeezes, discrimination against downstream rivals, discount practices, exclusive dealing, vexatious litigation, the use and abuse of government approval procedures to exclude rivals, and abuses in connection with the adoption of standards or other specifications.

See Ch. 16 (Other Exploitative Abuses). Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ 2009 C 45/2 (hereinafter, the “Guidance Paper”), para. 22. 6 Case COMP/37.990, Intel, Commission Decision of 13 May 2009, paras. 870-873. The decision was upheld by the General Court in Case T-286/09 Intel v Commission, EU:T:2014:547 but the Court of Justice set aside this judgment and referred the case back to the General Court, where judgment is awaited: see Case C-413/14 P Intel v Commission, EU:C:2017:632. 7 See Case C-52/09, TeliaSonera Sverige [2011] ECR I-527, para. 24 and Case C-209/10, Post Danmark A/S v Konkurrencerådet, EU:C:2012:172, para. 20. 8 Case C-209/10, Post Danmark A/S v Konkurrencerådet, EU:C:2012:172, para. 21. 9 See, by analogy, Case C-52/09, TeliaSonera Sverige [2011] ECR I-527, para. 43. 4 5

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The final broad category of abusive conduct under Article 102 TFEU concerns reprisal abuses. 10 This involves situations in which a dominant firm punishes or disciplines a rival firm to prevent it from competing aggressively or indirectly seeks to achieve the same end, e.g., by punishing a customer for dealing with a rival firm. For example, in United Brands, 11 the Court of Justice held that it was abusive for a dominant supplier to terminate supplies to a distributor on the grounds that the distributor had participated in an advertising campaign for a competitor of the supplier. Similarly, in Boosey & Hawkes, 12 Boosey & Hawkes refused all further supplies to a customer who had transferred its central activity to the promotion of a competing brand of musical instruments. An important evidentiary point was that Boosey & Hawkes had embarked on a plan to exclude the competitive threat from that rival and that the refusal to supply the customer was part of that plan. 13 Both cases stand for a general principle that, while a dominant firm can lawfully protect its interests (e.g., by terminating relations with other trading parties), it must act proportionately in doing so and not overreact. The basic definition of abuse. Building on the basic categorisation of abuses, the EU Courts have articulated a number of different general formulations intended to elaborate the meaning of the term “abuse.” The seminal definition of exclusionary abuses was provided in Hoffmann-La Roche, where the Court of Justice defined an abuse as conduct “which, through recourse to methods different from those governing normal competition in products or services on the basis of transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.” 14 Under this definition, the concept of an abuse is anything that cannot be regarded as “normal competition” based on quality and price and which has the effect of restricting competition. An alternative formulation is to say that abuse is anything that is not legitimate competition or “competition on the merits.” Thus, in AKZO, the Commission made clear that a dominant firm is “entitled to compete on the merits.” 15 The Commission added that aggressive, legitimate competition was to be encouraged and that it did not suggest that “large producers should be under an obligation to refrain from competing vigorously with smaller competitors or new entrants.” 16 A similar formulation was put forward in Michelin II, where the General Court defined exclusionary conduct as conduct that lacks “objective economic justification.” 17 Other definitions of abuse put forward by the EU institutions suggest that dominant firms have certain responsibilities towards the competitive process. For example, in See generally J Temple Lang, “Anticompetitive Non-Pricing Abuses Under European and National Antitrust Law” in Hawk (ed.), 2003 Fordham Corporate Law Institute, Juris Publication Inc. (2004), pp. 235–340. 11 Chiquita, OJ 1976 L 95/1, upheld on appeal in Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207. 12 BBI/Boosey & Hawkes—Interim Measures, OJ 1987 L 286/36. 13 Ibid., para. 19. 14 Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 6. 15 ECS/AKZO, OJ 1985 L 374/1, para. 81, upheld on appeal in Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3359. 16 Ibid. 17 Case T-203/01, Manufacture française des pneumatiques Michelin v Commission [2003] ECR II4071, paras. 107, 110. 10

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Michelin I, the Court of Justice used the phrase “special responsibility” in connection with a dominant firm’s duty not to abuse its position. According to the Court of Justice, while the finding of dominance is not a recrimination in itself, it means “that, irrespective of the reasons for which it has such a position, the undertaking concerned has a special responsibility not to allow its conduct to impair genuine undistorted competition on the common market.” 18 More recently, the EU Courts have sought to reorient abuses under Article 102 TFEU around conduct that has the effect of causing harm to consumers. Thus, in Post Danmark I, the Court of Justice held that Article 102 TFEU “applies, in particular, to the conduct of a dominant undertaking that, through recourse to methods different from those governing normal competition on the basis of the performance of commercial operators, has the effect to the detriment of consumers of hindering the maintenance of the degree of competition existing in the market or the growth of that competition.” 19 The Court added in this context that Article 102 TFEU does not seek to ensure that competitors less efficient than the undertaking with the dominant position should remain on the market, 20 and that competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation. 21 These points were recently endorsed in explicit terms by a Grand Chamber of the Court of Justice Intel so there can be no doubt as to their centrality to the definition of abusive conduct. 22 In a further important development, the Court of Justice also held in Intel that, at least where an as-efficient competitor (AEC) price/cost test played an important role in the Commission’s assessment of whether the alleged pricing abuses were capable of having foreclosure effects on competitors, it is necessary to examine all of the dominant firm’s arguments concerning that test. 23 Uncertainty surrounding the definition of exclusionary conduct. There has been considerable debate among practitioners and commentators as to what the definition of an exclusionary abuse is or should be. 24 This debate has been prompted by a series of difficulties. First, distinguishing legitimate competition and exclusionary conduct is inherently difficult, since they are very similar in appearance. For example, low prices 18 Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission [1983] ECR 3461, para. 10. But see Joined Cases T-191/98, T-212/98 to T-214/98, Atlantic Container Lines AB and Others v Commission [2003] ECR II-3275, para. 1460. 19 Case C-209/10, Post Danmark A/S v Konkurrencerådet, EU:C:2012:172, para. 24 (emphasis added). 20 Ibid., para. 21. 21 Ibid., para. 22. 22 Case C-413/14 P Intel v Commission, EU:C:2017:632, paras. 133-136. 23 Ibid., paras. 143-144. 24 The literature is vast on this issue. Among the better publications are J Temple Lang, “How Can The Problem Of Exclusionary Abuse Be Resolved?,” European Law Review (2012) 37:136; BE Hawk, “Article 82 and Section 2: Abuse and Monopolising Conduct,” in Issues In Competition Law and Policy (ABA Section of Antitrust Law 2008), Ch.36; A Ezrachi (ed.), Article 82 EC: Reflections On Its Recent Evolution, Hart Publishing (2009); F Etro and I Kokkoris (eds.), Competition Law And The Enforcement Of Article 102, Oxford University Press, (2010); P Akman, The Concept Of Abuse In EU Competition Law, Hart Publishing (2012); and E Rousseva, Rethinking Exclusionary Abuses in EU Competition Law, Hart Publishing (2010).

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are the essence of competition but they can sometimes be too low and exclusionary. Put differently, both legitimate competition and exclusionary conduct harm rivals, but, in the former case, such “harm” is an essential part of a properly-functioning competitive process. Second, the ways in which a firm can exclude competitors are myriad: a single, overarching definition of exclusionary conduct therefore might risk being either under-inclusive or over-inclusive. A third problem is that the definition of an abuse in the Article 102 TFEU decisional practice and case law is imprecise, and does not encapsulate a clear normative concept capable of satisfying the basic requirements of the rule of law and legal certainty. “Normal competition,” as per Hoffmann-La Roche, is a vague phrase, since it begs the question of what is “normal.” The Commission has also applied the principle of “normal competition” to novel abuses such as representations to a national patent office that may affect patent duration. 25 The concepts of novelty and normality do not sit easily together. Similarly, one would instinctively think that conduct carried out by a dominant undertaking that is also routinely carried out by non-dominant firms should be presumed “normal” and efficiency-enhancing. And, yet, the Commission has rejected the notion that a common practice within an industry would necessarily constitute “normal competition.” 26 Indeed, one of the central conundrums in Article 102 TFEU is that conduct carried out by a dominant firm may be abusive even if the exact same conduct is carried out by a non-dominant firm. This of course can give rise to arbitrariness. “Competition on the merits” and “genuine undistorted competition” are similarly vague. These terms have been defined as competition on the basis of “price, quality and functionality” of the product. 27 But this is unclear and does not provide sufficient limiting principles. For example, all predatory pricing and loyalty discounts are competition based on “price,” but they are not always allowed. Tying is competition by adding functionality, but is not always allowed. Finally, the term “special responsibility” fares no better. The General Court has clarified that the term special responsibility means only that a dominant undertaking 25 AstraZeneca, OJ 2006 L 332/24, on appeal Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, and Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. 26 Microsoft, OJ 2007 L 32/23, para. 827, footnote 877 (citing Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission [1983] ECR 3461, para. 57; and Case T-111/96, ITT Promedia NV v Commission [1998] ECR II-2937, para. 139). Indeed, the English Court of Appeal concluded in National Grid that the concepts of “normal competition” and “competition on the merits” were not hard-edged concepts of law at all: “Nor do the authorities support [the] depiction of ‘normal competition’ as a concept with a legal definition, or at least a sufficiently hard-edged concept that it can be determined as a matter of law whether a particular factual situation does or does not amount to normal competition. An equivalent expression used in some of the cases is ‘competition on the merits’ but that is far from being a legal definition or the expression of a sufficiently hard-edged concept to enable factual situations to be included within it or excluded from it as a matter of law.” See National Grid plc v Gas and Electricity Markets Authority [2010] EWCA Civ 114, para. 41. 27 See, e.g., Comments by M Monti, former European Commissioner for Competition, on the speech given by Hewitt Pate, Assistant Attorney General, US Department of Justice, at the Conference “Antitrust in a Transatlantic Context,” Brussels, 7 June 2004 (“I think we can both agree that in competition the best should win on the merits, but only on the merits. Whenever dominant companies can use their market power to win in a market for reasons that are not related to the price or quality of their products, then we should consider intervening.”).

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may be prohibited from conduct which is legitimate where it is carried out by nondominant undertakings.” 28 In other words, it simply encapsulates a general, obvious statement that conduct carried out by firms that are not dominant may be abusive when carried out by a dominant firm rather that constituting a normative definition in itself. Indeed, more recent statements on the concept of “special responsibility” by the Commission and EU Courts have made the concept even less normative. In AstraZeneca it was held that a dominant firm making incorrect representations to a national patent office that had the effect of extending patent duration—by acquiring a supplementary protection certificate (SPC)—was an abuse under Article 102 TFEU, largely because such representations were not consistent with the “special responsibility” of a dominant firm. This was despite the fact that AstraZeneca was no longer dominant in some countries at the time the (extended) patent came into force. But a non-dominant firm acquiring a SPC at a time when it is not dominant may lead to its having a very powerful dominant position in future. Thus, non-dominant firm conduct with equal or more serious effects than dominant firm conduct would escape scrutiny, whereas the lesser conduct by a dominant firm would be condemned because it has, by virtue of its dominance, a “special responsibility.” This is not a coherent position. A fourth problem is that a practice may be regarded as not constituting “normal competition,” “competition on the merits,” and “genuine undistorted competition” in one situation, but not in others. A good example is unconditional price reductions. The rules established under the AKZO line of case law state that, first, prices below average variable cost are presumed abusive, and, second, that prices above average variable cost but below average total cost may be regarded as abusive when they are part of a plan to eliminate a rival firm. 29 From this, one might reasonably assume that an unconditional price cut above average total cost is not abusive. And yet, in Compagnie Maritime Belge, 30 the EU Courts found that such prices could, in exceptional cases, constitute an abuse. They indicated that the AKZO case law was not exhaustive, i.e., that unconditional price cuts could be unlawful in other circumstances. In other words, the terms “normal competition,” “competition on the merits,” and “genuine undistorted competition” are not merely vague, but also conclusory. That is, they are defined according to what the EU institutions or national authorities happen to conclude is an abuse in each case. This is obviously unsatisfactory. 31 Fifth, the practical application of Article 102 TFEU by the EU institutions and national authorities has been criticised as lacking clarity, consistency, and economic rigour.32 28 See Joined Cases T-191/98, T-212/98 to T-214/98, Atlantic Container Lines AB and Others v Commission [2003] ECR II-3275, para. 1460. 29 See ECS/AKZO, 1985 OJ L 374/1, upheld on appeal in Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3359. 30 Cewal, Cowac and Ukwal, OJ 1993 L 34/20, upheld on appeal in Joined Cases T-24/93, T-25/93, T-26/93, and T-28/93, Compagnie Maritime Belge Transports SA and Others v Commission [1996] ECR II-1201 and in Joined Cases C-395/96 P and C-396/96 P, Compagnie Maritime Belge Transports SA and Others v Commission [2000] ECR I-1365. 31 Similar criticisms have been made of Section 2 of the United States Sherman Act. See E Elhauge, “Defining Better Monopolisation Standards” (2003) 56 Stanford Law Review 253. 32 See, e.g., B Sher, “The Last of the Steam-Powered Trains: Modernising Article 82” (2004) 25 European Competition Law Review 243 (“There is no internal consistency of application. There is no

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Among the reasons suggested for this are as follows: 33 (1) the Commission has underestimated the risk of causing harm through inadequately considered statements and actions, in particular about pricing abuses; 34 (2) the only general statements about the application of Article 102 TFEU made by the Commission concern exclusionary abuses, with no official position being expressed on exploitative abuses, reprisal abuses, or discrimination abuses—the latter are often important, and misunderstood in practice; 35 (3) the EU Courts analysing antitrust cases in detail only in appeals from the Commission has led to judicial statements very closely tied to the facts of particular cases, rather than general principles; and (4) there are relatively few cases—European companies are less litigious than US companies, and may be less willing to sue dominant enterprises. Finally, economists have, until relatively recently, 36 largely ignored the assessment of unilateral practices, focusing instead on mergers and other forms of agreements. This has been particularly true in the EU. This is true both in terms of the shaping of efficient normative rules on what constitutes abusive conduct and also in terms of empirical study of the harm caused by abusive conduct or particular categories of abusive conduct. For example, there has been long-standing hostility under Article 102 TFEU to conditional rebate schemes that have the feature that the discount applies not only to the additional unit above the relevant discount threshold but “rolls back” to all units purchased by the customer below the threshold—so-called all-unit discounts. But the empirical economic evidence for the pervasive and harmful nature of these practices is limited, and mainly concerns stylised models that differ from dynamic competition in practice. 37 This is consistent with other areas of abusive conduct where much of economic work on unilateral practices is theoretical rather than empirical.

5.2

THE ECONOMICS OF ABUSIVE UNILATERAL CONDUCT 5.2.1

Evolution Of Economic Thinking On Unilateral Conduct

Overview. As with other areas of antitrust, economic thinking on unilateral conduct consistency between the application of Art. [102] and the application of other competition provisions of the Treaty. More fundamentally, there is no longer any coherent policy basis for applying Art. [102].”). See also SB Völcker, “Developments in EC Competition Law in 2003: An Overview” (2004) 41(4) Common Market Law Review 1048. 33 See J Temple Lang, “Anticompetitive Non-Pricing Abuses Under European and National Antitrust Law” in Hawk (ed.), 2003 Fordham Corporate Law Institute, Juris Publication Inc. (2004), pp. 235–340. 34 See J Temple Lang and R O’Donoghue, “Defining Legitimate Competition: How to Clarify Pricing Abuses Under Article 82 EC” (2002) 26 Fordham International Law Journal 83–162. 35 See the Guidance Paper. The Commission has also issued guidance in the telecomunications sector. See Notice on the application of the competition rules to access agreements in the telecommunications sector—framework, relevant markets and principles, OJ 1998 C 265/2. 36 The first serious official attempt to consider an economically coherent definition of abusive conduct under Article 102 TFEU was the Report by the Economic Advisory Group on Competition Policy, “An Economic Approach to Article 82,” July 2005. 37 Indeed, there is economic evidence that such practices may have multiple efficiencies not achieved, or less well achieved, by other forms of rebates. See S Kolay, SG Shaffer, and J Ordover, “All-Unit Discounts In Retail Contracts,” (2004) 13(3) Journal of Economics and Management Strategy 429–459. For a detailed discussion see Ch.9 (Loyalty Rebates and Related Practices).

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has evolved considerably over time. Earlier decisions on unilateral conduct tended to focus on formalistic rules or intuitions that lacked a clear economic foundation. Many of these assumptions were questioned by lawyers and economists associated with the so-called “Chicago School” of antitrust thinking, which explained why practices that had hitherto been regarded as anticompetitive were either legitimate or required further elements before unlawful conduct could be made out. This school of thought had a significant influence on the approach to unilateral conduct under US antitrust law and, though clearly less marked, has also impacted on EU competition law. A number of commentators then questioned some of the general assumptions made by the Chicago School and identified situations in which conduct that the Chicago School considered to be legitimate might be harmful to consumer welfare. A final, more recent scholarly debate—known variously as the New Brandeis School or “hipster antitrust”—rejects the central reliance on economics in the Chicago (and, with modifications, post-Chicago) school, including in some cases the consumer welfare standard underpinning modern antitrust. These basic phases of thinking on unilateral conduct are outlined below.38 More detailed reference is made in subsequent chapters to the evolution of economic thinking where appropriate. Pre-Chicago thinking. The “pre-Chicago approach” refers to judgments concerning business practices that are not based on an economic analysis of whether firms with market power have the incentive or ability to engage in such practices for anticompetitive reasons. These judgments typically failed to consider whether, and to what extent, those business practices result from procompetitive efforts to achieve efficiencies. The pre-Chicago approach, instead, is based on what might best be described as “intuitions” about whether practices are objectionable or not. The US Supreme Court used this intuitive approach in many cases that examined unilateral practices in the first three quarters of the twentieth century—a period that is sometimes called the pre-Chicago era in antitrust. One of the major pre-Chicago contributions is the so-called “leverage doctrine,” where a dominant firm seeks to extend its market power in one market into adjacent markets. The belief was that a firm with a monopoly in one market has always an incentive to extend that monopoly to a market for a complementary product, and thereby get two monopoly profits instead of one. 39 Following this reasoning, several types of unilateral practices were considered to be illegal per se. One concern was that a monopolist would tie the purchase of its monopoly product to other competitive products in order to extend its monopoly power to previously competitive markets. Tying was therefore illegal per se. 40 Another significant pre-Chicago view was that firms could use predatory actions to drive rivals out of the market, thereby creating a monopoly position for the predator. 41 For example, a large firm could set low, predatory prices so that its competitors would lose money and exit. Predatory pricing was considered under the

38 This section draws heavily on J Padilla, “Designing Antitrust Rules for Assessing Unilateral Practices: A Neo-Chicago Approach,” (2005) 72(1) University of Chicago Law Review, 73-98. 39 See United States v Terminal Railroad Association, 224 US 383 (1912). 40 See International Salt Co v United States, 332 US 392, 396 (1947). 41 See Standard Oil Co v United States, 221 US 1 (1911).

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rule of reason, but courts were free to apply reason as they thought best, and many defendants lost. 42 Chicago School thinking. The Chicago School made a significant contribution to antitrust by applying basic price theory to a variety of practices that were viewed suspiciously by competition authorities and courts. Much has been written on the influence of the Chicago School on modern antitrust. 43 For example, the Chicago School’s arguments have made significant inroads in the treatment of vertical restraints. One of the earliest Chicago-influenced decisions overruled precedent and analysed territorial restraints imposed by manufacturers on distributors under the rule of reason, rather than finding them illegal per se. 44 Some, though by no means all, of this thinking has found its way into Article 101 TFEU—the major provision of EU competition law dealing with agreements. 45 In terms of unilateral conduct, two specific insights of the Chicago School should be mentioned. The first, and most famous, is the “single monopoly profit theorem.” This holds that in a vertical chain of production there is a single monopoly profit to be had. A firm that has a monopoly at one level of the vertical chain can secure that profit if it charges a monopoly price for its product and everyone else charges a competitive price for their products. It would then prefer to have as much competition as possible at every other level of the chain because that will reduce the price of the final product, increase sales, and thereby maximise the total profit that it receives. This theorem is fatal, or so it appeared, to the leverage doctrine. The monopoly has no incentive to monopolise competitive levels of the chain because it can never get more profit than it currently obtains from having a monopoly at one level. 46 Variants of the single 42 See JS McGee, “Predatory Price Cutting: The Standard Oil (N.J.) Case” (1958) 1 Journal of Law and Economics 137. 43 See, e.g., R Posner, “The Chicago School of Antitrust Analysis” (1979) 127 University of Pennsylvania Law Review 925; H Hovenkamp, “Antitrust Policy After Chicago” (1985) 84 Michigan Law Review 213; A Cucinotta et al. (eds.), Post-Chicago Developments in Antitrust Law, Edward Elgar Publishing Company (2002); ILO Schmidt and JB Rittaler, A Critical Evaluation of the Chicago School of Antitrust Analysis, Springer-Verlag (1989); EW Kitch, “The Fire of Truth: Remembrance of Law and Economics at Chicago, 1932–1970” (1983) Journal of Law and Economics 163; MS Jacobs, “An Essay on the Normative Foundations of Antitrust Economics” (1995) 74 North Carolina Law Review 219; MW Reder, “Chicago Economics: Permanence and Change” (1982) 20 Journal of Economic Literature 1–28; AJ Meese, “Tying Meets the New Institutional Economics: Farewell to the Chimera of Forcing” (1997) 146 University of Pennsylvania Law Review 1; WH Page, “The Chicago School and the Evolution of Antitrust: Characterization, Antitrust Injury, and Evidentiary Sufficiency” (1989) 75 Virginia Law Review 1221; H Hovenkamp, “Post-Chicago Antitrust: A Review and Critique” (2001) Columbia Business Law Review 257; and CS Yoo, “Vertical Integration and Media Regulation in the New Economy” (2002) 19 Yale Journal on Regulation 187–205. 44 See Continental TV v GTE Sylvania, 433 US 36 (1977). 45 See Commission Regulation 330/2010 of 20 April 2010 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 OJ 2010 L 102/1; and Commission Notice—Guidelines on Vertical Restraints, OJ 2010 C 130/1. 46 In fact, the monopolist may even have incentives to eliminate market power at other levels of the chain. A second monopoly for example would result in a higher price for the final product and reduce its sales. This result, known as double marginalisation, dates back to Cournot in 1838. See AA Cournot, Researches into the Mathematical Principles of Theory of Wealth (Homewood, RD Irwin, 1986) (1838).

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monopoly profit theorem have been applied to tying, essential facilities, and, more broadly, to the analysis of vertical integration and restraints. Another significant Chicago contribution concerns the treatment of predatory pricing claims, which reasoned that predatory pricing was generally irrational unless the predator could reasonably expect to recoup its losses. This view has strongly influenced US Supreme Court decisions, with the result that predatory pricing claims are very difficult to pursue in US courts. 47 Post-Chicago thinking. Beginning in the 1980s, certain economists began to question the broad assumptions underlying Chicago School thinking. In particular, they found that it was possible to develop models in which leveraging behaviour could be shown to harm consumer welfare. 48 These models show for example that, under certain assumptions, a monopolist has incentives to tie its monopoly product to a secondary product to eliminate competition in the secondary market. More precisely, they show that leveraging a monopoly position in the tying market onto an adjacent tied market may be profitable when the tied market is subject to economies of scale and, therefore, is imperfectly competitive, and when leveraging successfully induces the exit, or deters the entry, of competitors in the tied market. Subsequent articles have identified other sets of assumptions under which a dominant firm has both the incentive and ability to foreclose competition in a secondary market, either to attain an additional monopoly profit there or to protect their monopoly profit in the primary market. 49 Likewise, another strand of modern economics literature undercuts the proposition that firms lack the incentive or ability to engage in predatory pricing. 50 The post-Chicago approach has had a significant impact on US thinking on unilateral conduct. In Kodak the Supreme Court essentially rejected the per se legal approach to tying in aftermarkets that would follow from the Chicago School in favour of a rule-ofreason approach that would consider the possibility of anticompetitive behaviour in the particular factual circumstances of the case. 51 The US Department of Justice also relied on post-Chicago approaches in two well-known cases initiated in the late 1990s. In Microsoft, it argued that Microsoft had promoted its own browsing software for the purpose of deterring a challenge to its operating system monopoly, i.e., the monopoly maintenance exception to the Chicago leveraging critique. 52 The economic subtext for this case can be found in an article associated with the post-Chicago tradition. 53 In See, e.g., Brooke Group Ltd v Brown & Williamson Tobacco Corp, 509 US 209 (1993). The seminal article is probably MD Whinston, “Tying, Foreclosure, and Exclusion” (1990) 80 American Economic Review 837. 49 See JP Choi and C Stefanadis, “Tying, Investment, and the Dynamic Leverage Theory” (2001) 32 RAND Journal of Economics 52; DW Carlton and M Waldman, “The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries” (2002) 33 RAND Journal of Economics 194. For a non-technical summary, see Report by the Economic Advisory Group on Competition Policy, “An Economic Approach to Article 82,” July 2005. 50 See P Bolton, JF Brodley and MH Riordan, “Predatory Pricing: Strategic Theory and Legal Policy” (2000) 88 Georgetown Law Review 2239. Post-Chicago thinking on predatory pricing is discussed in detail in Ch. 6 (Predatory Pricing). 51 Eastman Kodak Co v Image Technical Serv. Inc, 504 US 451 (1992). 52 These claims were more or less upheld on appeal. See United States v Microsoft, 253 F.3d 34 (D.C. Cir. 2001). 53 DW Carlton and M Waldman, “The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries” (2002) 33 RAND Journal of Economics 194. 47 48

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American Airlines, the Justice Department also pressed a post-Chicago predatory pricing theory, 54 which was rejected by two courts. 55 There are also indications that Commission decisions sometimes attach weight to postChicago theories, mainly as support for findings of abuse. For example, in Microsoft, the decision found, inter alia, that Microsoft’s tying its media player to its operating system had spillover effects not only on competition in related products such as media encoding and management software, but also in client PC operating systems for which media players compatible with quality content are an important application. 56 This argument echoes economic literature showing that under some assumptions markets can tip and that firms can engage in anticompetitive actions to make markets tip to themselves and thereby establish a monopoly. 57 Similarly, on the refusal to deal abuse, the Commission countered Microsoft’s argument that any leveraging was efficient under the “single monopoly profit” theory by pointing to economic thinking to the effect that this theory only applied where the products on the two markets are perfect complements with fixed ratios, which it said did not hold good in the case of the linkages between the Windows PC operating system and server-side products. 58 Finally, in Wanadoo, the Commission referred in several places to a post-Chicago article on predatory pricing as support for the view that the defendant’s actions were a rational and exclusionary strategy of predatory pricing. 59 New Brandeis School. In the last few years, certain scholars have proposed a move away from the Chicago School’s central reliance on economics as the source of what should guide competition law, as well as varying degrees of rejection of the consumer welfare standard that has generally underpinned competition law enforcement in major developed economies (including in the EU). These moves have been variously labelled the “New Brandeis School”—called after the famous US Supreme Court justice—or, less loftily, “hipster antitrust.” 60 Professor Fox summarises the broad concerns of the New Brandeis School as follows: 61

54 As academic support the Justice Department cited, for example, the post-Chicago theories discussed in P Bolton, JF Brodley, and MH Riordan, “Predatory Pricing: Strategic Theory and Legal Policy” (2000) 88 Georgetown Law Review 2239. 55 United States v AMR Corp, 140 F. Supp. 2d 1141 (D. Kan. 2001), aff’d, 335 F.3d 1109 (10th Cir. 2003). 56 See Microsoft, OJ 2007 L 32/23, para. 842. 57 See, e.g., WB Arthur, “Competing Technologies and Lock-In by Historical Events: The Dynamics of Allocation Under Increasing Returns” (1989) 99 Economic Journal 116. 58 Microsoft, OJ 2007 L 32/23, para. 767, upheld in Case T-201/04, Microsoft v Commission [2007] ECR II-3601, paras. 962-965. 59 See Case COMP/38.233, Wanadoo Interactive, Commission Decision of 16 July 2003, paras. 266, 307, and 334. 60 See, e.g., LA Khan, “The New Brandeis Movement: America’s Antimonopoly Debate,” 9 Journal of European Competition Law and Practice 131, (2018); LA Khan, “Amazon’s Antitrust Paradox,” 127 Yale Law Journal 710 (2017); M Glick, “American Gothic: How Chicago School Economics Distorts ‘Consumer Welfare’ in Antitrust,” 22 July 2019, available at ssrn.com; T Wu, “After Consumer Welfare, Now What? The ‘Protection of Competition’ Standard in Practice,” Competition Policy International, 2018; Columbia Public Law Research Paper No. 14-608 (2018); and T Wu, The Curse of Bigness, Columbia Global Reports (2018). 61 E Fox, “Power: Trust And Distrust,” Le Concurrentialiste, April 2020, available at https://leconcurrentialiste.com/eleanor-fox-power/.

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“…[D]ata began to link increasing business concentration with increasing inequality. There was and is a growing feeling among ordinary people that the deck is stacked against them. No small piece of this picture is the big tech/big data giants, who found their footing and soared. At first non-transparently and later as exposed by the Ida Tarbells of the tech age, they acquired power (through innovative products but also network effects, data grabs, and attention capture) and began to exercise their power over numerous facets of our lives, triggering (with other forces such as unconscionably high prices of life-saving drugs) a backlash against big business and high concentration. The populist front guard of inflection perspective 1 expresses itself most loudly and clearly in the New Brandeis movement, which insists that antitrust is much more than microeconomic rationality; it is an intertwined mixture of social, political and economic policy with a human face, it stresses diversity as a value, and it embraces competition as the safeguard of liberal values against power, political and economic. The neo Brandeisians call for breaking up big tech and aggressively controlling business power. On these points – the goals and the remedies — the neo Brandeisians and many but not all progressives depart.”

These calls for rule modifications or wholesale changes have been driven by five main concerns. First, it is suggested that, in general, markets have become more concentrated with market shares and profits also increasing, 62 a point that is disputed. 63 Second, it is suggested that not only have firm profits increased, but consumers have been harmed through general price rises. 64 But this point is also disputed due to the absence of data on marginal costs. 65 Third, lax enforcement of competition law is said to be a major contributory cause of rises in concentration and profit levels, particularly in the area of merger control. 66 Fourth, some dispute the continued usefulness of the consumer welfare standard widely accepted in the economics and competition law literature for many years now. One report puts the issue as follows: 67 “The economy faces a market power crisis. Rampant consolidation and vertical integration leave consumers, workers, suppliers, and competitors powerless and disadvantaged. In highly consolidated markets, consumers have limited choice and little power to pick their price, quality, or provider for the goods and services they need. Workers are met with massive employers and have little agency to shop around for competitive wages and benefits. 62 See J De Loecker and J Eeckhout, “The Rise of Market Power and the Macroeconomic Implications,” The Quarterly Journal Of Economics, (2017) (documenting the evolution of market power based on firm-level data for the US economy since 1955 and finding average mark-ups rising from 21% above marginal cost to 61% and an increase in the average profit rate from 1% to 8% (even taking account of increases in overhead costs)); J Furman and Peter Orszag, “A Firm-Level Perspective on the Role of Rents in the Rise in Inequality,” Presentation at “A Just Society” Centennial Event in the Honour of Joseph Stiglitz, Columbia University (16 October 2015); and S Barkai, “Declining Labour And Capital Shares,” Stigler Centre for the Study of the Economy and the State New Working Paper Series 2 (2016). 63 See JD Wright, E Dorsey, J Klick, and Jan M. Rybnicek, “Requiem For A Paradox: The Dubious Rise and Inevitable Fall of Hipster Antitrust,” Arizona State Law Journal (2019), p. 293, Part II and sources collected therein. 64 De Loecker and J Eeckhout, ibid. 65 See S Ganapati, “Oligopolies, Prices and Quantities: Has Industry Concentration Increased Price and Restricted Output?,” (2017), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3030966. 66 Furman and Orszag, ibid. 67 M Steinbaum and M Stucke, “The Effective Competition Standard—A New Standard For Antitrust,” New York: Roosevelt Institute, p.1, available at https://rooseveltinstitute.org/wpcontent/uploads/2018/09/The-Effective-Competition-Standard-FINAL.pdf. For a counterargument, see D Melamed and N Petit, “The Misguided Assault on the Consumer Welfare Standard in the Age of Platform Markets,” Review of Industrial Organisation, June 2019, Volume 54, Issue 4, pp. 741–774.

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Suppliers can’t reach the market without paying powerful intermediaries for the privilege or succumbing to acquisition. This market power imbalance is due, in large part, to lax antitrust law and enforcement. The Federal Trade Commission and Department of Justice are intended to monitor and prevent monopolies with market power from forming ‘in their incipiency.’ But of late, they have failed. This is due to the consumer welfare standard, which identifies and judges harm to competition only by its potential effect on consumers—and rarely with respect to anything other than prices. The consumer welfare standard fails to define ‘welfare’ and ignores adverse effects on workers, suppliers, quality, and innovation. It is not only ambiguous, but it is also inadequate to the task of preserving competition throughout the supply chain, in the labour market, and in the economy as a whole.”

Finally, some authors consider the above issues to be particularly acute in the context of digital platform markets due inter alia to direct and indirect network effects, the potential for extreme returns to scale, low or zero marginal costs, and the typically costless nature of distribution of digital products. 68 The predicate of the New Brandeis School’s calls for reforms of competition law is that: (1) enforcement of competition law has been too lax; (2) the main reasons for this are excessive reliance on antitrust economics; and (3) these issues are particularly acute as respects enforcement of unilateral practices by “Big Data” platforms such as Google, Facebook, Amazon, and Microsoft. It is probably fair to say that the US has experienced a relatively long period in which Federal enforcement of non-merger cases has been very limited. Indeed, it is difficult to think of many major antitrust cases brought by the two US Federal agencies outside the areas of mergers and cartel settlements in the last several years. 69 However, the same criticisms cannot fairly be levelled at EU competition law or Article 102 TFEU. Enforcement in the EU at the Commission and national levels is manifestly vibrant. In particular, as discussed in Chapter Seventeen (Abuses In Digital Platform Markets), the suggestion that, as respects digital platforms and unilateral conduct, there has been lax enforcement is particularly risible in the context of the EU. The EU has been at the vanguard in this area with a series of important infringement decisions in cases such as Shopping, 70 Android, 71 and AdSense, 72 commitment decisions in cases such as Amazon 68 See, e.g., LM Khan, “Amazon’s Antitrust Paradox,” 126 Yale Law Journal, 710 (2017); LM Khan and S Vaheesan, “Market Power and Inequality, The Antitrust Counterrevolution and its Discontent,” 11 Harvard Law and Policy Review, 234 (2017). See further Ch. 17 (Abuses In Digital Platform Markets). 69 See B Kovacic, “Kovacic Challenges US Enforcers’ ‘Risk Appetite,’” New York University School of Law, conference, 28 February 2020: “During the administration of President Barack Obama, Kovacic said today, there were a lot of suggestions that the US Department of Justice’s antitrust division would bring big cases. But ‘we got basically nothing, including from a number of spokespeople that say now the system has to expand a lot more.’ ‘Why didn’t you do more then?’ Kovacic asked. ‘What was the risk appetite and does that consciously have to change and how do you transmit that to your staff?’ In more than 100 years of existence, the FTC has never prevailed at the Supreme Court in a case challenging monopolisation under section 2 of the Sherman Act, he said. ‘You might say that’s a long enough time to test whether that model was designed to do something else,” he said, questioning if the US antitrust laws were intended for more aggressive enforcement. The last time the US government appeared before the Supreme Court in a section 2 case on its own behalf was 1973, he said, referring to the DOJ’s challenge to Otter Tail Power’s control of transmission lines.’” 70 Case AT.39740, Google Search (Shopping), Commission Decision of 27 June 2017 (currently on appeal). 71 Case AT.40099, Google Android, Commission Decision of 18 July 2018 (currently on appeal).

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E-books, 73 as well as non-infringement decisions at a national level in cases such as Streetmap, 74 Bottin, 75 and Verband. 76 It is certainly not self-evident from these decisions that the legal principles applicable under Article 102 TFEU are materially deficient in capturing abuses in digital platform markets or that an entirely new paradigm is needed. For example, Android is based on tying abuse case law, as well as case law on exclusivity. AdSense is based on recent Article 102 TFEU case law on exclusivity. Shopping seeks to use old leveraging case law to bolster a new “favouring”/self-preferencing paradigm. It is, however, fair to say that there is currently an embryonic debate, at a largely theoretical level, in the EU about two issues that mainly concern the application of Article 102 TFEU. 77 The first is whether aspects of competition law, including Article 102 TFEU, could or should be modified in digital markets, and digital platforms in particular. Most notably, in 2019, DG COMP commissioned a study into this area containing a range of interesting ideas, e.g., shifting the burden of proof to defendants in dominant digital platform cases. 78 However, as the law currently stands, these proposals, if adopted, would almost certainly require a legislative change. There have been similar studies at a national level but they have not, thus far, led to concrete legislative action. 79 One notable exception in this regard is Germany. Following a report in 2019, a new Act on Digitalisation of German Competition Law is expected to enter into force in the second half of 2020. Among other things the new law would apply new conduct rules under domestic competition law for digital platforms. 80 The second debate is that, in the EU and elsewhere, there have been recent calls, of varying degrees of precision of focus, that “fairness” should play a greater role in general in competition law, and in particular concerning the laws on unilateral conduct and abuse of dominance. 81 The current Competition Commissioner, Margrethe

Case AT.40411, Google Search (AdSense), Commission Decision of 20 March 2019 (currently on appeal). 73 Case AT.40153, E-book MFNs and related matters (Amazon), Commission Decision of 4 March 2017. 74 Streetmap.EU Limited v Google Inc. and others, [2016] EWHC 253 (Ch). 75 Bottin Cartographes v. Google Inc., Paris Court of Appeal, 25 November 2015. 76 Verband der Wetterdienstleister v. Google, District Court of Hamburg, 4 April 2014. An unofficial translation is available at https://www.taylorwessing.com/fileadmin/files/docs/pdfgerman/Google_Weather_InBox_-_Court_Order_2013-04-04_Unofficial_Translation.pdf. 77 There is also greater impetus to use existing procedural powers to act more quickly in these areas, particularly interim measures. See further Ch. 19 (Remedies). 78 See J Crémer, YA de Montjoye, and H Schweitzer, Competition Policy For The Digital Era, Final Report (2019). 79 See, e.g., Unlocking Digital Competition, Report of the Digital Competition Expert Panel, March 2019. 80 See summary “Competition 4.0,” 9 September 2019, available at https://www.dkart.de/en/blog/2019/09/09/competition-4-0/. The law is available in German at https://www.dkart.de/wp-content/uploads/2019/10/GWB-Digitalisierungsgesetz-Fassung-Ressortabstimmung.pdf 81 For a general overview, see A Lamadrid de Pablo, “Competition Law as Fairness,” Journal of European Competition Law & Practice, 2017, Vol. 8, No. 3, 147 and D Gerard, “Fairness in EU Competition Policy: Significance and Implications,” Journal of European Competition Law & Practice, 2018, Vol. 9, No. 4 211. 72

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Vestager, has been at the vanguard of these calls. 82 In a narrow sense, these calls seek modifications of varying degrees to competition law rules due inter alia to concerns about their general effectiveness, over-reliance on technical economics, the alleged under-inclusiveness of a consumer welfare standard, and the growth of multi-sided digital platforms and other aspects of “Big Data.” In a wider sense, these issues are linked to growing concerns about perceived rising inequality in society, perceived increases in market concentration, and a disconnect between growth in wages and firm profits, as well as a more basic point that growth in monopoly rents is likely to have an unduly regressive effect on those with the least means.

5.2.2

Designing Economically Optimal Rules For Unilateral Conduct

Balancing error costs. Lawyers and economists have long advocated that legal rules, including competition law rules, should be designed in a way that makes their practical enforcement efficient. 83 This is premised on the notion that perfect information allowing competition authorities and courts to weigh the procompetitive and anticompetitive effects of a practice in every case will almost never be available. A related point is that, for unilateral conduct, it is not reasonable to expect firms to subject everyday business decisions to detailed balancing analysis to scrutinise their compatibility with competition law. Antitrust commentators therefore propose that legal rules should be guided by several considerations that make their enforcement optimal. The overriding concern is that a legal rule should not allow anticompetitive practices to go unpunished (so-called “false positives” in statistical parlance) and should not result in practices that are procompetitive being wrongly found to be anticompetitive (so-called “false negatives”). Which of the two errors is likely to be costlier depends on whether a particular practice is, on balance, more likely to lead to harm or good. A good example concerns unconditional price cuts by a dominant firm. Price competition is of course to be encouraged. At some point, however, price competition may cause harm to consumers, where for example a dominant firm charges low prices to cause rivals’ exit, and later recoups its investment through increased prices in future. While the precise measurements differ, economists have long argued that firms should be presumed to be acting lawfully when prices are above production costs, usually marginal cost or some analogous measure. This insight is captured by the first rule on predatory pricing in the AKZO case, that prices below average variable cost (a proxy for marginal cost) are presumed to be exclusionary. 84

82 See, e.g., speech at the Web Summit in Lisbon, 7 November 2017, “Clearing The Path For Innovation,” available at https://ec.europa.eu/competition/speeches/index_2017.html (“Companies have to take fairness and trust just as seriously as they do innovation. So we can make the most of what technology can do for us.”). For a discussion, see M Volnar and K Helmdach “Protecting Consumers And Their Data Through Competition Law? Rethinking Abuse Of Dominance In Light Of The Federal Cartel Office’s Facebook Investigation,” European Competition Journal, (2018) Vol 14, 195. 83 See, e.g., R Posner, “An Economic Approach To Legal Procedure And Judicial Administration” (1973) 2 Journal Of Legal Studies 399–458. For an application more specific to unilateral conduct, see D Evans, “How Economists Can Help Courts Design Competition Rules: An EU And US Perspective” (2005) 28(1) World Competition 93–99. 84 See Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3359, paras. 70–71. See generally Ch. 6 (Predatory Pricing).

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Economists have also devised theoretical models showing that even prices above cost can sometimes harm consumer welfare. 85 The basic idea is that less efficient rivals can bring about reductions in price that are sufficient to compensate for their relative inefficiency, as well as the notion that many firms will become as or more efficient over time. But this insight has not led to general restrictions on above-cost prices cuts under Article 102 TFEU, precisely because of the very high risk of wrongly condemning aggressive, but legitimate, price competition. Instead, such price cuts have been condemned in only exceptional cases, usually where the firm in question is a virtual monopolist and/or the pricing strategy is part of a series of abusive acts with the same aim. 86 Many commentators would argue that even this exception goes too far and risks false negatives. Indeed, the Commission’s Guidance Paper suggests that “normally” it will not pursue a predatory pricing case where the dominant firm prices above its average total costs. 87 Thus, there is a strong consensus that above-cost unconditional price cuts should be presumed lawful in all but extreme cases, which is reflected in the design of the rules concerning predatory pricing. Form versus effect. An evaluation of the risks of false negatives and positives, and prior beliefs about the degree of benefit and harm of particular practices, has led to the application of different types of tests for antitrust rules. At one extreme are practices that are subject to per se legality or illegality rules, i.e., the practice is deemed lawful or unlawful without the need for a detailed inquiry into its actual or likely effects on competition. A per se rule may be absolute in the sense that no exceptions are permitted or modified in the sense that a rebuttable presumption of legality or illegality applies. Per se rules are only appropriate where: (1) experience and logic suggests that the benefit/harm resulting from a practice is so clear and unambiguous that there is no point in wasting court or regulatory resources in investigating its effects; and (2) the risk of false positives or false negatives is small. At the other extreme lie rule of reason inquiries where the benefits and harm caused by a practice are evaluated. This inquiry may be structured, in the sense that conduct is evaluated through a series of screens to distinguish lawful and unlawful conduct, or unstructured in that harm and benefit are simply assessed and compared. Economists overwhelmingly agree that a rule of reason (or effects) based approach is correct when dealing with unilateral conduct and have criticised past policy under Article 102 TFEU for its excessive reliance on form over effects. A report by the Economic Advisory Group on Competition Policy on Article 102 TFEU—which was commissioned by the then Chief Economist of DG Competition—proposed an effects-based approach for the following reasons: 88

85 See M Armstrong and J Vickers, “Price Discrimination, Competition, and Regulation” (1993) 41(4) Journal of Industrial Economics 335. See generally Ch. 6 (Predatory Pricing). 86 See, e.g., Joined Cases C–395/96 P and C-396/96P, Compagnie Maritime Belge Transports SA, Compagnie maritime belge SA and Dafra-Lines A/S v Commission [2000] ECR I-1365. See generally Ch. 6 (Predatory Pricing). 87 Guidance Paper, para. 67. The Commission uses long-run average incremental cost as its average total cost measure. 88 See Report by the Economic Advisory Group on Competition Policy, “An Economic Approach to Article 82,” July 2005, p. 6.

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“A more consistent approach would start out from the effects of anticompetitive conduct…and consider the competitive harm that is inflicted on consumers. Adopting such an effects-based approach would ensure that these various practices are treated consistently when they are adopted for the same purpose. In contrast, a form-based approach creates the risk that they will be treated inconsistently, with some practices possibly enjoying a relatively more lenient attitude (e.g., because of different standards). Arbitraging among these different treatments may facilitate exclusion, or induce the dominant firm to adopt alternative exclusionary methods, which may well inflict a higher cost on consumers.”

Another way of looking at these types of rules is to consider whether unilateral practices should be assessed on the basis of their form or actual or likely effect. Historically, a number of practices under Article 102 TFEU could have been considered as subject to modified per se legality rules. Exclusive dealing was subject to a strong presumption of illegality in earlier cases such as Suiker Unie and Hoffmann-La Roche. 89 This presumption was relaxed in more recent cases, most notably in Intel, 90 where the Court of Justice held that, where the dominant firm puts forward prima facie evidence tending to suggest an absence of anticompetitive effects, the public authority is bound to consider it, which, in practice, is akin to the rule of reason which applies under Article 101 TFEU. Similarly, regarding predatory pricing, the AKZO case suggested that pricing below average variable cost is subject to a per se rule. This finding has also been relaxed in recent cases, in line with economic thinking indicating that pricing below average variable cost may have a non-exclusionary explanation. For example, in Wanadoo, the Commission did not conclude that the dominant firm’s prices were unlawful from the mere fact that they were below average variable cost for a significant period, but in addition looked at their strategic rationale and effects on competition. The current rules might therefore best be described as modified per se illegality. Finally, individualised retroactive loyalty rebates were also effectively subject to a per se illegality rule (absent objective justification). 91 Again, however, this rule has been substantially relaxed and has shifted towards a rule of reason-type inquiry, with some structural screens to eliminate unproblematic cases. This approach is now reflected in the Intel decision and the earlier framework set out in the Guidance Paper. 92 In sum, there are now virtually no practices that could be described as per se unlawful under Article 102 TFEU. 93

89 See Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114-73, Coöperatieve Vereniging “Suiker Unie” UA and others v Commission [1975] ECR 1663; and Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461. 90 See Case C-413/14 P Intel v Commission, EU:C:2017:632, paras. 138-141. See generally, Ch. 8 (Exclusive Dealing and Related Practices). 91 See D Waelbroeck, “Michelin II: A Per Se Rule Against Rebates by Dominant Companies?” (2005) 1 Journal of Competition Law & Economics 149–171. See generally Ch. 9 (Loyalty Rebates and Related Practices). 92 Case COMP/37.99, Intel, Commission Decision of 13 May 2009 (currently on appeal). See Guidance Paper, paras. 40-42. 93 As Advocate General Ruiz-Jarabo Colomer stated in Glaxo Greece, “for both legal and economic reasons, Article [102] is not appropriate to govern conduct branded as abusive per se.” See Opinion in Joined Cases C-468/06 to C-478/06, Sot. Lélos kai Sia EE and Others v GlaxoSmithKline AEVE Farmakeftikon Proïonton, formerly Glaxowellcome AEVE [2008] ECR I-7139, para. 62. The Court of

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5.2.3

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Advances In Defining Exclusionary Conduct

Overview. Given the uncertain and vague nature of historic definitions of exclusionary behaviour, lawyers and economists have made a number of proposals that seek to offer a unified definition of exclusionary conduct. 94 A first test is based on the notion of profit sacrifice, meaning that exclusionary conduct requires a firm to deliberately forego a more profitable course of action. 95 A closely-related test is the “no economic sense” test, which would treat as exclusionary conduct that would make no economic sense but for its tendency to exclude rivals. 96 A second test is the equally efficient competitor test. 97 This holds that the only conduct that is exclusionary is that which would exclude an equally or more efficient rival. Conduct that excludes less efficient rivals is deemed competition on the merits on the grounds that the competitive process would result in the elimination of such undertakings in any event. The final test suggested is a test based on consumer welfare. Under this test, only conduct that harms consumer welfare, or harms consumer welfare more than it enhances efficiency, is considered exclusionary. 98 This test is expressly rooted in the consumer welfare maximisation objectives of competition law. The main elements of these tests, and the principal criticisms, are outlined below. But the differences between these tests should not be overstated. They all in essence seek to identify situations in which conduct is inefficient and so is anti-consumer and, conversely, to promote efficient conduct that yields consumer benefits over time. 5.2.3.1 The profit sacrifice test and its close relations Elements of the profit sacrifice test. The profit sacrifice test assumes that a firm would not rationally engage in exclusionary conduct unless it considers that any shortterm sacrifice of profits would be less than any expected gains as a result of excluding or discouraging of rival firms if the conduct is successful. The most obvious example Justice did not expressly follow his opinion but nor did it call into question the correctness of his conclusions on this point. But see the discussion of the concept of a “naked restraint” in Section 5.4 infra. 94 For an overview of the main tests, see J Vickers, “Abuse of Market Power,” Speech to the 31st conference of the European Association of Research in Industrial Economics, Berlin, 3 September 2004. See also Organisation for Economic Co-operation and Development, “Competition on the Merits,” Background Note, 9 May 2005. 95 The profit sacrifice test was originally proposed by industrial economists in the early 1980s. See J Ordover and R Willig, “An Economic Definition of Predation: Pricing and Product Innovation” (1981) 91 Yale Law Journal 8. The test was intended to provide an objective, transparent, and economically based framework for assessing exclusionary unilateral behaviour. The economists defined exclusionary behaviour as a “response to a rival that sacrifices part of the profit that could be earned under competitive circumstances were a rival to remain viable, in order to induce exit and gain consequent additional monopoly profits.” Ibid., pp. 9–10. 96 See G Werden, “The ‘No Economic Sense’ Test for Exclusionary Conduct,” paper submitted to the British Institute of International and Comparative Law, 5th Annual Antitrust dialogue, London, 9-10 May 2005. 97 R Posner, Antitrust Law, University of Chicago Press (2001) (2nd edn.), pp. 194–195. 98 See AI Gavil, “Exclusionary Distribution Strategies by Dominant Firms: Striking a Better Balance” (2004) 72 Antitrust Law Journal 3; S Salop, “Section 2 Paradigms and the Flawed ProfitSacrifice Standard” 73 Antitrust L.J. 311-374 (2006); and M Dolmans, “Efficiency Defences Under Article 82 EC Seeking Profits Or Proportionality? The EC 2004 Microsoft Case in Context of Trinko,” 24th Annual Antitrust And Trade Regulation Seminar, NERA, Santa Fe, New Mexico 8 July 2004 (on file with authors).

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concerns predatory pricing. The theory is that a firm would not knowingly sell below cost unless it had a reasonable expectation that short-term losses will be less than additional profits that come in the medium- to long-term from the exclusion of rivals. The issue of recoupment in effect seeks to measure whether profit sacrifice would be rational by assessing whether the longer term gains of below-cost pricing are likely to outweigh its short-term costs. Antitrust case law in the United States has endorsed a profit sacrifice test to some extent, but judicial acceptance of the test has been mixed overall. In American Airlines, 99 the Justice Department (as plaintiff) argued that the appropriate inquiry in a predatory pricing case was whether incrementally-added capacity was money losing, even if the service provided by the incumbent airline as a whole remained profitable on the city pair as a whole. The 10th Circuit held that, even under the standard advanced by the Justice Department, they had failed to demonstrate that the additions of capacity at issue were unprofitable. 100 In Trinko, 101 the Justice Department advocated (as amicus curiae) essentially the same sacrifice test for assessing unilateral refusals to deal. Although the Supreme Court majority opinion did not expressly refer to the sacrifice test, it justified past cases in which a duty to deal was imposed on the basis that the defendant was foregoing a more profitable course of conduct in refusing to deal. For example, in its discussion of Aspen Skiing, the Court attached importance to the fact that the defendant had refused to deal even when the requesting party offered a price equal to the retail price charged by the defendant downstream. It pointed to the defendant’s willingness to forego short-term benefits through “[t]he unilateral termination of a voluntary (and thus presumably profitable) course of dealing,” and its “unwillingness to renew the ticket even if compensated at retail price,” as facts that suggested its “distinctly anticompetitive bent.” 102 As a result, the Justice Department has indicated that it plans to assert the sacrifice standard with renewed confidence following Trinko. Criticisms of the profit sacrifice test. The profit sacrifice test has been criticised in important respects. The first set of criticisms is fundamental in nature. Certain commentators have argued that the test is flawed in two critical respects. 103 First, they argue that a number of types of conduct do not involve profit sacrifice, but have been recognised as exclusionary. For example, filing a false or overbroad patent application may be cheaper than filing a correct and properly-defined one. The same point can be made about other forms of non-price predation (e.g., falsely disparaging a rival), reprisal

United States v AMR Corp, 140 F. Supp. 2d 1141 (D. Kan. 2001), aff’d, 335 F.3d 1109 (10th Cir. 2003). 100 See R Hewitt Pate, “The Common Law Approach and Improving Standards for Analysing Single Firm Conduct,” Fordham International Antitrust Conference, 23 October 2003. 101 Verizon Communications Inc v Law Offices of Curtis V. Trinko LLP, 540 US 398 (2004). 102 See “The Struggle For Standards,” remarks by JB McDonald, Deputy Assistant Attorney General, Antitrust Division, US Department of Justice, presented at American Bar Association Section of Antitrust Law, Spring Meeting, quoting Verizon Communications, Inc v Law Offices of Curtis V. Trinko LLP, 124 S.Ct. 872 (2004) (emphasis in original). 103 See E Elhauge, “Defining Better Monopolisation Standards” (2003) 56 Stanford Law Review 253. 99

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abuses, and anticompetitive forms of raising rivals’ costs. A profit sacrifice test would therefore seem to wrongly exclude such abuses. 104 A second criticism is that a profit sacrifice test could capture a number of forms of highly desirable market activity. For example, in the area of intellectual property or major investments in tangible property, the initial investments would typically be unprofitable but for the prospect of later monopoly returns reaped by (lawfully) excluding competitors. A literal application of the sacrifice test might treat such investments as predatory despite the fact that, in general, they clearly benefit consumer welfare by offering a new or better market option. Of course, it might be argued that common sense would prevail in such circumstances and that the conduct in question would be seen as creating dynamic benefits. But a rule that contains exceptions based on the notion that “we will know them when we see them” is unpromising. Another set of criticisms concerns the ease of application and predictability of the profit sacrifice test in practice. A number of difficulties are said to arise. 105 First, there is the problem of determining the sacrifice: a sacrifice relative to what? It is not clear, for example, whether the profit sacrifice requires a firm to opt for the most profitable course of action to avoid a finding of exclusionary conduct or whether it should be required to have passed on a more profitable alternative. It is also not clear what degree of sacrifice would be sufficient to establish exclusionary conduct or whether the rule is a strict one, i.e., is any profit sacrifice automatically abusive? Second, many abuse of dominance cases do not involve extending a monopoly and increasing profits, but actions designed to maintain a monopoly. For example, a reprisal abuse may be carried out simply to make clear to rivals and customers that aggressive competition, or actions by customers to support rival firms, or complaints to competition authorities will meet with an immediate response by the dominant firm. In such cases there may be no additional profits resulting from the dominant firm’s conduct, but it may serve to insulate an existing dominant position from future erosion. This also exposes a related problem: that the dominant firm’s current prices may already be above the competitive level, with the result that the absence of higher prices as a result of the exclusionary conduct could falsely show an absence of exclusionary effect on the grounds that no sacrifice occurred, i.e., a variant of the “cellophane fallacy,” discussed in Chapter Three (Market Definition). Finally, although one of the main benefits of the profit sacrifice standard is said to be its objectivity, 106 it is argued that the test would in practice be highly subjective and speculative. In its most basic form, the profit sacrifice test asks a court to assess the dominant firm’s likely conduct in the hypothetical absence of an ability to raise prices. This is hypothetical, speculative, and uncertain. Different outcomes could be imagined on the basis of the same set of facts.

104 See Brief for the United States and Federal Trade Commission as Amici Curiae Supporting Petitioner, Verizon Communications, Inc v Law Office of Curtis V. Trinko LLP, No. 02-682 (docketed US Sup. Ct. 13 Dec. 2002). 105 See S Salop, “Section 2 Paradigms and the Flawed Profit-Sacrifice Standard” 73 Antitrust L.J. 311-374 (2006). 106 See, e.g., M Patterson, “The Sacrifice of Profits in Non-Price Predation” (2003) 18 Antitrust 37.

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The no economic sense test as a variant of profit sacrifice. Criticism of the profit sacrifice test has led the US Department of Justice to argue for a variant of the test: the “no economic sense” test. The Justice Department has argued in antitrust cases that it is relevant to ask whether the conduct would make economic sense for the defendant but for its tendency to eliminate or lessen competition. It argues that conduct is not exclusionary or predatory if it would not make economic sense for the defendant but for its tendency to eliminate or lessen competition. 107 The Justice Department contends that this type of “sacrifice” is more accurate for exclusionary abuses than profit sacrifice, since it entails a choice between a business strategy that would make no business sense but for the probability that the conduct would create or maintain monopoly power. 108 The no economic sense test addresses some of the criticisms of the profit sacrifice test. In particular, it does not characterise as unlawful every departure from short-run profit maximisation. This would permit investments that confer long-term benefit by allowing a firm to retain exclusive control over its inventions, something which could in theory be regarded as suspect under the profit sacrifice standard. But it is clear in some instances, particularly those involving network effects, that the elimination of competition, and the survival of a single competitor, is beneficial. Investments in network effects of this kind would only make economic sense if rivals are eliminated. It is not clear how such cases would be treated under the no economic sense test, but they could in theory result in a finding of exclusionary conduct. A further problem is that the no economic sense test involves an assessment of the range of options that were open to the company at the time it embarked on a particular course of conduct. In most cases, the best evidence of a company’s options will be its business plans. Assessing whether a course of conduct made sense only if competitors were eliminated on the basis of such plans is extremely difficult in practice. For example, assume that a firm enters a new market in which initial capital costs are very high and it needs to acquire scale and scope economies and learning experience to reduce costs and enter into profitability, i.e., the firm needs to acquire customer volume. There is no effective way in this scenario of distinguishing between volume growth that is justified in itself and volume growth that is predicated, in whole or in part, on the elimination of a rival. It may be that, in this instance, the firm would pass the no economic sense test on the basis that there was a reasonably-anticipated non-exclusionary reason for its strategy (even if that turned out to be wrong). But this is not obvious and, even if it were, it runs the risk of being under-inclusive by allowing exclusionary conduct in the vital early stages of a new market to go unchecked. Of course, these types of cases are difficult under any test, but the point is that the no economic sense test does not appear to have any unique advantages over the profit sacrifice test, or other tests, in this regard. Conclusion. Both the profit sacrifice and no economic sense tests are useful in that they seek to move the debate on abusive conduct away from a subjective assessment of what is competition on the merits towards a more objective measure of whether conduct is profit maximising or economically rational. But the criticisms of both tests are not Brief for the United States and Federal Trade Commission as Amici Curiae Supporting Petitioner, Verizon Communications, Inc v Law Office of Curtis V. Trinko LLP, No. 02-682 (docketed US Sup. Ct. Dec. 13, 2002). 108 Ibid. 107

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trivial. In particular, it is not even clear whether the sacrifice test is a single unified substantive standard for assessing all exclusionary conduct or simply a more objective measure of the defendant’s intent, or the likely effects of a practice. As one commentator notes, “while the sacrifice test might be useful in assessing wilfulness or intent, it does not naturally yield a substantive standard of what behaviour is exclusionary. There is no escape from the fundamental question of what is [exclusionary].” 109 In other words, the sacrifice test may, at best, constitute a useful characterisation of certain types of abuses—in particular pricing abuses—but it is not, in itself, capable of identifying exclusionary conduct and clearly distinguishing it from legitimate conduct. 5.2.3.2 Equally efficient competitor test Elements of the equally efficient competitor test. Exclusionary conduct has also been defined as conduct that would exclude an equally efficient rival firm. This definition was originally proposed by Richard Posner in his seminal book, Antitrust Law. He offers the following definition of exclusionary conduct: 110 “[T]he plaintiff must first prove that the defendant has monopoly power and second that the challenged practice is likely in the circumstances to exclude from the defendant's market an equally or more efficient competitor. The defendant can rebut by proving that although it is a monopolist and the challenged practice exclusionary, the practice is, on balance, efficient…[P]ractices that will only exclude less efficient firms, such as a monopolist’s dropping his price nearer to (but not below) its costs, are not actionable, because we want to encourage efficiency. Only when monopoly power is used to discourage equally or more efficient firms and thus perpetuate a monopoly not supported by superior efficiency should the law step in. Even then, it should be alert to the possibility that the exclusionary effect of the monopolist’s practice is offset by efficiency gains.”

Criticisms of the equally efficient competitor test. A number of criticisms can be made of the equally efficient competitor test. First, less efficient competitors can, in theory, enhance consumer welfare when the increased competition they bring in the market benefits consumers more than the cost of their relative inefficiency. 111 For this reason, the duties imposed on dominant firms under Article 102 TFEU are not limited to equally efficient competitors, but, exceptionally, may include duties towards less efficient firms. Under the CEWAL line of case law, unconditional price cuts that remain above the dominant firm’s average total costs may be abusive in certain circumstances. Chapter Six (Predatory Pricing) criticises rules seeking to place restrictions on unconditional above-cost price cuts, mainly on the grounds that they are in practice likely to chill desirable competition. It also appears from the Guidance Paper that the Commission would not generally be interested in investigating unconditional price cuts above average total cost or some similar measure of total cost. But the case law clearly suggests that less efficient firms can confer a net benefit on consumer welfare and that

109 See J Vickers, “Abuse of Market Power,” Speech to the 31st conference of the European Association of Research in Industrial Economics, Berlin, 3 September 2004. 110 R Posner, Antitrust Law, University of Chicago Press (2001) (2nd edn.), pp. 194–96. 111 See, e.g., M Armstrong and J Vickers, “Price Discrimination, Competition and Regulation” (1993) 41(4) Journal of Industrial Economics 334. See also A Edlin, “Stopping Above-Cost Predatory Pricing” (2002) 111 Yale Law Journal 941.

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abuses may, exceptionally, be found on this basis. This suggests that the “equally efficient rival” test could not be unreservedly accepted under Article 102 TFEU. A second problem concerns the definition of equal efficiency where the dominant firm has a first mover or some other cost advantage over new entrants or rivals have not yet reached their minimum efficient scale. For example, in the area of conditional abovecost pricing schemes (e.g., loyalty rebates), discussed in Chapter Nine, much of current uncertainty in the law stems from how to treat economies of scale for purposes of defining an “equally efficient firm.” The objection in such cases is usually that the dominant firm’s large volume of sales gives it a scale or scope advantage over rivals and that, by extending this advantage to marginal units and customers, the dominant firm can, in certain instances, offer prices at the margin that a rival only competing for the marginal units cannot match (including in some cases even if it gave away the units for free). The Commission has responded to this concern by proposing a test that, in effect, seeks to remove certain of the advantages of scale or scope that the dominant firm may possess. The basic idea is that the dominant firm may be an unavoidable trading partner for a large proportion of customers’ requirements—which the Commission terms “noncontestable”—and rivals therefore only compete for the “contestable” portion of the market. 112 Grossly oversimplified, the new test seeks to estimate what price a competitor would have to offer in order to compensate the customer for the loss of the conditional rebate if the customer would divert part of its demand away from the dominant firm. The Commission then proposes to apply a price/cost test based on the estimated effective price over the relevant range compared to the average price of the dominant firm (with the rebate included). If the effective price remains above the longrun average incremental cost (LRAIC) of the dominant firm, foreclosure concerns do not normally arise. Where the effective price is below the dominant firm’s average avoidable cost (AAC), the rebate scheme will generally be “capable” of anticompetitive foreclosure. 113 This, plainly, is not a test based on equal efficiency. Or, more precisely, it seeks to put to one side the advantages that the dominant firm derives if it is an unavoidable trading partner for a proportion of customer demand. In crude terms, it focuses on equal efficiency only for the contestable portion of the market, which is a regulatory-type approach. Third, for certain types of abuses, the concept of equal efficiency is of limited use. For example, in the case of false declarations by a dominant firm to regulatory approval agencies, or concealment of essential patents within the context of standard setting organisations, rivals’ relative efficiency will be of little relevance if the action in question materially limits their access to the market. Of course, a less efficient firm is, all things equal, likely to be more adversely affected by conduct of this kind by a dominant firm than an equally efficient one, but this issue goes more to the effects of the practice rather than the definition of operational rules as to when certain conduct is abusive or not. The point is that one does not need market power to engage in misrepresentations and, if the gravamen is the misrepresentation, the concept of equal efficiency does not even come into it. 112 113

Guidance Paper, para. 39. Ibid., paras. 41-44.

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Finally, the equally efficient competitor test may require complex balancing exercises in some cases where the conduct would harm an equally efficient firm, but generates efficiencies sufficient to offset this harm. Of course, efficiencies, if asserted, would also need to be assessed under any other test for exclusionary abuses. But the point is that the outcome of the equally efficient competitor test may not always be predictable by a firm at the time when it embarks on a particular course of action. 114 Conclusion. The equally efficient competitor certainly captures an important insight under competition law: that less efficient firms should not, in general, receive any protection from aggressive competition, since consumers are best served by more efficient firms. To hold otherwise risks protecting competitors, not competition. But a number of valid criticisms can be made of this general statement. First, at least on a theoretical level, consumers can benefit from the presence of less efficient firms on the market (though the practical effect of rules protecting less efficient firms may lead to net harm). Second, a definitional issue arises where the dominant firm has a first mover advantage or significant scale of scope advantages over rivals. Finally, equal efficiency is of limited relevance where the activity in question concerns non-market conduct, such as abusing regulatory approval processes. However, a good case can be made for saying that conduct harming an equally efficient firm should be presumed abusive, absent compelling efficiencies. The equally efficient competitor test therefore offers perhaps the most promising general economic test for exclusionary conduct, certainly for exclusionary price-based abuses. 5.2.3.3 Consumer welfare test Elements of the consumer welfare test. The final test seeks to shift the focus away from the economic motivation for the alleged exclusionary conduct, and the relative efficiency of competitors, towards an assessment of whether the dominant firm’s practices had, or are likely to have, a material adverse effect on consumer welfare. 115 Under this test, exclusionary conduct violates Article 102 TFEU if “it reduces competition without creating a sufficient improvement in performance to fully offset

114 Another efficiency-based test, proposed by Professor Elhauge, focuses on whether the alleged exclusionary conduct increases the firm’s dominance because it enhances its own efficiency or only because it limits rivals’ production. He states as follows: “The proper monopolisation standard should instead focus on whether the alleged exclusionary conduct succeeds in furthering monopoly power (1) only if the monopolist has improved its own efficiency or (2) by impairing rival efficiency whether or not it enhances monopolist efficiency…which would permit the former conduct and prohibit the latter.” See E Elhauge, “Defining Better Monopolisation Standards” (2003) 56 Stanford Law Review 253. The test has received endorsement from the OECD: see Organisation for Economic Cooperation and Development, “Competition on the Merits,” Background Note, 9 May 2005, para. 65. A further variant is a combination of an equally efficient competitor test with a second limb based on the proportionality of the conduct at issue (assuming it pursues some legitimate efficiency-enhancing objective). See E Rousseva, Rethinking Exclusionary Abuses in EU Competition Law, Hart Publishing (2010), pp.456 et seq. 115 See A Gavil, “Exclusionary Distribution Strategies by Dominant Firms: Striking a Better Balance” (2004) 72 Antitrust Law Journal 3; S Salop, “Section 2 Paradigms and the Flawed ProfitSacrifice Standard” 73 Antitrust L.J. 311-374 (2006); and M Dolmans, “Efficiency Defences Under Article 82 EC: Seeking Profits Or Proportionality? The EC 2004 Microsoft Case in Context of Trinko,” 24th Annual Antitrust and Trade Regulation Seminar, NERA, Santa Fe, New Mexico 8 July 2004 (on file with authors).

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these potential adverse effects on prices and thereby prevent consumer harm.” 116 In other words, only conduct that produces anticompetitive effects overall would be regarded as exclusionary. An analysis of whether the conduct causes net harm to consumer welfare would take account of all available information relevant to the likely effects of conduct on consumers. The most relevant evidence is output and prices, but quality and innovation may also play a role. There is some divergence among proponents of the consumer welfare test on whether efficiencies should be assessed on the basis of whether they simply outweigh any inefficiencies, 117 should be subject to a more detailed proportionality inquiry. 118 The latter has two elements. First, it would need to be shown that any harm caused by the dominant firm’s conduct is necessary to achieve the overall efficiencies. Second, it would need to be assessed whether the harm caused to competition is disproportionate when compared to any benefits that it brings. The consumer welfare test certainly has some pedigree in the case law in the EU and elsewhere, as well as in the wording of Article 102(b) which uses the phrase “prejudice to consumers.” 119 In the various Microsoft proceedings, the United States Court of Appeals and the Commission essentially applied a consumer harm standard to the various practices alleged. 120 The United States Court of Appeals elaborated a multistage analysis of the various alleged exclusionary practices. First, the plaintiff has to show that consumers would be harmed. Second, if such harm is shown, the defendant may offer a procompetitive justification for its conduct. Third, the procompetitive justification can be rebutted by the plaintiff or its positive impact on consumers shown to be outweighed by its negative effects on consumers. 121 On the facts, the Court performed little actual balancing, since it was clear, on the evidence, that most of Microsoft’s conduct was overwhelmingly anticompetitive or procompetitive. For example, regarding the claim that Microsoft had deceived Java developers about the Windows-specific nature of the tools, the Court noted that no efficiency justification had been advanced by Microsoft. A balancing exercise was also considered by the Commission in Microsoft. The Commission found that, in relation to the tying of Windows Media Player (WMP) with Windows operating system (OS), Microsoft had “not submitted adequate evidence to the effect that tying WMP is objectively justified by procompetitive effects which would outweigh the distortion of competition caused by it…what Microsoft presents as the benefits of tying could be achieved in the absence of Microsoft tying WMP with Windows.” 122 In particular, the Commission found that: (1) ease of use could be achieved without tying (OEMs could do the bundling at no cost to Microsoft); 123 (2) distribution efficiencies were minor and did not outweigh distortion of

116 See S Salop, “Section 2 Paradigms and the Flawed Profit-Sacrifice Standard” 73 Antitrust L.J. 311-374 (2006). 117 See AP Gavil, “Exclusionary Distribution Strategies by Dominant Firms: Striking a Better Balance” (2004) 72 Antitrust Law Journal 3. 118 See PE Areeda and H Hovenkamp, Antitrust Law, Aspen Publishers (2002) (2nd edn.), para. 651a. 119 See Case C-209/10, Post Danmark A/S v Konkurrencerådet, EU:C:2012:172, para. 20. 120 See United States v Microsoft, 253 F.3d 34, 59 (D.C. Cir. 2001); and Microsoft, OJ 2007 L 32/23. 121 Ibid. 122 Microsoft, OJ 2007 L 32/23, para. 970. 123 Ibid., para. 970.

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competition; 124 (3) there was no evidence of technically superior performance due to code integration of WMP with the OS; 125 and (4) platform efficiency (i.e., desire to keep applications focused on Microsoft interfaces) was not a recognised efficiency. 126 The consumer welfare test, if universally accepted, would unify the principles concerning mergers and other agreements with those under Article 102 TFEU. Cooperative agreements between firms that restrict competition are subject to an express balancing act under Article 101(3), including an assessment whether the anticompetitive effects are necessary and proportionate to achieve the alleged efficiencies. The Commission’s Guidelines on Article 101 TFEU provide that “restrictive effects on competition within the relevant market are likely to occur where it can be expected with a reasonable degree of probability that, due to the agreement, the parties would be able to profitably raise prices or reduce output, product quality, product variety or innovation.” 127 Similarly, efficiencies under EU merger control are subject to the conditions that they: (1) benefit consumers; (2) result from the merger; and (3) are verifiable. A sliding scale is also applied, i.e., mergers with the greatest scope for causing consumer harm also require the most compelling evidence of counterbalancing efficiencies. 128 Criticism of the consumer welfare test. The consumer welfare test presents a number of difficulties. The most obvious difficulty under Article 102 TFEU is that the decisional practice and case law do not require, as a necessary element, a demonstration of a direct impact on consumer welfare. 129 A distinction should be made between exclusionary abuses and other forms of abuse. For example, for exploitative abuses, there is a line of decisional practice and case law, discussed in Chapter Sixteen, which treats unfair and disproportionate contractual clauses as abusive under Article 102 TFEU. This appears predicated on some notion of imbalance of inter partes bargaining power, or an equally nebulous notion of the dominant firm’s taking advantage of its market power, rather than a material impact on consumer welfare. Even for discrimination abuses, it is not clear that harm to consumers is an essential requirement, although, as discussed in Chapter Fifteen, it plainly should be. Even for exclusionary abuses, the EU Courts have consistently accepted that harm to the “structure of competition” may be a sufficient, and that a separate demonstration of (direct) harm to consumers is not required. It may be argued that harm to the structure of competition, if it is serious enough and lasting, is a reasonable proxy for harm to consumers, but, as discussed in Section 5.4 below, the position in relation to anticompetitive effects under Article 102 TFEU is not exactly a model of clarity or consistency.

Ibid., paras. 956ff. Ibid., para. 958. 126 Ibid., para. 962. 127 See Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, OJ 2011 C 11/01, para. 28. 128 See Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings, OJ 2004 C 31/5, paras. 80–86. 129 See generally L Lovdahl Gormsen, A Principled Approach to Abuse of Dominance in European Competition Law, Cambridge University Press (2010) (arguing that the EU Courts have not always favoured consumer welfare at the expense of economic freedom). 124 125

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The second principal issue is that while balancing procompetitive and anticompetitive effects may be appropriate when firms choose to make an agreement—in particular when, as under merger control rules, that agreement is subject to mandatory prior approval—judging unilateral conduct in the same way is precarious and might lead to haphazard outcomes. In particular, a firm embarking on a course of conduct ex ante may be unsure as to where the balance between procompetitive and anticompetitive aspects lies and when such effects will materialise. Much would depend on the effect of a practice on the dominant firm’s rivals, which the dominant firm cannot generally be expected to know. Moreover, what a firm expects ex ante may turn out to be different to what occurs ex post. These problems are most likely to be acute in markets in which technology evolves rapidly and new entry is a strong feature, since actual market outcomes may differ materially from many firms’ expectations. Finally, as discussed in Section 5.5 below, the conditions for a dominant firm’s efficiency (or other objective justification) defence under Article 102 TFEU also have an inherent design problem in that they are operationally unlikely to lead to defences being accepted in most cases. The reality is that efficiency defences have rarely if ever succeeded under Article 102 TFEU, which is a powerful practical argument against the adoption of a pure consumer welfare test. Proponents of the consumer harm test have responded to these criticisms with several clarifications. First, they argue that any balancing would not turn courts and competition authorities into central planners, i.e., comparing the harm to consumer welfare with the benefits to producer welfare. Second, they say that courts and competition authorities would not be required to apply sophisticated quantitative techniques to measure the probability and weight of certain effects. Instead, they would apply a preponderance of evidence approach to determine whether the benefits and harm are each proven by the evidence and, if so, to compare which is greater. Third, proponents argue that firms would not be judged ex post, but based on the types of effects that were reasonably foreseeable ex ante, even if they turned out to be wrong. Finally, issues of uncertainty are said to be exaggerated. Most cases, they say, can be resolved at an early stage without the need for complex balancing exercises, either because there is no material harm to consumers or because it is clear that the conduct in question is overwhelmingly harmful or beneficial. But, even with these clarifications, it is clear that the consumer harm test could present significant complexities in many cases and that it would not be easy for a dominant firm to apply such a test ex ante. Conclusion. The consumer harm test undoubtedly asks the correct theoretical question for assessing unilateral conduct: does it cause net harm to consumers? This test has a clear basis under Article 102(b), which mentions conduct that “limits production” to the “prejudice of consumers.” It also has some pedigree in the decisional practice and case law under Article 102 TFEU and is consistent with the overall assessment of anticompetitive effects under Article 101 TFEU and the substantive analysis under EU merger control. But whether all unilateral conduct should be subject to such an overarching inquiry is questionable. What unilateral conduct a firm can engage in without violating the law should be subject to clear rules in all but unusual cases, without the need to balance exclusionary effects against procompetitive aspects. Although proponents of the consumer harm test have made its operational features as useful as possible, complex and precarious balancing acts are still likely to be necessary

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in marginal cases where the cost of error is likely to be high. Moreover, if issues of proportionality come into play, economics contributes very little by way of predictability and the outcomes will represent matters of policy rather than precision. Of course it might be argued that much the same exercise is sometimes conducted under Article 101 TFEU and EU merger control. But cases involving agreements are different in the sense that the firms can always choose not to make an agreement, or to make a different agreement, or amend some aspect of it to comply with objections under competition law. The firms are also more likely to have detailed knowledge of the effect of an agreement on their output and to be able to quantify the synergies created by cooperation. The same cannot generally be said of most unilateral conduct. 5.2.3.4 Acceptance of the above tests under Article 102 TFEU Equally-efficient competitor test currently in the ascendancy. Whilst there is a certain degree of overlap in the above three tests, 130 it is clear from recent case law and major policy statements that the equally-efficient competitor test is currently in the ascendancy under Article 102 TFEU, at least for exclusionary abuses. 131 In particular, following the Grand Chamber judgment of the Court of Justice in Intel, there is clear endorsement both of: (1) a general point that competition, and consumers, are generally best served by permitting unilateral conduct that excludes less efficient rivals; and (2) a more specific point concerning the importance of an as-efficient competitor price/cost test as an indicator of lawfulness in the case of exclusionary pricing abuses. 132 But this acceptance is not unqualified, and has a chequered history that renders its overall status not entirely free from doubt. A number of points bear emphasis. First, almost 30 years ago, the Court of Justice elaborated the AKZO predatory pricing rules, which are grounded in the economic insight that a profit-maximising dominant firm should be allowed to price down to the level of its average variable costs. 133 This applies even if the dominant firm’s costs are lower than those of rivals, on the basis that consumers are generally best served by the most efficient firms, i.e., those with the lowest costs. 134 The same basic test was applied For example, if a dominant firm applies an unconditional price cut that remains above the relevant measure of its costs, such pricing is, in general, likely to pass all three tests suggested above. There would be no profit sacrifice, since the price would cover the product’s relevant costs. For the same reason, if it is profitable, the price could not be said to make no economic sense. It would also obviously pass the equally-efficient competitor test and it is likely, in general, to pass the consumer welfare test, since consumers are generally best served by prices that are closest to the lowest level of efficient costs. 131 But see also, in the context of discrimination abuses, Case C-525/16 MEO-Serviços De Comunicações E Multimédia EU:C:2018:270, para. 31, discussed further below. 132 See Case C-413/14 P Intel v Commission, EU:C:2017:632, and in particular paras. 133, 134, 136, 139, 140. For commentary, see P Ibáñez Colomo, “The Future of Article 102 TFEU After Intel,” Journal of European Competition Law and Practice (2018) Vol.9 No. 5 pp.293-303; N Petit, “Analysis and Reflections Intel and the Rule of Reason in Abuse of Dominance Cases,” European Law Review (2018) Vol. 43, No. 5 pp.728- 750; and JS Venit, “The Judgment Of The European Court Of Justice In Intel v Commission: A Procedural Answer To A Substantive Question?,” European Competition Journal (2017) pp.172-198. 133 Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3359. 134 See also Opinion of Advocate General Jacobs in Case C-7/97, Oscar Bronner GmbH & Co KG v Mediaprint Zeitungsund Zeitschriftenverlag GmbH & Co KG, Mediaprint Zeitungsvertriebsgesellschaft mbH & Co KG and Mediaprint Anzeigengesellschaft mbH & Co KG 130

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to margin squeeze abuses, save that they had the added complication that the prices fell to be assessed in the context of partial vertical integration by the dominant firm. 135 Second, the use of a type of as-efficient competitor test for predatory pricing and margin squeeze under Article 102 TFEU remained an outlier for many years. Not only did the Commission and EU Courts in practice not apply the as-efficient competitor test outside of these two related areas, but they deprecated its use in other contexts. Most notably, in both Tomra and Post Danmark II the Court of Justice held, in the context of conditional rebate practices, that: (1) the invoicing of negative prices, that is to say, prices below cost prices, to customers is not a prerequisite of a finding an abuse; (2) there is no legal obligation under Article 102 TFEU requiring a finding to the effect that a rebate scheme operated by a dominant undertaking is abusive to be based always on the as-efficient-competitor test; and (3) the as-efficient-competitor test is simply one tool amongst others for the purposes of assessing whether there is an abuse of a dominant position in the context of a rebate scheme. 136 In the same cases, the Court of Justice contrasted its position in this regard with its case law on unconditional price cuts under predatory pricing and margin squeeze, thus giving the impression that there was a deliberate distinction in the use of an as-efficient competitor test between the cases of conditional and unconditional price cuts. 137 Third, the Commission itself has been somewhat schizophrenic in how it views the asefficient competitor test outside the areas of predatory pricing and margin squeeze. In its 2008 Guidance Paper, the Commission stated that, in relation to price-based exclusionary conduct, it “will normally only intervene where the conduct concerned has already been or is capable of hampering competition from competitors which are considered to be as efficient as the dominant undertaking.” 138 It then elaborated various price-cost tests before setting out the following: 139 “If the data clearly suggest that an equally efficient competitor can compete effectively with the pricing conduct of the dominant undertaking, the Commission will, in principle, infer that the dominant undertaking's pricing conduct is not likely to have an adverse impact on effective competition, and thus on consumers, and will therefore be unlikely to intervene. If, on the contrary, the data suggest that the price charged by the dominant undertaking has the potential to foreclose equally efficient competitors, then the Commission will integrate this in

[1998] ECR I-7791, para. 58 (“the primary purpose of Article [102] is to prevent distortion of competition—and in particular to safeguard the interests of consumers—rather than to protect the position of particular competitors.”). 135 See, e.g., Case T-271/03, Deutsche Telekom AG v Commission [2008] ECR II-447 and more recently Case C-52/09 TeliaSonera Sverige, EU:C:2011:83, paras. 40-46. 136 See Case C-549/10 P Tomra Systems and Others v Commission, EU:C:2012:221, paras 73 and 80, approved in Case C-23/14, Post Danmark A/S v Konkurrencerådet EU:C:2015:651, paras. 56, 57, 61. 137 Case C-23/14, Post Danmark A/S v Konkurrencerådet EU:C:2015:651, para. 55. 138 Guidance Paper, para. 23. The Commission added a caveat: “the Commission recognises that in certain circumstances a less efficient competitor may also exert a constraint which should be taken into account when considering whether particular price-based conduct leads to anti-competitive foreclosure. The Commission will take a dynamic view of that constraint, given that in the absence of an abusive practice such a competitor may benefit from demand-related advantages, such as network and learning effects, which will tend to enhance its efficiency.” (para. 24) 139 Ibid., para. 27.

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the general assessment of anti-competitive foreclosure…, taking into account other relevant quantitative and/or qualitative evidence.”

On this basis, it seemed that the as-efficient competitor test would take centre stage in the assessment of exclusionary pricing abuses. The problem, however, was that, in practice, neither the Commission nor the EU Courts seemed willing to make the as-efficient competitor test the centre piece of the analysis of exclusionary abuses. In Tomra, the EU Courts considered the Guidance Paper to be of no relevance since it post-dated the Commission’s decision in that case. 140 More worryingly, in Intel, the Commission appeared to regard the test for rebates set out in the Guidance Paper, and many of the Guidance Paper’s statements on anticompetitive effects, as non-essential parts of the analysis. According to the Commission, the Guidance Paper is a statement of enforcement priorities rather than a normative basis on which anticompetitive foreclosure concerns could be excluded. 141 The most that the Commission was prepared to say was that its decision “was in line with the orientations set out in the Guidance Paper.” 142 The General Court essentially accepted the Commission’s view of the Guidance Paper in the appeal, stating that the reference to the Guidance Paper “is clearly a point that the Commission raised for the sake of completeness, having explained that the Article [102] Guidance was not applicable in the present case.” 143 There was also a lack of consistency in Court of Justice judgments. In Post Danmark I, 144 the Court of Justice stated that, to the extent that a dominant firm sets its prices at a level that covers its costs, it will, as a general rule, be possible for a competitor as efficient as that undertaking to compete with those prices without suffering losses that are unsustainable in the long term. 145 But, only two weeks after Post Danmark I, the Court of Justice judgment in Tomra rejected the relevance of a price/cost test in the context of rebates, 146 and, further, upheld an approach based largely on formalistic reasoning. 147 To confuse matters even further, the Court of Justice in Post Danmark II held that, in the context of conditional rebate practices, pricing below cost is not a prerequisite of a finding an abuse, albeit it might be one tool “amongst others.” 148 Thus, even between the two Post Danmark judgments, there appeared to be inconsistency. Fourth, the Court of Justice judgment in Intel offers the strongest and clearest indication yet that, at least in the context of exclusionary abuses, the as-efficient competitor test is central to the definition of abusive conduct and anticompetitive effects. The judgment divides into three main parts of interest for present purposes. The first part recalls a Case C-549/10 P Tomra Systems and Others v Commission, EU:C:2012:221, para. 73. See also Opinion of Advocate General Kokott in Case C-109/10 P, Solvay SA v Commission [2011] ECR I-256, para. 20. 141 Intel, Commission Decision of 13 May 2009, para. 916. 142 Ibid. 143 Case T-286/09, Intel Corp. v Commission EU:T:2014:547, para. 158. 144 Case C-209/10, Post Danmark A/S v Konkurrencerådet EU:C:2012:172. 145 Ibid., para. 38. 146 Case C-549/10 P Tomra Systems and Others v Commission, EU:C:2012:221, paras. 67, 73. 147 Ibid., para. 75. 148 Case C-23/14, Post Danmark A/S v Konkurrencerådet EU:C:2015:651, paras. 56, 57, 61. 140

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number of general principles governing exclusionary conduct under Article 102 TFEU, including, notably, that “competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation.” 149 Second, the Court held that, where the dominant firm 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, the Commission “is not only 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, it is also required to assess the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant undertaking from the market.” 150 Finally, the Court held that since, in the decision at issue, the as-efficient competitor test played an “important” role in the Commission’s assessment of whether the rebate scheme at issue was capable of having foreclosure effects on as efficient competitors, the General Court was required to examine all of Intel’s arguments concerning that test, which it did not. 151 The judgment thus makes a general point and a specific one. The general point—which is of interest for this chapter—is that the as-efficient competitor test is now clearly an important part of the definition of an exclusionary abuse under Article 102 TFEU, as well as something akin to a litmus test for distinguishing the desirable effects of hard, but fair, competition from anticompetitive effects. The narrower point—which is discussed in detail in Chapter Nine (Loyalty Rebates And Related Practices)—is that, in practice, the Commission will be obliged to consider the as-efficient competitor test in rebate cases (both exclusivity rebates and loyalty rebates) and probably also exclusivity cases, 152 since defendants will now routinely submit evidence that, they say, is prima facie exculpatory, and which the Court of Justice judgment in Intel obliges the Commission to then consider. Thus, whilst the Court of Justice expressed the need to consider the as-efficient competitor test in the context of exclusivity rebates in Intel as a procedural obligation on the part of the public competition authority to consider evidence emanating from the defendant tending to show no abuse, the practical effect of the judgment will be to create a de facto substantive rule to this effect. Indeed, there are already signs that the Court of Justice itself is expanding the use of the as-efficient competitor test into other aspects of Article 102 TFEU, and not only the narrow issue of exclusivity rebates which arose in Intel or, indeed, exclusionary abuses. 153

Case C-413/14 P Intel v Commission, EU:C:2017:632, para. 134. Ibid., paras. 137-139. 151 Ibid., paras. 142-146. 152 See Ch. Eight (Exclusive Dealing And Related Practices). 153 For example, in MEO, the Court of Justice held, in the context of potentially abusive discrimination under Article 102(c), that the competition authority or competent national court should consider the undertaking’s dominant position, the negotiating power as regards the tariffs, the conditions and arrangements for charging those tariffs, their duration and their amount, and the possible existence of a strategy aiming to exclude from the downstream market one of its trade partners “which is at least as efficient as its competitors.” See Case C-525/16 MEO-Serviços De Comunicações E Multimédia EU:C:2018:270, para. 31. 149 150

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Acceptance of equally-efficient competitor test not unqualified. Notwithstanding the overall importance of the Court of Justice judgment in Intel, the as-efficient competitor test cannot yet be said to have some sort of erga omnes status under Article 102 TFEU, for several reasons. First, the Court of Justice has not formally overruled its own case law in Post Danmark II suggesting that the as-efficient competitor test is not a legal requirement in certain cases. It is, however, striking that the Intel judgment refers only to Post Danmark I, and not the later judgment in Post Danmark II. Since the Court of Justice rarely if ever expressly overrules its own judgments, this may be an implicit but clear indication that Post Danmark II has somewhat fallen out of favour. That said, the practical difference between the Court of Justice’s conclusions in Intel and Post Danmark II may not be that great: in Intel, the as-efficient competitor test was not treated as an express substantive requirement in all cases and Post Danmark II also accepted that the as-efficient competitor test is at least a tool to assess abuse. 154 Second, in the context of unconditional price cuts, the case law has also suggested that selectively low prices could be abusive even if they are above average total cost within the meaning of AKZO. 155 But, as discussed in Chapter Six (Predatory Pricing), special circumstances applied in those cases. Similarly, for margin squeeze abuses, the Court of Justice has held that there may be an abuse even if the margin remains positive, if it can be demonstrated that the application of the pricing practice was, by reason, for example, of reduced profitability, likely to have the consequence that it would be at least more difficult for the operators concerned to trade on the market concerned. 156 Third, it may be that, even in an exclusionary pricing abuse case, the as-efficient competitor test is inappropriate for specific reasons. In Royal Mail the Competition Appeal Tribunal held that the as-efficient competitor test did not assist in that case because: (1) of issues to do with the scale of entry (the dominant firm was active nationally whereas the competitor could only realistically compete in a particular geographic area); and (2) the dominant firm was subject to a universal service obligation, which entailed unique advantages and disadvantages for the dominant firm that were not easily “mapped” onto to the situation of the new entrant. 157 There was also a suggestion that the dominant firm’s access pricing was adopted for the specific purpose of preventing the new entrant from gaining traction, and that the publication of the pricing schedule led the new entrant’s investors to reduce their funding. Finally, the as-efficient competitor test has obvious limitations for certain forms of nonprice conduct. For example, if a dominant firm deceives public bodies into taking measures in its favour that maintain or strengthen its market position, it is difficult to

Case C-23/14, Post Danmark A/S v Konkurrencerådet EU:C:2015:651, para. 61. See, e.g., Cewal, Cowac and Ukwal, OJ 1993 L 34/20, upheld on appeal in Joined Cases T-24/93, T-25/93, T-26/93, and T-28/93, Compagnie Maritime Belge Transports SA and Others v Commission [1996] ECR II-1201 and in Joined Cases C-395/96 P and C-396/96 P, Compagnie Maritime Belge Transports SA and Others v Commission [2000] ECR I-1365 156 See Case C-52/09 TeliaSonera Sverige, EU:C:2011:83, para. 74. This conclusion is controversial. See further Ch. 7 (Margin Squeeze). 157 See Royal Mail plc v Office of Communications [2019] CAT 27, paras. 532 et seq. The case has been appealed. 154 155

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see how the as-efficient competitor test logically assists. In AstraZeneca 158 and Rambus, 159 concerns arose about allegedly misleading representations made by a dominant firm to national patent offices and standards bodies, respectively. Similarly, the concept of a “naked restraint,” discussed in Section 5.4.2 below, remains before the EU Courts in Intel, where the Commission’s case is that certain conduct, such as banning a customer from even testing a rival product, is an automatic abuse. A similar point can be made about the Commission’s Baltic Rail decision, where the dominant firm dismantled a nineteen kilometre section of track connecting Lithuania and Latvia to stymie a competitor. 160

5.3

THE CATEGORIES OF ABUSE UNDER ARTICLE 102 TFEU

Overview. There is no exhaustive statutory definition of “abuse” in Article 102 TFEU. Instead, it merely lists four categories of abusive conduct, which the Commission and EU Courts have elaborated upon in several cases. The four clauses of Article 102 TFEU can broadly be classified as exploitative, exclusionary, or reprisal abuses. But some abuses, such as discrimination or tying, can be exploitative or exclusionary, or both at the same time. Indeed, some commentators argue that, ultimately, the only conduct that is truly abusive is that which has a material adverse effect on consumer welfare in the form of exploitation of market power. In other words, it has been suggested that there is only one type of anticompetitive unilateral action— that which is exploitative. 161 This view is perhaps a valid overall comment, but it is nonetheless important, for analytical reasons, to be clear about which clause of Article 102 TFEU applies, when, and what the scope of that clause is. In each case, the legal and economic principles are somewhat different, even if, at the same time, it is important that the overall concept of an abuse should have a unified meaning.

5.3.1

Exploitative Abuses (Article 102(a))

Excessive prices. Article 102(a) covers exploitative conduct, that is “directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions.” This covers taking undue advantage of consumers by using market power to charge grossly excessive prices or impose unjustifiably onerous or unfair terms. The EU institutions have generally applied a two-stage test to assess whether a price is excessive. This test requires, first, comparing actual costs and prices (the price-cost limb of the test), and, second, determining whether a price is excessive in itself or by comparison to competitors’ products (the comparison limb of the test). 162 The second limb of the test is in practice crucial, since there are multiple legitimate reasons why AstraZeneca, OJ 2006 L 332/24, on appeal Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, and Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. See Ch.12 (Exclusionary Non-Price Abuses) for discussion. 159 Rambus, OJ 2010 C 30/17. See Ch.13 (Abusive Conduct and Standards) for discussion. 160 Case AT.39813, Baltic Rail, Commission Decision of 2 October 2017. The case is currently under appeal. 161 This distinction was first mentioned in various works by Professor Eleanor Fox. See, e.g., E Fox, “We Protect Competition, You Protect Competitors” (2003) 26(2) World Competition 149. See more recently P Akman, The Concept Of Abuse In EU Competition Law, Hart Publishing (2012), Ch. 8. 162 See Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207. 158

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prices may significantly exceed cost. Indeed, in the case of intellectual property, the ability to charge prices significantly above costs of production is an essential component of competition and innovation, since this ex post reward spurs ex ante investment and risk-taking. Pursuing excessive pricing arguably only makes sense in cases where there are significant barriers to entry that cannot be overcome by new entry investments. Absent these conditions, competition is usually a better way to remedy excessive prices given the enormous difficulties of identifying, and monitoring, a “competitive” price. As noted in Chapter Fourteen (Excessive Prices), however, excessive pricing decisions are rarely taken by the Commission nowadays due to its reluctance to regulate prices using general competition law powers. An important development in this connection is the Port of Helsingborg decisions where the Commission developed a more elastic interpretation of the concept of “economic value” that offers defendants greater scope for justifying why the prices they charge may in some instances significantly exceed cost. 163 National cases remain quite common, however, and may in particular be appealing to more recently-acceded Member States anxious to cut their teeth in enforcement. Unfair contractual terms and conditions. A second category of exploitative abuse, discussed in Chapter Sixteen (Other Exploitative Abuses), concerns unfair terms and conditions. There is no clear definition of these abuses, but they essentially concern contractual clauses that are unfair in that the dominant firm takes advantage of its market power to impose terms that could not be imposed by a firm that did not have market power. As the Commission’s 1965 Memorandum on the Concentration notes, “an improper exploitation of a dominant position must be assumed when the dominant firm utilises the opportunities resulting from its dominance to gain advantages it could not gain in the face of practicable and sufficiently effective competition.” 164 In other words, abuse consists of taking advantage of dominance.165 Examples of unfair contract terms and conditions include:166 (1) contractual clauses preventing a customer from adding accessory parts to a machine purchased from a dominant supplier (or adding or removing parts); (2) the need to obtain prior permission from the dominant supplier for the resale or transfer of the equipment; (3) exclusive rights to repair and maintain a machine for the lifetime of that machine; (4) equipment leases of excessive duration; (5) a clause requiring members of a copyright-collection society to assign all of their present and future rights to the society, including for a period of five years following their withdrawal from the society; and (6) long-term maintenance contracts allowing a dominant firm to unilaterally set the price of maintenance. Some of these clauses are also objectionable because they have the added effect of excluding rival firms, 163 Case COMP/A.36.568/D3, Scandlines Sverige AB v Port of Helsingborg, Commission Decision of 23 July 2004; Case COMP/A.36.568/D3, Sundbusserne v Port of Helsingborg, Commission Decision of 23 July 2004. 164 Mémorandum sur le Problème de la Concentration dans le Marché Commun (1 December 1965), reprinted in Revue Trimestrielle de Droit Européen 651–77 (1966), at 670 (reprinted in (1966) 26 Common Market Law Review 1–30), para. 24. 165 See R Joliet, “Monopolisation and Abuse of Dominant Position” (1970) 31 Collection Scientifique de la Faculté de Droit de l’Université de Liége. 166 See Ch. 16 (Other Exploitative Abuses) for more detail.

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but it is nonetheless clear that unfair trading conditions and terms can constitute an independent ground of violation under Article 102(a) because of their exploitative effect.

5.3.2

Exclusionary Abuses (Article 102(b))

The need for a unified basis for exclusionary abuses. A legitimate preliminary question is whether it is useful or necessary to have an overall definition of exclusionary abuses or whether it is sufficient to simply define operational rules depending on the categorisation of the specific practice at issue. The latter approach would be problematic. Significant difficulties would arise if the notion of an abuse depended on the formal categorisation of a practice, since a number of practices fit into multiple categories, which could lead to different outcomes depending on how they happened to be categorised. Take for example the abuse of margin squeeze, discussed in Chapter Seven, where a vertically-integrated dominant firm charges a price, or combination of prices, that renders downstream rivals’ activities uneconomic. This practice might be categorised as an “excessive” upstream price (or, more precisely, one that is excessive in relation to the downstream price). Alternatively, it might be categorised as predatory pricing by a vertically-integrated dominant firm. Margin squeezes also involve discrimination, since the dominant firm in effect discriminates in favour of its own downstream business. Finally, another characterisation of margin squeezes is that they are simply a constructive refusal to deal: the dominant firm will only deal on terms that render rivals uneconomic. Similar comments can be made in relation to other abuses. 167 The other reason why some unified definition of exclusionary conduct matters is because Commission enforcement in recent years has increasingly addressed novel kinds of exclusionary abuses. Thus, AstraZeneca 168 and Rambus 169 concern the issue of misleading representations to national patent offices and standards bodies, respectively. Complex and novel issues have arisen in the area of standard-setting organisations around issues such as the meaning of a promise to grant licences on fair reasonable and non-discriminatory (FRAND) terms, the issue of a patent owner’s ability to obtain injunctions against rivals where it has committed to licensing on FRAND terms, and the activities of so-called non-practising entities who acquire patents purely as assets with

167 See Report by the Economic Advisory Group on Competition Policy, “An Economic Approach to Article 82,” July 2005, p. 5 (“For example, predatory pricing can take the form of selective rebates, targeted at the rival’s prospective customers. Alternatively, the predator can engage in explicit discrimination and charge more attractive prices or, more generally, offer better conditions to these customers. Other instruments in the predator’s toolbox include implicit discrimination (e.g. in the form of fidelity or quantitative rebates that are formally available to all, but in fact tailored to the specific needs of the targeted customers) and mixed bundling or tying, when these customers are particularly interested in the bundle in question. To take another example, a firm that controls a key input may distort competition in a downstream market by refusing to deal with independent downstream firms; alternatively, it can engage in exclusive dealing arrangements or engage in explicit or implicit price discrimination such as mentioned above; yet other instruments include specific (in-)compatibility choices, physical or commercial tying, and so forth.”). 168 AstraZeneca, OJ 2006 L 332/24, on appeal Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, and Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. See Ch.12 (Exclusionary Non-Price Abuses) for discussion. 169 Rambus, OJ 2010 C 30/17. See Ch.13 (Abusive Conduct and Standards) for discussion.

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no own-exploitation of them. 170 Indeed, with the ever-increasing specialisation of products and services, it seems inevitable that Article 102 TFEU will increasingly be applied to novel areas. It cannot be right that for every novel practice a competition authority or court can approach the issue de novo with no overarching principles as to what constitutes an exclusionary abuse. This would lead to fragmentation of Article 102 TFEU and an overall lack of coherence. None of this is to say, however, that it is not meaningful to analyse specific practices and the operational rules that have been put forward for assessing such practices. Indeed, in part for reasons of expositional simplicity, this is the approach adopted in the remainder of this work. But the point is that there must be an overall coherent framework for the assessment of exclusionary abuses and, within that framework, the operational rules that most accurately capture prior beliefs about the type of harm caused by a specific practice should be developed. The types of rules may vary from practice to practice but there should be no overall difference in treatment between practices that broadly raise the same economic issues. Article 102(b): the legal basis for defining exclusionary conduct. Article 102(b) states that “limiting production, markets or technical development to the prejudice of consumers” is illegal. Unlawful foreclosure or handicapping of competitors, by which competition is reduced still further, are examples of “limiting production.” Limiting production is the most frequent and important category of abuse in practice, since it broadly covers any type of exclusionary conduct that limits rivals’ possibilities and, crucially and separately, causes harm to consumers. And in the same way as firms can compete in a myriad of ways, so too they can seek to exclude rivals through a multiplicity of strategies. The vast majority of infringement decisions under Article 102 TFEU have concerned exclusionary abuses and, therefore, Article 102(b). Article 102(b) has important advantages as the legal basis for defining exclusionary conduct. It is expressly based, as it should be, on the words of the TFEU. Most importantly, it captures the two fundamental insights of any sensible definition of exclusionary conduct. The first is that it ensures that only conduct that results in output limitation (or “limiting production”) is considered exclusionary. All exclusionary conduct results in the limitation of either the dominant firm’s production, or, more likely, that of competitors (either because rivals are forced to exit the market or remain in the market but face marginalisation due to increases in their costs caused by the dominant firm’s strategic actions). Although the EU Courts do not always refer to specific clauses of Article 102 TFEU in their judgments, multiple judgments have confirmed that Article 102(b) captures both types of limitation, i.e., it prohibits a dominant enterprise from limiting the production, marketing or development of its competitors, as well as its own. 171 Indeed, it is sometimes overlooked that in its first See Ch.13 (Abusive Conduct and Standards) for discussion. See, e.g., Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114-73, Coöperatieve Vereniging “Suiker Unie” UA and others v Commission [1975] ECR 1663, paras. 399, 482–83, and in particular paras. 523–527; Case 41/83, Italy v Commission (British Telecommunications) [1985] ECR 873; Case 311/84, Centre belge d'études de marché - Télémarketing (CBEM) v SA Compagnie luxembourgeoise de télédiffusion (CLT) and Information publicité Benelux (IPB) [1985] ECR 3261, para. 26; Case 53/87, Consorzio italiano della componentistica di ricambio per autoveicoli and Maxicar v Régie nationale des usines Renault [1988] ECR 6039; Case 238/87, AB Volvo v Erik Veng (UK) Ltd [1988] ECR 6211; 170 171

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comprehensive judgment on exclusionary abuses under Article 102 TFEU, the Court of Justice expressly based its findings on Article 102(b). 172 The Commission has also applied Article 102(b) in its seminal decision in Microsoft, 173 where Microsoft’s conduct was characterised as limiting innovation to the prejudice of consumers, as did the General Court on appeal. 174 The second key insight captured in Article 102(b) for defining exclusionary conduct is that the only output limitation of interest under Article 102 TFEU is that causing prejudice to consumers. Article 102(b) makes it clear that a dominant company may limit its rivals’ possibilities if no prejudice to consumers results, such as by offering better products or lower prices. No other clause of Article 102 TFEU captures these two key insights of exclusionary conduct—that it limits production and causes prejudice to consumers—explicitly, even if implicitly consumer welfare concerns necessarily underpin the other clauses of Article 102 TFEU too. Article 102(a) deals mainly with exploitative abuses: “fairness” is not an objective or useful criterion for defining exclusionary conduct, even if, in some sense, a dominant firm’s duty not to engage in exclusionary acts broadly involves elements of fairness. Article 102(c) is also very limited as a basis for defining exclusionary conduct, since it only views conduct through the lens of discrimination. Many exclusionary acts do not involve discrimination. Moreover, the interpretation applied by the EU institutions to Article 102(c) has been largely jurisdictional, without a meaningful inquiry into competitive effects or consumer harm. Finally, Article 102(d) only captures a very specific practice—tying. Article 102(b) also has a clearer normative content for defining exclusionary conduct than any of broad definitions used by the EU institutions. “Normal competition,” as per Hoffmann-La Roche, is a vague phrase, not least because the Commission has rejected the notion that a common practice within an industry would necessarily constitute “normal competition” if carried out by a dominant firm. 175 “Competition on the merits” Joined Cases C-241/91 P, Radio Telefís Éireann (RTE) and Independent Television Publications Ltd (ITP) v Commission (Magill) [1995] ECR I-743, para. 54; Case C-41/90, Klaus Höfner and Fritz Elsner v Macrotron GmbH [1991] ECR I-1979, para. 30; Case C-55/96, Job Centre coop arl [1997] ECR I7119, paras. 31–36; and Case C-258/98, Giovanni Carra and Others [2000] ECR I-4217. For commentary, see J Temple Lang, “Abuse of Dominant Positions in European Community Law, Present and Future: Some Aspects” in BE Hawk (ed.), Fifth Fordham Corporate Law Institute, Law & Business (1979) pp. 52, 60; J Temple Lang, “Anticompetitive Non-Pricing Abuses Under European and National Antitrust Law” in BE Hawk (ed.), 2003 Fordham Corporate Law Institute, Juris Publication Inc. (2004), pp. 235–340; C Bellamy and GD Child, European Community Law of Competition, Sweet & Maxwell (1978) (2nd edn.) pp. 754–755; L Ritter, DW Braun and F Rawlinson, EC Competition Law–A Practitioner’s Guide, Kluwer Law Institute (2000) (2nd edn.) pp. 362–63; M Waelbroeck and A Frignani, European Competition Law, Transational Publishers Inc. (1999) (2nd edn.) p. 551; and P Mercier, O Mach, H Gilliéron, and S Affotten, Grands Principes du Droit de la Concurrence: Droit Communautaire: Droit Suisse, Dossiers de Droit Europeen No. 7, Helbing et Lichtenhahn (1999) pp. 260–65. 172 Suiker Unie, ibid., para. 526 (“the system complained of was likely to limit markets to the prejudice of consumers within the measure of Article [102](b) because it gave other producers . . . no chance or restricted their opportunities of competing with sugar sold by SZV”). 173 Microsoft, OJ 2007 L 32/23, Section 5.3.1.3.1 (“Microsoft’s refusal to supply limits technical development to the prejudice of consumers”) and paras. 693 et seq. 174 Case T-201/04, Microsoft v Commission [2007] ECR II-3601, para. 647. See more recently IBM Maintenance Services, OJ 2012 C 18/6, para. 39. 175 Microsoft, OJ 2007 L 32/23, footnote 877.

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and “genuine undistorted competition” are also vague, since not all competition on the basis of price, quality, and functionality is allowed under Article 102 TFEU. And, as noted above, the term “special responsibility” is simply an overall label for conduct that is abusive if carried out by a dominant firm. Article 102(b) is also more precise and certain than saying that each practice should be judged according to its positive and negative effects on consumer welfare. Economists sometimes underestimate the importance of legal certainty. This general principle of EU law requires that firms should, to the extent possible, be able to judge whether their conduct is legal or not when they decide to embark on a particular course of conduct. 176 Finally, Article 102(b) is sufficiently flexible to incorporate the economic tests outlined in Section 5.2.3 above as a basis for verifying exclusionary conduct. Although these tests have no clear legal basis, they may be useful to verify the “limiting production” test. In particular, Article 102(b) does not prevent the use of the profit sacrifice, equally efficient competitor, and consumer welfare tests where valid and useful. Moreover, in circumstances where each test is said to exclude the application of the other tests, and all tests remain essentially untested under Article 102 TFEU, it is important that Article 102(b) should be relied upon as the basic test for defining exclusionary conduct. This applies not least because economists can and do change their views or evolve them over time. Finally, to the extent it matters, the limiting production test is also similar to the test proposed by the leading treatise on US antitrust law for defining exclusionary conduct. 177 Explanation of the “limiting production” test. Article 102(b) captures the key feature of exclusionary conduct, that it makes competitors’ products or services less attractive or less available, rather than simply making the dominant company’s product better or more available. 178 Offering better or cheaper products must generally be legal, however great the difficulties it causes to rivals. In contrast, creating difficulties for competitors in other ways is not. In basic terms, the application of these principles to the most common pricing and non-pricing abuses is relatively straightforward. The bare wording of Article 102(b) does not of course solve every problem or question, but it at least provides some satisfactory underlying principles, as well as consistency.

176 See T Tridimas, The General Principles of EU Law, Oxford University Press (2006) Ch.6; J Temple Lang, “Legal Certainty and Legitimate Expectations as General Principles of Law” in U Bernitz and J Nergelius (eds.), General Principles of European Community Law, Kluwer Law International (2000), pp. 163–84. In the context of Article 102 TFEU, see Case T-271/03, Deutsche Telekom AG v Commission [2008] ECR II-447, paras. 188-192. For non-competition cases, see Case C-313/99, Gerard Mulligan and others v Minister of Agriculture and Food, Ireland and Attorney General [2002] ECR I-5719; Case C-63/93, Duff and others v Minister for Agriculture and Food and Attorney General [1996] ECR I-569, paras. 19–20. 177 See PE Areeda and H Hovenkamp, Antitrust Law, Aspen Publishers (2002) (2nd edn.), para. 651a (defining exclusionary conduct as acts that “(1) are reasonably capable of creating, enlarging, or prolonging monopoly power by impairing the opportunities of rivals; and (2) that either (2a) do no benefit consumers at all, or (2b) are unnecessary for the particular consumer benefits that the acts produce, or (2c) produce harms disproportionate to the resulting benefits.”) (emphasis added). 178 For more detailed treatment see Treatment Of Exclusionary Abuses Under Article 82 Of The EC Treaty Comments On The European Commission's Guidance Paper, Final Report Of A CEPS Task Force (J Temple Lang and A Renda eds.) (2009).

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For example, in the area of predatory pricing, pricing below average variable cost (or some analogous measure of marginal cost) will usually harm rivals who are at least as efficient as the dominant firm and so limit their production. Of course, reducing prices will ordinarily increase the dominant firm’s output. But if the effect of its pricing below cost is to cause rivals to exit or marginalise them, the dominant firm can subsequently limit its own production and increase prices, which causes consumer prejudice. Similarly, for unlawful exclusive dealing, requirements contracts, or loyalty rebates, the basic objection is not so much that the dominant firm offers an unbeatable price, but that that price is only available on condition that customers do not deal with rival firms. The same basic analysis can be applied to non-pricing abuses. Refusal to deal cases raise some of most intractable issues under Article 102 TFEU. But the basic rubric is consistent with a limiting production test. In general, a dominant firm can invest in capital assets, patents, or other intellectual property rights. Successful investments may of course limit the possibilities open to its competitors, in particular when backed by legal monopolies such as intellectual property laws, but they normally benefit consumers by expanding production and creating new or better market options. In exceptional circumstances, however, the limitation of rivals’ production causes such prejudice to consumers that a duty to share may be appropriate. Strict conditions apply: the refusal must substantially eliminate all existing competition, prevent new kinds of products from coming on the market for which there is a clear and unsatisfied demand, or suppress an existing product that consumers wish to go on using. Finally, the emphasis on prejudice to consumers in Article 102(b) would expressly allow for efficiency defences for conduct that limits rivals’ production. Such defences would appear to be precluded under the profit sacrifice and equally efficient competitor tests. For example, an exclusive dealing obligation by a dominant firm will usually limit rivals’ production or access to market, but it may have a valid defence if the dominant firm is making a substantial customer-specific investment and needs some assurance that the customer will buy from it to justify the investment. Pricing below cost may also have a consumer benefit in limited circumstances. Promotional pricing is legitimate where a new product requires consumer familiarity before customers can appreciate its enhanced qualities. Customer familiarity with the product in question during the promotional pricing phase may render them loyal and therefore willing to pay a higher price in future because of the product’s added qualities. In such circumstances, the low price is intended to allow customers to try the product. Higher future prices do not depend on competitors’ exclusion, but on customers appreciating the product’s enhanced characteristics over existing products. The Commission’s policy rethink in the Guidance Paper. The last decade has witnessed a period of introspection by the Commission in examining its policy on exclusionary conduct. The first official document was the 2005 Discussion Paper,179 followed by the Guidance Paper published in late 2008.180 The motivation for and progress of these reforms—as well as the legal status of the Guidance Paper—is the subject of a separate DG Competition discussion paper on the application of Article 82 of the Treaty to exclusionary abuses, Brussels, December 2005 (hereinafter, the “Discussion Paper”) 180 Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ 2009 C 45/2. 179

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chapter in this work. 181 An important preliminary point is whether the Guidance Paper signals a reorientation of the Commission’s interpretation of the concept of an exclusionary abuse. The focus is now said to be on those practices that cause most harm to consumers. The corollary of this is that competitors should not be protected from abusive conduct merely because they are competitors, but only because their exit or marginalisation harms the competitive process. The Guidance Paper states as follows: 182 “In applying Article [102] to exclusionary conduct by dominant undertakings, the Commission will focus on those types of conduct that are most harmful to consumers. Consumers benefit from competition through lower prices, better quality and a wider choice of new or improved goods and services. The Commission, therefore, will direct its enforcement to ensuring that markets function properly and that consumers benefit from the efficiency and productivity which result from effective competition between undertakings. The emphasis of the Commission's enforcement activity in relation to exclusionary conduct is 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. In doing so the Commission is mindful that what really matters is protecting an effective competitive process and not simply protecting competitors. This may well mean that competitors who deliver less to consumers in terms of price, choice, quality and innovation will leave the market.”

The Guidance Paper also introduces a new concept for the assessment of exclusionary abuses—the concept of “anticompetitive foreclosure.” “Anticompetitive foreclosure” is said to “describe a situation where effective access of actual or potential competitors to supplies or markets is hampered or eliminated as a result of the conduct of the dominant undertaking whereby the dominant undertaking is likely to be in a position to profitably increase prices to the detriment of consumers.” 183 Evidence of such harm to consumers may be qualitative or quantitative. For pricing abuses, the concept of an equallyefficient competitor is stated to be the starting point for the assessment of exclusionary abuses. 184 No specific definition is offered, however, for the definition of non-price abuses. The Guidance Paper then adds various “plus” factors that build on this basic definition: 185 (1) the strength of the dominant position; (2) the nature and extent of barriers to entry or expansion; (3) the relative strength of rivals and whether a strategically important rival is being singled out; (4) selectivity of the practice; (5) the extent of market coverage of the practice in question; (6) any evidence of actual foreclosure caused by the abusive conduct; and (7) direct evidence of exclusionary strategy via internal documents. The Guidance Paper is a welcome development on the concept of exclusionary abuse in the sense that it expressly recognises that harm to consumers is a critical component of any definition of an exclusionary abuse and that mere harm to rivals is not only insufficient but will, without more, be the very hallmark of competition. But these laconic, although clearly important, points apart, the Guidance Paper in truth offers See Ch.2 (History, Development, and Reform), and in particular Section 2.4. Guidance Paper, paras. 5-6. 183 Guidance Paper, para. 19. 184 Guidance Paper, paras. 61-68. 185 Guidance Paper, para. 20. 181 182

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limited assistance in defining a comprehensive test for exclusionary abuses. 186 A particular failure is that there is very little articulation in the Guidance Paper of what is anticompetitive, and what distinguishes legitimate competition conduct from abusive conduct. The “plus factors” that the Commission lists above may or may not be caused by abusive conduct. For example, market exit by rivals may be due to the fact that consumers do not value its products or services. Simply listing factors such as changes in market shares runs into the problem of observational equivalence: merely observing these factors tells one very little about whether the underlying conduct constitutes an exclusionary abuse or not.

5.3.3

Discriminatory Abuses (Article 102(c))

The need to distinguish different categories of discrimination. Article 102(c) prohibits a dominant firm from “applying dissimilar conditions to equivalent transactions with other trading partners, thereby placing them at a competitive disadvantage.” This provision is not as strict as anti-discrimination laws in other jurisdictions, such as the United States Robinson-Patman Act 1936, since Article 102(c) requires dominance as a pre-condition. But Article 102(c) remains potentially very broad and gives rise to perhaps the greatest scope for potential confusion of any single clause under Article 102 TFEU. Several difficulties arise. A first general problem is that discrimination, and in particular price discrimination, is, in some sense, implicated in most abuses, which makes it difficult, if not impossible, to have a single unified definition of abusive discrimination. Loyalty discounts and other forms of volume reductions may involve commitments by a seller to price discriminate in favour of large volume buyers or buyers meeting other conditions. Predatory pricing also usually involves discrimination by a dominant firm between its existing customers and actual or potential customers of rival firms. Margin squeeze cases also involve hidden price discrimination by a vertically-integrated dominant firm in favour of its own downstream business, to the detriment of rivals. Essential facility cases could be analysed as involving an extreme situation of discrimination in the sense that the dominant firm discriminates in favour of its vertically-integrated business by denying downstream rivals access to essential inputs or dealing with some rivals but not others. Finally, one justification for tying and bundling practices may be the dominant firm’s desire to extract more of the consumer surplus from undertakings that value the tied/bundled products more than they value each separately, i.e., price discrimination. Thus, in broad terms, discrimination and in particular price discrimination, can arise in many cases under Article 102 TFEU. Second, the decisional practice and case law have created confusion by not always clearly distinguishing between different types of abuses that may involve some element of discrimination. Many Article 102 TFEU cases have concerned the cumulative or combined anticompetitive effects of several practices committed simultaneously by the dominant firm. 187 These cases have given rise to decisions and judgments which, even 186 See J Temple Lang and A Renda (eds.), Treatment Of Exclusionary Abuses Under Article 82 Of The EC Treaty Comments On The European Commission’s Guidance Paper, Final Report Of A CEPS Task Force (2009). 187 See, e.g., Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207; Case 53/87, Consorzio italiano della componentistica di ricambio per

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though they are probably correct in outcome, are not always clear in their analysis of issues of discrimination or in their implications. A recurrent theme concerns the application of Article 102(c) to situations involving foreclosure of competitors of the dominant firm (e.g., price reductions given on condition of exclusivity, a selective lower price which is predatory, and discrimination by a vertically integrated dominant enterprise in favour of its own downstream operations). In a number of cases, the EU institutions have analysed exclusionary conduct that had elements of discrimination as being unlawful simply because it was discriminatory. 188 The reason for this is probably expediency: it is invariably easier to show that something is unlawful merely because there is a difference in treatment than to go further and show that the difference in treatment is also exclusionary. This applies not least because the historical interpretation of the various conditions of Article 102(c) has been generous to competition authorities and plaintiffs. A final problem is that many cases in which Article 102(c) has been applied have involved direct or indirect discrimination on the grounds of nationality or residence, 189 which is subject to a very strict rule. Indeed, in the 1998 Football World Cup case, the Commission held that discrimination on the basis of nationality by a dominant firm fell within Article 102(c) “notwithstanding the absence of any effect on the structure of competition.” 190 The fact that a very strict rule applies to nationality discrimination under Article 102(c) may also have (wrongly) led the EU institutions to apply equally strict rules to other examples of discrimination, even if they raise very different economic and legal issues. Clarifying the treatment of discrimination under Article 102 TFEU. Article 102 TFEU would be clearer and more rational if a more explicit distinction was autoveicoli and Maxicar v Régie nationale des usines Renault [1988] ECR 6039; Case T-30/89, Hilti AG v Commission [1991] ECR II-1439, on appeal Case C-53/92 P, Hilti AG v Commission [1994] ECR I-667; Case T-83/91, Tetra Pak International SA v Commission [1994] ECR II-755; T-65/89, BPB Industries plc and British Gypsum Ltd v Commission [1993] ECR II-389; Case T-228/97, Irish Sugar plc v Commission [1999] ECR II-2969; Joined Cases C–395/96 P and C-396/96 P, Compagnie Maritime Belge Transports SA, Compagnie maritime belge SA and Dafra-Lines A/S v Commission [2000] ECR I-1365. 188 For example, in Irish Sugar, the General Court seemed to confuse discrimination that forecloses competitors of the dominant firm (i.e., an exclusionary abuse) with discrimination that distorted competition between customers of the dominant firm (i.e., pure discrimination). In condemning Irish Sugar’s rebates offered to customers at border areas exposed to competition as exclusionary, the General Court suggested that the rebates were objectionable because customers located in non-border areas would have paid higher prices—in effect, subsidising the low prices in the border area. The Court’s approach in Irish Sugar creates unnecessary confusion between cases of “pure” discrimination (i.e., discrimination that produces effects at a vertical level against companies that do not compete with the dominant firm) and discrimination against competitors (i.e., discrimination that products effects against firms that compete on a horizontal level with the dominant firm). See Case T-228/97, Irish Sugar plc v Commission [1999] ECR II-2969. 189 See, e.g., Case 226/84, British Leyland plc v Commission [1986] ECR 3263; Case T-229/94, Deutsche Bahn AG v Commission [1997] ECR II-1689; Case T-128/98, Aéroports de Paris v Commission [2000] ECR II-3929, confirmed on appeal in Case C-82/01 P, Aéroports de Paris v Commission [2002] ECR I-9297; Case C-163/99, Portugal v Commission [2001] ECR I-2613; Brussels Airport, OJ 1995 L 216/8; and Ilmailulaitos/Luftfartsverket, OJ 1999 L 69/24. 190 1998 Football World Cup, OJ 2000 L 5/55, para. 100 (emphasis added).

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made in the decisional practice and case law between: (1) discrimination by a dominant firm against its rivals (whether on horizontally- or vertically-related markets); and (2) discrimination by a dominant firm between companies to whom it sells on a level of trade in which it is not itself active, i.e., customers. In simple terms, the former involves the exclusion of rivals—which is sometimes referred to as primary-line injury in antitrust economics—whereas the latter concerns differences in treatment between customers with whom the dominant firm does not compete—or secondary-line injury. In each of these situations, the dominant firm’s ability and incentives to distort competition differ and, as a result, so do the applicable legal and economic principles. In essence, this would mean that: (1) Article 102(b) would apply to exclusionary abuses; and (2) the prohibition under Article 102(c) would deal mainly with issues of secondary-line injury, that is discrimination between customers with which the dominant firm is not otherwise associated. The two provisions would not then apply simultaneously. 191 a. The analysis of exclusionary abuses that involve elements of discrimination. There are various examples of exclusionary conduct that, in some sense, involve elements of discrimination. But these cases still concern the foreclosure of competitors. In such cases, the issue is not discrimination per se, but merely that discrimination is a vehicle for exclusionary conduct. The determinative issue is whether the conduct is truly exclusionary, and not merely whether it has discriminatory effects. Discrimination may simply make the exclusionary conduct possible, reinforce its anticompetitive or exploitative effects, or allow the dominant firm to take advantage of that conduct. An obvious example of an exclusionary abuse that involves some element of discrimination concerns selective price cuts by a dominant firm, discussed in Chapter Six (Predatory Pricing). Such price cuts generally discriminate between the dominant firm’s own customers and rivals’ actual or potential customers, by offering more favourable prices to the latter. Again, in this scenario, it is not really informative (though it is usually relevant) to observe that the dominant firm is discriminating. The real issue is whether the lower prices are predatory. This involves consideration of a range of issues, including whether the dominant firm’s prices are below the relevant measure of its costs and the strategic reasons for the price cuts. Discrimination may mean that any losses suffered by the dominant firm are less extensive than in the case of an across-the-board price cut, but no clear conclusions can be drawn from the presence or absence of discrimination in itself. Margin squeeze abuses, discussed in Chapter Seven, also involve actual or implied discrimination by a vertically-integrated incumbent in favour of its own downstream business. But the test for a price squeeze abuse—whether the dominant firm’s business would make a profit if had to pay the same price as rivals do for the input—is essentially a test based on whether an equally efficient entrant would be excluded. A related example concerns refusal to deal, discussed in Chapter Ten. In many refusal to deal cases, the dominant firm may not refuse to deal outright but may apply Both types of discrimination can obviously result from the same conduct. For example, a discriminatory rebate scheme could foreclose competitors of the dominant firm, as well as distort competition between customers of the dominant firm downstream. But this does not call into question the soundness, or need for, the basic distinction. 191

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discriminatory conditions between its own downstream business and rivals, or may decide to deal with one rival, but not another. In this scenario, it is again not meaningful to say that the dominant firm is discriminating: the relevant issue is whether it is unlawfully excluding rivals in refusing to deal, which requires consideration of the exceptional circumstances in which such a refusal is exclusionary. Discrimination is simply one way in which the exclusionary conduct may be manifested. It says very little about whether the refusal to deal is exclusionary. The Court of Justice judgment in Post Danmark I offers some support for the above suggested approach. 192 The Court held that: “Moreover...the fact that the practice of a dominant undertaking may, like the pricing policy in issue in the main proceedings, be described as ‘price discrimination’, that is to say, charging different customers or different classes of customers different prices for goods or services whose costs are the same or, conversely, charging a single price to customers for whom supply costs differ, cannot of itself suggest that there exists an exclusionary abuse.” This finding corrects an obvious mistake in many decisions and judgments on loyalty rebates where the Commission and EU Courts have held that the mere fact of observing price discrimination can itself support a finding of exclusionary abuse. b. The analysis of discrimination by a dominant firm between non-associated customers. Secondary-line discrimination—that is discrimination by a dominant seller or buyer against trading parties with whom it does not compete—raises fundamentally different legal and economic issues from exclusionary abuses directed against rivals that may have elements of discrimination. Exclusionary abuses essentially concern whether the conduct in question unlawfully limits rivals’ production and, if so, whether it also causes harm to consumers. By contrast, discrimination that leads to secondary-line injury involves an analysis of whether two similarly-situated customers are treated differently, with the result that the party paying the higher price or receiving worse terms is placed at a “competitive disadvantage” vis-a-vis the other party, and whether there is any legitimate justification for the difference in treatment. Such an analysis has no necessary connection with the analysis of exclusionary abuses (even if such abuses have elements of discrimination): indeed, the consumer welfare basis for interfering with pricing and non-pricing conduct where the only issue is that a dominant seller or buyer treats two non-associated companies differently is not even obvious. The consumer welfare rationale for prohibiting exclusionary unilateral practices is much stronger. These points were made explicit by Advocate General Wahl (as he then was) in MEO: 193 “To my mind, and as has been pointed out in a good number of analyses in legal literature, when examining price discrimination, such as that at issue in the present case, for the purposes of the application of point (c) of the second paragraph of Article 102 TFEU, a distinction must immediately be drawn between undertakings that are vertically integrated and will therefore have an interest in displacing competitors on the downstream market and those that have no such interest. In the case of vertically integrated undertakings, the application by a dominant undertaking of discriminatory prices on the downstream or upstream market is in 192 193

Case C-209/10, Post Danmark A/S v Konkurrencerådet, EU:C:2012:172, para. 30. Case C-525/16 MEO-Serviços De Comunicações E Multimédia EU:C:2017:1020, paras. 76-77.

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reality similar to first degree price discrimination which indirectly affects the undertaking’s competitors. Such discrimination may have the effect of weakening the competitors of the dominant undertaking on the downstream market.”

The treatment of discrimination in subsequent chapters. Because no separate legal rule is required for exclusionary abuses that may involve elements of discrimination against rivals, the remainder of this work simply analyses the principal categories of exclusionary conduct, commenting, where appropriate, on the relevance, if any, of discriminatory conduct within each category of abuse. The same comment applies to discrimination by a dominant firm in favour of its own downstream business (i.e., vertical discrimination). The issue in such cases remains whether the conduct is exclusionary, although it is correct to say that actual discrimination by a dominant firm in favour of its own downstream business, to the detriment of rivals, has been subject to a stricter rule under Article 102 TFEU. Various exclusionary abuses are treated in detail in subsequent chapters, including, if applicable, the relevance of issues of discrimination that may arise in the context of such abuses. By contrast, the treatment of pure secondary-line discrimination—Article 102(c)—is discussed separately in Chapter Fifteen (Abusive Discrimination).

5.3.4

Tying Abuses (Article 102(d))

A narrow but potentially complex abuse. The final abuse defined in Article 102(d) concerns tying or “making the conclusion of contracts subject to the acceptance by the other party of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.” Tying may be contractual (i.e., where customers cannot purchase the second product separately), economic (i.e., where the price for two products is sufficiently low relative to their stand-alone price to coerce customers into buying the products as a package), or technical (i.e., where two separate products are technically integrated as one). The distinctions between these forms of tying are not always hard and fast. For example, at a certain point, the stand-alone price for a second product may be so high as to lead consumers to only purchase it as part of a package with another product where the price of the package is low enough. Cases on tying have thus far been rare under Article 102 TFEU, the most notable and The controversial example being the Commission’s findings in Microsoft. 194 Commission found that Microsoft had abused its dominant position in client operating systems by, inter alia, tying Windows Media Player (WMP) to Microsoft’s client operating system. The proceedings were significant because they involved a departure from the formalistic approach to tying in the earlier decisional practice and case law, which treated tying as akin to a per se offence once separate products were found. The Commission stated that there were good reasons why it could not assume, without further analysis, that tying WMP constituted conduct which by its very nature is liable to foreclose competition. The Commission engaged in extensive analysis to assess the potential foreclosure effects. It first compared WMP’s distribution system, i.e., Windows, with alternative distribution systems of rival media players and concluded that rival media players could not achieve the same level of market penetration as Microsoft, OJ 2007 L 32/23, upheld on appeal in Case T-201/04, Microsoft v Commission [2007] ECR II-3601. 194

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Windows. 195 Second, it considered the effect that this advantage had on other market participants. 196 Finally, it assessed whether market developments were tipping in favour of WMP. 197 On appeal, the General Court confirmed the Commission’s analysis. 198 More recently in Android, the Commission found four separate infringements that formed part of a single and continuous infringement. Two of the infringements—the tying of the Google Search app with the Play Store and the tying of Google Chrome with the Play Store and the Google Search app—were analysed as a tie. The third infringement—making the licensing of the Play Store and the Google Search app conditional on the anti-fragmentation obligations in the anti-fragmentation agreements—had certain elements of a tie but, in substance, turned on the question of the objective justification for the clause in question. 199 Tying cases raise some of the most complex issues under Article 102 TFEU. For example, there is considerable disagreement about: (1) how to define a tie (i.e., when products should be regarded as separate); (2) whether the ubiquity of tying shows that it is generally efficient; (3) when anticompetitive effects are likely to arise from tying; and (4) the treatment of efficiencies, which underpin the majority of ties. These difficulties are possibly more acute in the area of technological tying which frequently arises in the information technology and software sectors. Tying and bundling are discussed in Chapter Eleven.

5.3.5

Leveraging Abuses

Definition of leveraging. The enforcement of Article 102 TFEU is not limited to situations in which a firm exercises market power in one market and uses that power to engage in abusive conduct in that market. In certain circumstances, it may also be an abuse for a dominant firm to use its position in one market to commit an abuse on a separate, but closely related, market. Such conduct is sometimes referred to as “leveraging.” This is, however, an imprecise and potentially misleading term, since it encompasses a wide range of conduct that may be either procompetitive or anticompetitive, or a mixture of the two. The most that can probably be said therefore is that leveraging is simply a label for various types of conduct that have in common the feature that they involve a firm that is active in two or more related markets. Without more, the term says nothing about whether the conduct in question is lawful or not. A leveraging abuse could occur under any one of the four clauses of Article 102 TFEU. In practice, however, most leveraging abuses concern the foreclosure of competitors (Article 102(b)) or tying (Article 102(d)). In terms of effects, leveraging abuses may be carried out in either horizontal or vertical adjacent markets. An example of horizontal leveraging might include a firm that is dominant in one market and carries out a campaign of predatory pricing not only in the dominant market, but also in adjacent markets in order to signal to potential entrants in other markets that it will react aggressively to potential threats. Another example is the Microsoft case where the Ibid., paras. 843-878. Ibid., paras. 879-896. 197 Ibid., paras. 897-944. 198 Case T-201/04, Microsoft v Commission [2007] ECR II-3601, paras. 859, 867-868, 1031-1035. 199 Ibid., paras. 479-482. 195 196

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Commission found that Microsoft sought to leverage its near-monopoly in computer operating systems to gain an (unfair) advantage in related markets for server operating system software and streaming media players. 200 Examples of vertical leveraging include situations in which a dominant firm controls an input (e.g., a raw material) that acts a “bottleneck” for entry into downstream markets. The most commonly-cited example concerns the local loop in telecommunications, or essential transport infrastructure such as railway lines, which may allow a firm owning or controlling such inputs to distort competition on downstream product or service markets that depend on the input in question to compete, i.e., refusal to deal cases. 201 But essentially the same issue arises in other situations involving vertical foreclosure, including excessive access charges (margin squeezes), incompatibility between the dominant firm’s own products and downstream rivals’ products, 202 tying, 203 and discriminatory pricing and licensing. The need to distinguish procompetitive and anticompetitive leveraging. Many forms of leveraging conduct are inherently procompetitive, even for dominant firms. Indeed, any firm with activities in two or more markets will engage in leveraging conduct all the time. For example, economies of scope—where it is cheaper to produce two products together than to make each separately—are an example of leveraging, but are a legitimate advantage. The same principle applies to any other synergy that can be achieved across markets: it is, in general, legitimate for a firm, including a dominant firm, to take full advantage of cost, knowledge, or any other synergy between two markets where that creates efficiencies in the markets concerned. And the rule is no different even if this gives the firm significant cost or non-cost advantages over rival firms. It is also important to appreciate that behaviour in markets in which a firm directly exercises market power is different from the actions of a firm in an adjacent market in which it does not. 204 A firm’s ability and incentives to distort competition in an adjacent market in which it is not dominant are, all things equal, much less than in the case of behaviour in a market in which it exercises market power. In terms of ability, a firm’s power to exclude competition in a market in which it does not exercise market power is obviously less than in situations in which it does. Its incentives may also differ. Where the dominant firm’s rivals in the second, competitive market are also its customers, the dominant firm may lower its overall profits by taking actions that would raise rivals’ costs. For example, it would make little sense for a dominant supplier of an input to attempt to exclude rival firms in downstream markets in which that input is used to produce a final product or service if the rivals offer differentiated products.

Microsoft, OJ 2007 L 32/23. See Ch. 10 (Refusal to Deal). 202 See Ch. 12 (Exclusionary Non-Price Abuses). 203 See Ch. 11 (Tying and Bundling). 204 For a good summary, see P Rey, J Tirole, and P Seabright, “The Activities Of A Monopoly Firm In Adjacent Competitive Markets: Economic Consequences And Implications For Competition Policy,” Institut d’Economie Industrielle, Université de Toulouse, unpublished manuscript dated 21 September 2001 (on file with authors), pp. 24–26. See also Report by the Economic Advisory Group on Competition Policy, “An Economic Approach to Article 82,” July 2005, pp. 23–29. 200 201

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The reasons why leveraging has, incorrectly, acquired something of a pejorative meaning under Article 102 TFEU are not entirely clear. One possible reason is that the critique by the Chicago School of antitrust thinking of vertical leveraging, as refined by recent economic advances, has not been fully recognised under Article 102 TFEU. The Chicago School of antitrust thinking questioned the conventional wisdom that a dominant firm’s efforts to extend its monopoly from the dominated market to a vertically-related non-dominant market are anticompetitive. In essence, their argument was that, in a single chain of production, there is only one monopoly profit. If dominant firm can reap that profit at one market level, it would prefer that the related markets at other levels are as competitive as possible. As discussed in detail in Section 5.2.1 above, some exceptions to this rule have been identified. But the basic point of the critique is sound—at least in cases involving vertical foreclosure—and has not been fully reflected in decisions under Article 102 TFEU. Another possible explanation is a spillover to Article 102 TFEU of the analysis in leveraging cases under EU merger control rules. The Commission in the past prohibited a number of high-profile mergers and acquisitions on the grounds that, post-merger, the firms would be able to extend advantages in a dominant market into a related, but nondominant market, even without engaging in conduct that would, if carried out, be abusive under Article 102 TFEU. These cases were strongly criticised as ignoring many of the efficiencies that result from synergies between two markets and protecting (less efficient) competitors at the expense of consumers. 205 But it is undoubtedly fair to say that the Commission has historically applied an expansive interpretation to anticompetitive leveraging under EU merger control rules, which may have also affected the analysis under Article 102 TFEU. More recent judgments, however, signal a return to a more orthodox position. 206

205 See e.g., D Patterson and C Shapiro, “Trans-Atlantic Divergence in GE/Honeywell: Causes and Lessons,” Antitrust Magazine, 12 November 2001; and W Kolasky, “Mario Monti’s Legacy: A US Perspective,” (2005) 1(1) Competition Policy International 155. 206 The EU Courts clarified the principles regarding the assessment of leveraging theories under merger control. In essence, the judgments held that: (1) a high standard of proof applies where the objection to a merger is that the merged entity would engage in leveraging conduct: there must be “convincing” evidence to support a conclusion that the relevant anticompetitive effects will occur in the future; and (2) the Commission does not need to examine whether the leveraging conduct would also constitute an abuse of dominance under Article 102 TFEU, although behavioural commitments not to engage in certain types of abusive leveraging conduct should be taken into account in assessing the need for a prohibition decision. See Case T-310/01, Schneider Electric SA v Commission [2002] ECR II-4071; Case T-5/02, Tetra Laval BV v Commission [2002] ECR II-4381, and Case T-80/02, Tetra Laval BV v Commission [2002] ECR II-4519, confirmed on appeal in Case C-12/03, Commission v Tetra Laval BV [2005] ECR I-987. See also Case T-210/01, General Electric Company v Commission [2005] ECR II-5575 where, contrary to the Court of Justice’s judgment in Tetra Laval, the General Court appeared to impose a stricter burden on the Commission. The General Court held that the Commission must, in principle, take into account the potentially unlawful, and thus sanctionable, nature of certain conduct as a factor which might diminish, or even eliminate, incentives for an undertaking to engage in particular leveraging conduct. However, its appraisal should not require an exhaustive and detailed examination of the rules of the various legal orders responsible for applying Article 102 TFEU. Thus, where the Commission, without undertaking a specific and detailed investigation into the matter, can identify the unlawful nature of the conduct in question under EU law, it must take account of this in its assessment of the likelihood that the merged entity will engage in such conduct (paras. 73-75). As

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Circumstances in which leveraging conduct amounts to an abuse. The decisional practice and case law have identified a number of situations in which leveraging conduct may amount to an abuse. Examples include denying an essential raw material to downstream rivals, 207 trying to extend a monopoly in primary equipment into competitive aftermarkets, 208 exclusionary discounting in a non-dominant market that is closely related to the dominant market, 209 and extending legitimate State monopolies or special rights into unjustified ancillary markets. 210 The essential point in each case is the same: that a company which is dominant in one market may not use its dominance to restrict competition or otherwise commit an abuse in a second, related market. Within the apparently straightforward definition of abusive leveraging, however, a number of important points should be borne in mind. a. No independent abuse of leveraging. Leveraging is not an independent ground of abuse. It is simply a convenient (and sometimes misleading) label to identify cases that have in common the feature that a dominant firm uses its power on one market to commit an abuse that has effects in an adjacent horizontal or vertical market. Crucially, the dominant firm’s conduct must itself be capable of being regarded as abusive, even if it has effects on a non-dominant market. This point is often overlooked and has created unnecessary confusion about the scope of abusive leveraging 211. Abusive leveraging therefore stands for a relatively simple proposition: that in certain circumstances, a dominant firm can use its dominance on one market to unlawfully exclude rivals on a horizontally- or vertically-related market in which it is not dominant. There must still be abusive conduct, however, and not merely the use of dominance in one market to gain an advantage in another market. 212 b. The need for a causal connection between the dominance and the abusive conduct. A related point is that there must be some causal connection between the firm’s dominance and the conduct on the adjacent market. In other words, an abusive leveraging case “presupposes a link between the dominant position and the alleged

noted, this standard appears stricter on the Commission than the Court of Justice’s findings in Tetra Laval. 207 See, e.g., Joined Cases 6-7/73, Istituto Chemioterapico Italiano SpA and Commercial Solvents Corporation v Commission [1974] ECR 223. 208 See, e.g., Case 238/87, AB Volvo v Erik Veng (UK) Ltd [1988] ECR 6211. 209 See, e.g., Case T-65/89, BPB Industries plc and British Gypsum Ltd v Commission [1993] ECR II-389. 210 See, e.g., Case C-260/89, Elliniki Radiophonia Tiléorassi AE and others others (Greek television) [1991] ECR 2925, paras. 22–26 and 38. 211 For example, in Google Shopping the Commission stated that Article 102 TFEU prohibits “not only practices by an undertaking in a dominant position which tend to strengthen that position, but also the conduct…that tends to extend that position to a neighbouring but separate market by distorting competition.” But it clarified elsewhere that the objection was not the mere fact of leveraging but the “more favourable positioning and display in Google’s general search results pages of Google’s own comparison shopping service compared to competing comparison shopping services.” See Case AT.39740, Google Search (Shopping), Commission Decision of 27 June 2017, para. 334 and footnote 3. 212 This point has been confirmed by a number of senior US courts. See Verizon Communications Inc v Law Offices of Curtis V. Trinko LLP, 540 US 398, 410 (2004) (“leveraging presupposes anticompetitive conduct”). See also, Covad Communications Company v Bell Atlantic Corporation, 398 F.3d 666, 365 U.S.App.D.C. 78, (2005).

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abusive conduct,” even if the conduct is carried out on the non-dominant market. 213 Such links are not normally present where conduct on a market distinct from the dominated market produces effects on that distinct market. However, in the case of distinct, but associated markets the application of Article 102 TFEU to conduct found on the associated, non-dominant, market and having effects on that associated market can be justified by “special circumstances.” 214 One example of “special circumstances” was Tetra Pak II, where the Court of Justice found that there were sufficient “associative links” between the dominant aseptic carton market and the non-dominant non-aseptic carton market to treat predatory pricing on the latter market as abusive. This was based on the following circumstances: (1) a substantial proportion (35%) of Tetra Pak’s customers had purchased both aseptic and non-aseptic packaging systems; (2) the fact that Tetra Pak held nearly 90% of the market in the aseptic sector meant that, for customers, it was not only an inevitable supplier of aseptic systems, but also a favoured supplier of non-aseptic systems; (3) the main producers operated on both markets, thereby confirming the links between the markets; and (4) Tetra Pak, by virtue of its quasi-monopoly in the aseptic sector, was able to focus its competitive efforts on the non-aseptic markets without fear of retaliation in the aseptic sector. 215 Taken together, these factors were found to give Tetra Pak a position “comparable to that of holding a dominant position on the markets in question as a whole.” 216 A similar conclusion was reached in connection with personal computer (PC) operating systems and work group servers in Microsoft concerning Microsoft’s abusive refusal to supply interoperability information to rival firms. The Commission concluded that a comparison of the relevant operating system markets and an evaluation of Microsoft’s position on both revealed a degree of inter-relation similar to that which prevailed in Tetra Pak II. The relevant factors were as follows: 217 (1) typical organisations that purchased work group servers also needed to purchase client PCs; (2) Microsoft was active in both the client PC operating system market and the work group server operating system market, enjoyed a quasi-monopoly on the client PC operating system market and had a leading position on the market for work group server operating systems; (3) almost all customers purchasing work group servers ran Microsoft’s Windows on their client PCs; (4) a vast majority of OEMs selling servers also supplied client PCs, and were therefore dependent on Microsoft; and (5) various technological links existed between the products in question (e.g., physical linking in computer network, other network effects). 218 213 See Case C-333/94 P, Tetra Pak International SA v Commission [1996] ECR I-5951, para. 27. See also Case T-83/91, Tetra Pak International SA v Commission [1994] ECR II-755. 214 Ibid. 215 Ibid., paras. 28–30. 216 Ibid., para. 31. 217 Microsoft, OJ 2007 L 32/23, paras. 530–534. 218 See also Case MPINF-PSWA001 Flybe, Office of Fair Trading (OFT) No Grounds for Action Decision of 5 November 2010. The OFT focused on a theory of harm which provided for sufficiently proximate associative links between Flybe’s alleged conduct on the Newquay–London Gatwick route (a non-dominant market) and a potential dominant position it may have had on related market(s). The OFT considered whether Flybe could be dominant on certain routes from Exeter Airport and, if so, whether it would be able to employ this market power on to the non-dominant Newquay–London

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c. The relevance of “associative links.” The EU Courts’ formulation that there should be “associative links” between the two markets in abusive leveraging cases is not particularly helpful and may obscure the central point. Associative links are neither necessary nor sufficient in abusive leveraging cases. 219 Instead, a distinction should be made between a number of different situations involving conduct in two markets: one dominant; the other non-dominant. The first two do not require “associative links”— though they may in practice be present—whereas the latter requires a very close connection between the market in which the dominance exists and the non-dominant market on which the abuse is carried out: 1.

The first situation is where the abuse takes place on the dominant market but its effects are felt on another market in which the firm is not dominant. The classic situation is a refusal to deal, which was already recognised as an abuse prior to the EU Courts’ findings in Tetra Pak II. The important point in this situation is not whether “associative links” exist between the two markets, but whether the refusal to supply an essential input on the upstream dominant market has a sufficiently serious effect on competition in the second, downstream market. It may be that the dominant firm’s ownership or control over an essential input creates an “associative link” with the downstream market, but this adds nothing of substance to the analysis. (It is of course also possible that the firm concerned is already dominant on the second market.)

2.

A second situation is where the abuse is committed on a non-dominant market, but the effect is to maintain or strengthen the firm’s position on the dominant market. In GVG, the Commission applied Article 102 TFEU to a situation in which the dominant firm sought to maintain its dominant position on a market where it held an effective monopoly. Ferroviere delle Stato (FS) was found to occupy dominant positions on the markets for certain train services (traction), as well as on the downstream market for rail passenger services. A competitor, GVG, asked FS to supply it with train services so that GVG could provide a train service between Basle and Milan but was denied. FS was already offering a Basle-Milan service and its refusal on the traction market insulated FS’s dominant position from competition on the market for train services. The Commission held that FS infringed Article 102 TFEU, finding that by refusing to provide traction to GVG, FS was “preserving its monopoly position” on the market for rail passenger services. 220 Again, in this situation, the presence or

Gatwick route. Specifically, the issue was whether Flybe stood to gain on certain routes it operates from Exeter Airport by virtue of its conduct on the Newquay–London Gatwick route. In the event, the OFT considered that the associative links between the Exeter Airport markets and the Newquay–London Gatwick market were probably not sufficiently proximate (para. 3.12). 219 See N Levy, “Tetra Pak II: Stretching the Limits of Article 86?” (1995) 2 European Competition Law Review 105. 220 See GVG/FS, OJ 2004 L 11/17. Although the judgment is not particularly clear on this point, the Court of Justice suggested in AKZO that AKZO’s below-cost pricing might have infringed Article 102 TFEU even if carried out in a non-dominant market. This was based on the notion that AKZO’s below-cost pricing on the flour additives segment was intended to strengthen its position on the plastics segment, where AKZO was dominant. See Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3359, para. 45 (“The Commission was in those circumstances justified in regarding the organic peroxides market as the relevant market, even though the abusive behaviour alleged was intended to damage ECS’s main business activity in a different market.”).

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absence of “associative links” is not the central point: the main issue is whether the conduct could be said to strengthen the dominant firm’s position on the relevant market on which it is already dominant. Such links may in practice be present in many cases involving the strengthening of dominance, but they are not essential. 3.

The third situation—which was raised in Tetra Pak II—is where the abuse takes place on a market that is separate from, but related to and connected with, the market dominated by the firm concerned. In this scenario, it is essential to show that the firm’s position on the dominant market allows it to exploit horizontal or vertical links between the two markets to such an extent that it uses its dominance to commit an abuse on a second, non-dominant market. Or, looked at differently, there would clearly be no basis for finding abusive conduct in circumstances where the dominant position and the abuse are in different and unrelated markets. The exact nature of the links between the two markets will vary from case to case, but they must be very close if Article 102 TFEU is to maintain any sensible or predictable meaning. Factors to consider would include: the structure of supply and demand on the two markets, use by the dominant firm of its power on the dominant market to penetrate the non-dominant market (e.g., tying practices), and market shares on the dominant and non-dominant markets. As a practical matter, it bears emphasis that the Commission has only found such “links” in two cases— Tetra Pak II and Microsoft. 221 Both cases concerned firms with a longstanding virtual monopoly on the dominant market and a market share on the second market that was at or above the level at which dominance is traditionally presumed under Article 102 TFEU. 222 Further, in each case, various cumulative factors were cited by the EU institutions as a basis for close commercial and technical links between the two markets. Taken together, these factors suggest that the EU institutions will only find an abuse on a nondominant market in very rare cases.

5.3.6

List Of Abuses In Article 102 TFEU: Illustrative Or Exhaustive?

Ambiguity in the decisional practice and case law. The EU Courts have consistently stated that Article 102 TFEU should not be understood as listing exhaustively the kinds of conduct which it prohibits. Most notably in Continental Can the Court of Justice held that Article 102 TFEU could be applied to mergers and acquisitions even in the absence of any specific clause dealing with changes in control. 223 In other words, the Court of Justice suggested that the examples of abuse given in the four clauses of Article 102 TFEU are merely illustrative. But the precise meaning and scope of this 221 Some national cases have also found “special circumstances” justifying a finding of abuse on a non-dominant market. See, e.g., Case No. CA98/05/2004, First Edinburgh/Lothian, 29 April 2004 (predatory pricing allegation in a non-dominant market based, inter alia, on associative links between Edinburgh bus market and routes in the surrounding area). 222 In Tetra Pak II, Tetra Pak accounted for approximately 48% of non-aseptic carton sales and for 52% of non-aseptic machine sales. In Microsoft, Microsoft had over 95% of the PC operating system market and a 50-60% share of the work group server market. 223 See, e.g., Case 6/72, Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 215, para. 26.

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statement has not been clearly articulated in any decision or judgment. In particular, it is not clear whether the EU Courts intended to say that: (1) the principal categories of abusive conduct are listed exhaustively in Article 102 TFEU (but all the possible examples of abuses within those categories are not); or (2) the categories of abuse under Article 102 TFEU extend beyond the four clauses mentioned therein. Non-exhaustive nature of Article 102 TFEU does not make it open-ended. It is submitted that it would be highly problematic if the EU Courts’ statements that the abuses mentioned in Article 102 TFEU are not exhaustive were applied in an unthinking way. There are several reasons for this. First, the Court of Justice’s statements in Continental Can regarding the non-exhaustive nature of the abuses listed in Article 102 TFEU were made in the context of a teleological interpretation of the EU treaties intended to fill an important lacuna in the law—the absence at the time of rules governing mergers and acquisitions. That need no longer arises, since concentrations with a EU dimension are now dealt with under the EU Merger Regulation. Second, the Court of Justice arguably did not need to develop a new type of abuse in Continental Can, since it would be reasonable to argue that Article 102(b) applies to a concentration that ends all scope for independent marketing, production, and technical development of the company acquired. This is analogous to cutting off supply of an essential raw material or making exclusive contracts with customers, both of which may be abusive. Indeed, shortly after Continental Can, the Court of Justice confirmed that Article 102(b) can be applied to conduct limiting the possibilities available to competitors of the dominant firm where there is prejudice of consumers. 224 An anticompetitive merger or acquisition that causes consumer prejudice is an example of unlawfully “limiting production.” Thus, Continental Can may not, after all, be an example of an abuse which does not fall under any of the four clauses of Article 102 TFEU. Third, it is very difficult to think of unilateral conduct that falls outside these four clauses of Article 102 TFEU and which should be subject to competition law. Article 102(a) is ample to cover exploitative abuses and other unfair trading conditions. All exclusionary abuse cases fall within Article 102(b) since they can all be characterised as limiting either rivals’ production or that of the dominant firm, to the prejudice of consumers. Article 102(c) contains a discrimination principle that is sufficiently broad to capture discrimination by a dominant firm against between both associated and non-associated companies. Finally, as evidenced by Microsoft and Android, Article 102(d) is more than capable of treating sophisticated tying and bundling cases. Even the miscellaneous abuses that could be broadly characterised as “raising rivals’ costs” (e.g., vexatious litigation, use and abuse of patent system) fit within the notion of “limiting production” under Article 102(b): conduct without a legitimate business rationale which limits rivals’ production and causes consumer harm is abusive. Similarly, even the more novel types of abuses posited by the Commission in

224 See Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114-73, Coöperatieve Vereniging “Suiker Unie” UA and others v Commission [1975] ECR 1663, paras. 399, 482–83, and in particular paras. 523–527.

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AstraZeneca 225 and Rambus 226 would equally fall within Article 102(b) (and possibly Article 102(a) to the extent that the exercise of market power would lead to excessive royalties being charged). Accordingly, given the broad scope of the existing clauses of Article 102 TFEU, the EU Courts’ statement that the examples in Article 102 TFEU are not exhaustive should probably be regarded as no more than a confirmation that there are kinds of conduct (e.g., refusal to contract and bundling) which are not explicitly described and prohibited by Article 102 TFEU, but clearly fall within the clauses listed therein. This is hardly surprising, since the ways in which firms may commit an abuse are myriad. No legislation could therefore exhaustively list all possible examples of abuse. The competing argument—that there may some unexpressed underlying principles in Article 102 TFEU that prohibit other kinds of abuses—would be contrary to legal certainty. Legal certainty requires that a dominant company should be able to know what its legal duties are under Article 102 TFEU. It cannot be right that defendants should find themselves exposed to the risk that courts and competition authorities could apply words and principles not mentioned in Article 102 TFEU. It would be highly unsatisfactory to rely on an implied underlying principle unless a case arose which clearly fell outside the four clauses of Article 102 TFEU.

5.4

ANTICOMPETITIVE EFFECTS UNDER ARTICLE 102 TFEU

Overview. As early as Hoffmann-La Roche, the Court of Justice made clear that the concept of abuse covered conduct that has “the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.” 227 The scope of this basic principle has given rise to some of the most contentious issues under Article 102 TFEU; in particular whether it is necessary to examine anticompetitive effects in all cases, what the standard for anticompetitive effects is or should be, and how the presence or absence of such effects should be measured. The following sections consider a number of central issues on the meaning of anticompetitive effects under Article 102 TFEU. 228 A first basic point is to what extent there is a requirement that a firm’s dominance causes the abusive effect(s). Second, the standard for anticompetitive effects under Article 102 TFEU has been subject to conflicting statements. Some judgments suggest that possible or potential anticompetitive effects suffice; others say that the standard is actual or likely anticompetitive effects. Third, it is surprisingly unclear what types of anticompetitive effects are relevant under Article 102 TFEU and how they might be shown. Most agree that harm to consumer welfare is the ultimate test but there is disagreement over what this means and how it should be demonstrated. Fourth, it is not 225 AstraZeneca, OJ 2006 L 332/24, on appeal Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, and Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. 226 Rambus, OJ 2010 C 30/17. 227 Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 91 (emphasis added). 228 For further discussion, see Article 82 EC: Reflections On Its Recent Evolution, Hart Publishing, A Ezrachi (ed.) (2009), Chs. 1, 2, and 3, and Competition Law And The Enforcement Of Article 102 Oxford University Press, F Etro and I Kokkoris eds (2010), Chs. 1 and 2.

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clear whether harm to consumer welfare is necessary under all four clauses of Article 102 TFEU, since only Article 102(b) specifically mentions “consumers.” Finally, the role of documentary or other evidence of abusive intent requires consideration, and in particular whether it sheds light on the likely effects of conduct.

5.4.1

The Need For Causation Between Dominance And The Abuse

Causation and Article 102 TFEU: conflicting statements. A number of statements in the decisional practice and case law suggest that there is no requirement to show a causal connection between dominance and abusive effects. For example, in Continental Can, the Court of Justice held that “the question of the link of causality raised by the applicants which in their opinion has to exist between the dominant position and its abuse, is of no consequence, for the strengthening of the position of an undertaking may be an abuse and prohibited under Article [102], regardless of the means and procedure by which it is achieved, if it has the effect [of substantially fettering competition].”229 Later, in Hoffmann-La Roche, the Court of Justice stated that “the interpretation suggested by the applicant that an abuse implies that the use of the economic power bestowed by a dominant position is the means whereby the abuse has been brought about cannot be accepted.” 230 These statements have led a number of commentators to argue that there is no need for a causal link between the dominance and the abuse. 231 Saying that causation is entirely irrelevant under Article 102 TFEU, however, goes too far. 232 While there are undoubtedly some statements by the EU Courts which suggest that causation is not a central issue in abuse cases, many more clearly suggest that it is. In Tetra Pak II, the Court of Justice held that Article 102 TFEU “presupposes a link between the dominant position and the alleged abusive conduct,” 233 although the Court was, exceptionally, prepared to accept that an abuse could be carried out in a nondominant market that was very closely related to the dominant market. Similarly, in Continental Can, Advocate General Roemer stated that the wording of Article 102 TFEU “with its expression ‘abuse...of a dominant position within the Common Market,’ appears to hint that its application can be considered only if the position on the market is used as an instrument and is used in an objectionable manner; these criteria are therefore essential prerequisites of application of the law.”234 229 See Case 6/72, Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 215, para. 27. 230 Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 91, cited in Case T-321/05 AstraZeneca v Commission [2010] ECR II-2805, para. 267. 231 See, e.g., B Sufrin and A Jones, EU Competition Law: Text, Cases, And Materials, Oxford University Press (2011) (4th edn.), Ch.7. 232 See T Eilmansberger, “How To Distinguish Good From Bad Competition Under Article 82 EC: In Search Of Clearer And More Coherent Standards For Anticompetitive Abuses” (2005) 42 Common Market Law Review 129, 140–42. 233 See Case C-333/94 P, Tetra Pak International SA v Commission [1996] ECR I-5951, para. 27. See also Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, para. 249 (“[I]t is advisable therefore to ascertain whether the dominant undertaking has made use of the opportunities arising out of its dominant position in such a way as to reap trading benefits which it would not have reaped if there had been normal and sufficiently effective competition.”). 234 See Opinion of Advocate General Roemer in Case 6/72, Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 215, at 254. The Court of Justice’s comments in Continental Can should also be seen in context. The case is generally regarded as a

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Further recent exceptions: AstraZeneca and Rambus. Two recent decisions in AstraZeneca 235 and Rambus 236 have cast further doubt on whether some plausible connection between the position of dominance and the act(s) of abuse is necessary under Article 102 TFEU. In AstraZeneca the abusive act was the making of representations to national patent offices that had the effect of obtaining extended patent protection. However, obtaining patent extension by misrepresentations is clearly not facilitated or enabled by the dominance itself: any firm can misstate the position, if it so chooses. It can be argued, however, that if a non-dominant firm misleads the patent office, its actions are less likely to lead to material harm to competition. But this does not necessarily follow. In the case of a supplementary protection certificate (SPC), the extended patent duration will typically only kick in at a later point in time, when conditions of competition may well be different. For this reason, a non-dominant firm acquiring a SPC at a time when it is not dominant may lead in future to its having a very powerful dominant position in future, which could not be challenged under Article 102 TFEU. This seems arbitrary. AstraZeneca itself is a perfect illustration of this because AstraZeneca was no longer dominant in several countries at the time the extended patents entered into force, which the EU Courts held was irrelevant to the question of abuse. 237 Rambus was an Article 9 commitment decision and so is necessarily of more limited relevance. The allegation is that Rambus failed to make advance disclosure of its ownership of essential patents in the standard, thereby creating a materially false and misleading impression that the standardised technology would not infringe its patents. These actions are alleged to have harmed other participants in the relevant standards organisation and consumers through subsequent Rambus demands for substantial royalties. But Rambus was not dominant at the time it was alleged to have committed the acts in question. Thus, even more so than in AstraZeneca, the causal connection between dominance and the relevant conduct appeared lacking. The Commission sidestepped this difficulty by characterising the abuse not as intentional non-disclosure but striking piece of judicial activism intended to cover a gap that existed at the time due to the lack of a merger control system at EU level. The Court’s comments on causality cannot therefore be transposed, without qualification, to other abuses, and, arguably, at all given that the gap in question has now been corrected with the introduction of the EU Merger Regulation. Moreover, the abusive act in Continental Can was unusual in that it involved the strengthening of dominance, which meant that the link between the initial dominance and the abusive act of strengthening it was not in point. It is also questionable whether the Court’s comments on causation actually have the meaning ascribed to them by certain commentators. The Court’s comments were in response to an argument by the acquiring party that, for an abuse to be made out, it would be necessary to show that a firm used its dominant position to purchase the acquired firm’s stock. The Court quite rightly rejected this argument: the relevant point was not the source of the funds, but whether the acquisition would strengthen existing dominance and thereby amount to an abuse. See Case 6/72, Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 215, 225. It might, however, be abusive for an undertaking vested with exclusive rights in a reserved area to acquire a rival in a non-reserved area using funds that result from an abuse of dominance in the reserved area (e.g., excessive pricing). See Case T-175/99, UPS Europe SA v Commission [2002] ECR II-1915. But this did not arise in Continental Can, since the acquiring firm had no exclusive State rights. 235 AstraZeneca, OJ 2006 L 332/24, on appeal Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, and Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. See Ch.12 (Exclusionary Non-Price Abuses) for discussion. 236 Rambus, OJ 2010 C 30/17. See Ch.13 (Abusive Conduct and Standards) for discussion. 237 Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770, para. 110.

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as Rambus’ ability to claim royalties “at a level which absent its allegedly intentional deceptive conduct it would not have been able to charge.” 238 In other words, the argument was that Rambus held a dominant position “at the point when it started asserting its patents and continues to hold that dominant position since.” 239 Resolving the conflict. Notwithstanding certain statements from the EU Courts that the dominant position does not necessarily need to cause the abuse in question, it is important for the overall intellectual coherence of Article 102 TFEU that this should generally be the position. As a general matter, it is necessarily the case that the main categories of abuse under Article 102 TFEU also expressly or implicitly depend on a connection between dominance and abuse.240 Abuses such as excessive pricing can only be successfully carried out by a firm with dominance: in a fully competitive market, attempts to charge excessive prices would be unsuccessful. Such abuses have a clear causal connection with dominance. A second category is abuses that would not occur if the firm in question is not dominant. A good example is predatory pricing. Below-cost prices confer a net benefit on consumers unless a firm can expect to recover any short-term losses in the longer term (i.e., recoupment), which assumes that dominance would exist. Or, put differently, no harmful effect would occur unless there is dominance. In this situation, dominance is also related to the scope for abusive effects. Cases such as AstraZeneca and Rambus are very much the exception, and it is submitted that the scope of the exception is, or should be, extremely narrow. There are a number of ways of rationalising these cases. First, while the harmful effect in question might not be excluded in the case of a non-dominant firm, the point is that, all else equal, its effects are likely to be exacerbated by the existence of dominance. This does not mean that one cannot posit scenarios in which an act by a non-dominant firm might not have similar effects or where the act of the dominant firm has no effect. But this is a false equivalence, and does not obviate the need for a prohibition in the case of a dominant firm. Second, it can be argued that where the relevant act is a misrepresentation—and typically also a deliberate one—the act in question has zero redeeming efficiency value. This may, exceptionally, justify the decoupling of dominance and abuse. Or, looked at differently, society loses nothing, and will usually gain something, by taking a hard line on such conduct. Finally, it has been argued that these cases should be seen as a single continuum of events whereby the original act apparently disconnected from the abuse is simply one of a series of steps that have the ultimate aim or effect of exploiting market power.241 These cases are thus said to be sui generis abuses, presumably of a very limited class. Causation in fact. A separate question on causation is the issue of causation in fact. (The issue analysed above is more associated with causation in law.) It is reasonably clear under Article 102 TFEU that where a competition authority or claimant in litigation posits a causal relationship between an act and its effect, there is a need to examine the question of causation in fact, since the authority or claimant has made this

Rambus, OJ 2010 C 30/17, para. 28. Ibid., para 26 (emphasis added). 240 See P Vogelenzang, “Abuse Of A Dominant Position In Article 86: The Problem Of Causality And Some Applications” (1976) 13 Common Market Law Review 62. 241 See M Dolmans, D Culley, and M Dhanani, “Learning from Rambus – How To Take Those Troublesome Trolls,” The Antitrust Bulletin, Volume 57, No.1 (Spring 2012), p. 125. 238 239

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issue an integral part of the definition of the abuse in that particular case. 242 For example, in Google Shopping, the Commission concluded that the challenged conduct diverted traffic in the sense that it decreased traffic from Google’s general search results pages to competing comparison shopping and increased traffic from Google’s general search results pages to Google's own comparison shopping service. 243 Google’s appeal challenges this affirmative cause cited by the Commission, and says that other nonabusive causes explain the increases and decreases observed by the Commission. It argues that where the Commission makes an affirmative case on causation an appellant must be able to challenge it. This is clearly correct, since it would be absurd to blame a dominant firm for adverse effects on a rival firm or competition that are not caused by anything done by the dominant firm or by non-abusive conduct. The Commission and EU Courts have often rejected abusive effect allegations due to a lack of causation in fact. In National Carbonising the Commission ultimately concluded that there was no margin squeeze on the market for industrial coke.244 Instead, the source of National Carbonising’s problem was that it had few long-term contracts for industrial coke. When demand for industrial coke fell, National Carbonising became too dependent on its domestic coke sales, where the retail price was limited by the prices of other kinds of domestic energy. National Carbonising’s difficulties had not been caused or increased by the dominant Coal Board’s actions, and the Board’s long-term contracts (which of course reduced the demand for National Carbonising’s product) were legitimate, even though National Carbonising was not so well placed to make such contracts. A more striking example is the product deregistration abuse in AstraZeneca. 245 AstraZeneca had switched its Losec capsules (the original formulation) for a multiple unit pellet system (MUPS) tablet formulation, and had requested certain national drug approval agencies to deregister the market authorisations for the capsules. Deregistration usually also meant that parallel imports and import licences would no longer be permitted. While the General Court upheld the Commission’s theory of harm that deregistration could be an abuse, it held that the Commission’s case had not been made out entirely insofar as it was alleged that deregistration prevented parallel trade. The Court stated that the Commission had to demonstrate that the public authorities in question were liable to withdraw, or did usually withdraw, parallel import licences following deregistration. 246 This was because it was not axiomatic that they would do so, and in any event it required further action by the public authorities concerned that

242 In a damages action, most national procedural and substantive rules on causation would also simply not allow an action to proceed without the particulars showing how the dominant firm’s abusive conduct caused loss and damage to the claimant and, ultimately, proof of loss. 243 Case AT.39740, Google Search (Shopping), Commission Decision of 27 June 2017 (currently on appeal), Section 7.3.2. 244 Case 109/75 R, National Carbonising Company Ltd v Commission [1975] ECR 1193 and National Coal Board, National Smokeless Fuels Limited and the National Carbonising Company Limited, OJ 1976 L 35/6. 245 AstraZeneca, OJ 2006 L 332/24, on appeal Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, and Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. For an interesting national abuse of dominance case on a lack of causation in fact, see Enron Coal Services Limited (In Liquidation) v English Welsh & Scottish Railway Limited [2009] CAT 36, on appeal Enron Coal Services Limited (In Liquidation) v English Welsh & Scottish Railway Limited [2011] EWCA Civ 2. 246 Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, paras. 806-808.

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was independent of AstraZeneca. 247 On the facts, the Court found that the Commission had established a causal link between deregistration and the revocation of parallel import licences in Sweden, but not in Denmark or Norway. 248 Thus, the Court annulled the decision insofar as it was alleged that AstraZeneca’s deregistration had prevented parallel trade to occur in Denmark and Norway. 249 The use of counterfactuals. A final important question is whether causal effects should, as occurs under Article 101 TFEU, be assessed by reference to what would have happened absent the agreement or conduct in question, i.e., a counterfactual. A number of points bear mention. First, as discussed above, where a competition authority or claimant in litigation posits a causal relationship between an act and its effect, there is a need to examine the question of causation in fact, since the authority or claimant has made this issue an integral part of the definition of the abuse in that particular case. In this narrow and specific sense, a counterfactual analysis is clearly part of Article 102 TFEU. Second, outside of the above specific point, there is no clear legal authority that the counterfactual is an essential element under Article 102 TFEU. The Guidance Paper indicates that such an assessment will usually be made. 250 But national case law and cases under Article 54 EEA suggest that use of a counterfactual is not a requirement in all cases. 251 For example in National Grid, 252 the English Court of Appeal rejected a submission as to the need for any finding of abuse under Article 102 TFEU (and its national law equivalent) to be based on a benchmark such as a counterfactual. While it acknowledged that benchmarks were applied in certain contexts under Article 102 TFEU, it held that there was no rule requiring the use of a benchmark in every case. 253 Similarly, in Post Norway, the EFTA Court attached limited importance Ibid., para. 809, citing Case C-223/01 AstraZeneca [2003] ECR I-11809, para. 27. Ibid., para. 845. In Denmark, there was no evidence that parallel importers’ authorisations were revoked or that it had a policy to withdraw parallel importer authorisations if marketing authorisations were withdrawn. In Norway, there was no clear policy and in any event parallel imports continued despite deregistration. 249 The General Court’s findings in this regard were also upheld on appeal: see Case C-457/10 P, AstraZeneca v Commission EU:C:2012:770. The Court of Justice also accepted that it may be objectively justified to deregister a marketing authorisation where its maintenance imposed an onerous regulatory burden. However, the facts of the case did not support such a defence (para. 135). 250 Guidance Paper, para. 21. 251 Certain Article 102 TFEU cases make passing reference to the situation absent the conduct in question. For example, in Microsoft, the General Court noted that, “in the absence of the bundling, consumers wishing to have a streaming media player would be induced to choose one from among those available on the market:” see Case T-201/04, Microsoft v Commission [2007] ECR II-3601, para. 1041. But this is more a statement of the obvious that if there were no tie consumers could choose freely between media players. 252 National Grid plc v Gas and Electricity Markets Authority [2010] EWCA Civ 114. 253 Ibid., para. 54. See also para. 57 (“The use of counterfactuals as a tool of appraisal is plainly permissible and of potential value. What is appropriate by way of counterfactual, however, is a matter of judgment for the decision-maker. There is no rule of law that the counterfactual has to take a particular form. The Commission’s guidance document refers to a range from ‘the simple absence of the conduct in question’ to ‘another realistic alternative scenario, having regard to established business practices.’ It does not say that the alternative scenario must be based on alternative arrangements that the parties to the contracts in issue would or might realistically have made instead, and there is no principle requiring the adoption of such a restrictive approach. The purpose of the counterfactual is 247 248

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to Norway Post’s arguments that: (1) even in the absence of the outlet exclusivity provisions, the COOP and ICA outlets with a Norway Post post-in-shop facility would normally not have concluded agreements with other parcel distributors in order to avoid confusion by employees and customers; and (2) Norway Post’s rival, Privpak, would not have been able to make a sufficiently attractive offer to the Norway Post outlets in any event. The Court reasoned that a dominant firm cannot argue that entry would be too difficult for new entrants in order to justify conduct by which it raises market barriers even higher, unless entry would be a priori hypothetical. 254 Third, it is clear that some consideration of the counterfactual is necessary under Article 101 TFEU, for both object 255 and effect 256 restrictions. In a case where Articles 101 and 102 TFEU apply in parallel—which is entirely possible—it may seem odd that the counterfactual would form part of the Article 101 TFEU assessment but not the assessment of the same agreement under Article 102 TFEU. 257 Finally, it is important to appreciate that the abusive conduct may itself obscure proper consideration of the counterfactual. As the Hong Kong Competition Tribunal noted in a recent judgment: 258 “It may be relevant to take account of potential effect not only where the agreement or conduct in question is very recent, but also, conversely, where it has been in place for a very long time. In such a case the intrinsic difficulties in building a hypothetical counterfactual (i.e. an imagined situation in the absence of the alleged infringement) by reference to which the effects of the agreement or conduct in question are to be assessed may be such that it is impossible positively to establish any actual concrete effects, at any rate on a quantitative basis.”

5.4.2

The Standard For Anticompetitive Effects Under Article 102 TFEU

Historic problems. One of the recurrent criticisms of the older decisional practice and case law under Article 102 TFEU was that abuses were made out on largely formalistic grounds, with little or no regard to any forensic demonstration of anticompetitive effects. The most egregious examples of this were rebate cases. For example in simply to cast light on the effect of the conduct in issue. It is for the decision-maker to determine whether a counterfactual is sufficiently realistic to be useful, and to decide how much weight to place on it. This is an area of appreciation, not of legal rules.”). A UK case considering the counterfactual in the context of an effect on competition is Streetmap.EU Limited v Google Inc. and others [2016] EWHC 253 (Ch), para. 100. 254 Case E-15/10, Posten Norge AS v EFTA Surveillance Authority, judgment of 12 April 2012, para. 174. 255 Case C-228/18 Gazdasági Versenyhivatal v Budapest Bank Nyrt. and Others, EU:C:2020:265, para. 82. 256 See, e.g., Case T-328/03 O2 (Germany) GmbH & Co. OHG v Commission, [2006] ECR II-1231, para. 71. 257 In Case C-307/18, Generics (UK) Ltd and others v CMA, EU:C:2020:52, the Court of Justice looked at patent settlement agreements under both Articles 101 and 102 TFEU. In the Article 101 TFEU assessment, the Court had regard to the counterfactual. But no counterfactual assessment was made in the Article 102 TFEU part of the case. It is not clear whether this was intentional or simply reflected the fact that, in that case, only Article 102 TFEU could apply to the particular agreement being considered (the GSK/IVAX agreement). 258 See HCAL176/2013, Television Broadcasts Ltd v Communications Authority And Another, 29 January 2016, per G Lam J, at para. 256.

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Michelin II, the General Court indicated that anticompetitive object or potential restrictive effects are sufficient to prove an abuse. 259 The Court rejected Michelin’s argument that, as its market share and general price levels had fallen during the period of the practices in question, the Commission had failed to prove that the conduct had in fact reinforced its dominant position or restricted competition. According to the Court, in order to fall under Article 102 TFEU, it is sufficient that a dominant undertaking’s behaviour is liable to restrict competition or by its very nature did so. 260 Thus, where it is established that a dominant undertaking’s behaviour has the object of restricting competition, such behaviour potentially has a restrictive effect: it is unnecessary to prove that there was an actual or concrete effect. 261 Similar comments were made in margin squeeze decisions under Article 102 TFEU. 262 A second deficiency in the older decisions and case law was a finding that prima facie evidence of lack of adverse effect—such as declines in the dominant firm’s market share and increases in rivals’ shares during the period of abuse—could be ignored, on the basis that one should presume that the rivals would have done even better, and the dominant firm even worse, but for the abuse. 263 This was obviously circular logic. There is no effective counter thesis to this assumption: it can always be assumed that practices had an adverse effect on competitors if evidence of lack of effect is disregarded in favour of such an assumption. It is circular because the conduct is said to be unlawful only because it ousts competitors, but if that is the reason, it cannot then be said that one does not need to look to see if it had that effect. It is inconclusive because legitimate competition can also result in competitors’ exit (i.e., the problem of observational equivalence). If a practice would be illegal because it caused foreclosure and so had anticompetitive effects, it cannot be shown to have those effects by merely stating that it is illegal. Even in a case where the practices in question had no effect on competition, an abuse could be found by relying on a presumption. In short, what was posited was probatio diabolica. Finally, the Commission did not always distinguish between correlation and causation when it comes to anticompetitive effects. For example, in Tomra, the Commission pointed to the exit of Prokent and Tomra’s acquisitions of Halton and Eleiko as evidence of the anticompetitive effect of the abuse. But market exit and acquisitions also occur routinely in competitive markets. Similarly, in Telefónica, the Commission suggested that an inference of anticompetitive effect should be drawn from the fact that Spanish retail prices were apparently high in comparison to European averages and that Case T-203/01, Manufacture française des pneumatiques Michelin v Commission [2003] ECR II4071. See also Case T-219/99, British Airways plc v Commission [2003] ECR II-5917, para. 293. 260 Ibid., para. 239. 261 Ibid., para. 241. 262 Deutsche Telekom AG, OJ 2003 L 263/9, paras. 179–180 (once a margin squeeze was shown, it was not necessary to assess any effects on competition: such effects were presumed from the mere existence of a margin squeeze). However, the Commission nonetheless undertook a detailed analysis of likely exclusionary effects, noting Deutsche Telekom’s 90% share of the affected market and competitors’ falling share of analogue connections. For national law, see France Télécom/SFR Cegetel/Bouygues Télécom, Conseil de la Concurrence, Decision No. 04-D48 of 14 October 2004, para. 242 (finding that, under Deutsche Telekom, once margin squeeze is established, it is not necessary to evaluate its actual impact on competition). 263 See Case T-219/99, British Airways plc v Commission [2003] ECR II-5917, para. 298. 259

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broadband penetration was below the EU average. 264 But unless one can perform regression or some other analysis to try to disentangle the effects of the abuse from other factors, i.e., causation, it is extremely difficult to reach robust conclusions. The gradual shift in the Commission’s approach. One of the principal drivers of the Commission’s policy reforms under Article 102 TFEU was to align it with a more economic approach including, notably, some demonstration of anticompetitive effects. Indeed, even before its 2008 Guidance Paper, the Commission had started to examine the issue of anticompetitive effect in much more detail than previously. In Wanadoo, the Commission undertook an extremely detailed recoupment and effects analysis, 265 despite the fact that Wanadoo’s prices were found to be below average variable cost— which is considered as presumptively unlawful under the AKZO case law—and there was a range of evidence of an express exclusionary plan. The Commission relied on the fact that: (1) Wanadoo’s market share rose by nearly 30% during the period of the infringement; (2) Wanadoo’s main competitor saw its market share tumble; and (3) one competitor even went out of business. In the Guidance Paper the Commission has also now expressly stated that, at least for exclusionary abuses, it will normally only pursue cases where there is evidence of anticompetitive foreclosure effects. 266 The Guidance Paper states that the following factors will generally be relevant in this connection: (1) the extent of dominance; (2) the market position of rivals; (3) the extent of the market coverage and duration of the practice in question; (4) evidence of discrimination or targeting of particularly important rivals; (5) evidence of actual foreclosure, particularly where the conduct has been in place for a sufficient period of time; and (6) direct evidence of any exclusionary strategy, including, notably, internal documents. The Guidance Paper adds that additional factors may also come into play in relation to particular abusive practices. The current legal position. The starting point in any assessment of the question of anticompetitive effects under Article 102 TFEU is that from the very outset the Court of Justice has insisted that the hallmark of abusive conduct is that it has the “effect” of hindering competition. 267 This is consistent with the fact that there are no per se Article 102 TFEU violations, 268 which must logically imply that an absence of evidence of any perceptible effect means that conduct is not abusive. An important affirmation of these principles was made in Post Danmark I. The Court held (among other things): (1) Article 102 TFEU covers conduct that “has the effect, to the detriment of consumers, of hindering the maintenance of the degree of competition existing in the market or the See also, in a refusal to deal case, Case COMP/39.525, Telekomunikacja Polska, Commission Decision of 22 June 2011. 265 See Case COMP/38.233, Wanadoo Interactive, Commission Decision of 16 July 2003, paras. 332 et seq. (recoupment) and paras. 369 et seq. (effects on competition). 266 Guidance Paper, para. 20. 267 Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 6. See also, Case T-65/89, BPB Industries plc and British Gypsum Ltd v Commission [1993] ECR II-389, paras. 65 and 66; Case T-65/98, Van den Bergh Foods Ltd v Commission [2003] ECR II-4653; ECS/AKZO, OJ 1985 L 374/1, para. 86; Deutsche Post AG, OJ 2001 L 125/27 at paras. 36–37; and Case T-83/91, Tetra Pak International SA v Commission [1994] ECR II-755, para. 151 268 See Opinion of Advocate General Ruiz-Jarabo Colomer in Joined Cases C-468/06 to C-478/06, Sot. Lélos kai Sia EE and Others v GlaxoSmithKline AEVE Farmakeftikon Proïonton, formerly Glaxowellcome AEVE [2008] ECR I-7139, para. 62 264

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growth of that competition;” 269 and (2) a lack of anticompetitive effect may be relevant to whether conduct is abusive. 270 So there clearly is a requirement of at least some demonstration of anticompetitive effect. 271 Post Danmark I was largely approved by the Grand Chamber in Intel so its pedigree cannot be in serious doubt. The next issue is what the standard for anticompetitive effects is. The sliding scale moves from capability for anticompetitive effect at one extreme to evidence of actual, or concrete, effects on the other, with a standard based on likely effects somewhere inbetween. A number of points bear mention. First, it would clearly not be correct to insist on a demonstration of actual anticompetitive effects in each and every case. 272 Otherwise, competition authorities and courts would have to wait for obvious anticompetitive effects to arise before they could act, which would in many cases be ineffective and too late. Moreover, in cases that involve actions intended to maintain a dominant position, there would be no perceptible additional effects. Second, much of the confusion in this regard stems from an apparent conflict between older and more recent case law on these issues. Some older case law suggests that conduct that is “capable” of an anticompetitive foreclosure effect suffices to show an abuse. Thus, in Tomra, the Court of Justice held that “it is therefore unnecessary to undertake an analyse of the actual effects of the rebates on competition given that, for the purposes of establishing an infringement of Article 102 TFEU, it is sufficient to demonstrate that the conduct at issue is capable of having an effect on competition.” 273 However, more recent case law clarifies that “capable” (or “tends”) is synonymous with “likely.” 274 In particular, in Post Danmark I the Court of Justice held that 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’ interests.” 275 Similarly, in Post Danmark II, the Court of Justice confirmed that: (1) “the fact that a rebate scheme, such as that at issue in the main proceedings, covers the majority of customers on the market may constitute a useful indication as to the extent of that practice and its impact on the market, which may bear Ibid., para. 24. Ibid., para. 39. See also Case C-280/08 P, Deutsche Telekom AG v Commission [2010] ECR I9555, para. 250 and Case T-271/03, Deutsche Telekom AG v Commission [2008] ECR II-447, paras. 234-244. 271 See also, more specifically in the context of margin squeeze, Case C-52/09, Konkurrensverket v TeliaSonera Sverige AB [2011] ECR I-527, paras. 70-71. 272 See Case T-336/07 Telefónica and Telefónica de España v Commission EU:T:2012:172, para. 272 273 Case C-549/10 P Tomra Systems ASA and others v Commission EU:C:2012:221, para. 79. 274 Case T-219/99 British Airways plc v Commission [2003] ECR II-5917, para. 293. See also Wanadoo España v Telefónica, OJ 2008 C 83/5, para. 544 (confirmed on appeal in Case T-336/07 Telefónica and Telefónica de España v Commission [2012] ECR II-1034, para 268). The merging of “capability” with “likely” effects is to be commended. It would for example be a pretty serious misuse of language to suggest that conduct with a 1% likelihood of anticompetitive effects was “capable” of having such effect. There must be some objective likelihood of such effects materialising. Equally, the “tendency” of things connotes something more likely than not or something usual. 275 Case C-209/10 Post Danmark A/S v Konkurrencerådet EU:C:2012:172, para. 44 (emphasis added). 269 270

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out the likelihood of an anticompetitive exclusionary effect;” 276 and (2) only dominant undertakings “whose conduct is likely to have an anticompetitive effect on the market” fall within the scope of Article 102 TFEU. 277 Finally, whilst it is now clear that the anticompetitive effects do not have to be concrete or actual, but may be a likely effect, the case law has not dealt head-on with the issue of what happens where an anticompetitive effect is posited as “likely” ex ante but it is clear with perfect hindsight (as events turn out) that it had no actual effect. In short, can the ex post absence of an actual effect trump an ex ante likely or potential effect? This is an unresolved issue, and the answer may not be capable or a simple binary or abstract answer. The first point is that, as noted above, there is a long line of case law that where an undertaking in a dominant position actually implements a practice whose object is to oust a competitor, the fact that the result hoped for is not achieved is not sufficient to prevent that being an abuse of a dominant position. 278 There is also case law saying that even if the practices did not seem to have an adverse impact—for example if the dominant firm’s market share decreased and the rivals’ shares increased—this can be disregarded on the basis that but for the abuse these declines and increased would have been even larger. 279 If this case law remains good law, then the ultimate absence of an actual anticompetitive effect would be irrelevant. But there are some contrary indications that, where conduct has been in place for some time, and no actual anticompetitive effect is discernible, this may undermine the ability to rely on a “likely” or potential (ex ante) effect. In Post Norway the EFTA Court held that it “agrees with the applicant that, in some cases, the persistent lack of actual negative effects on competition may cast doubt on a finding by [EFTA Surveillance Authority] that a certain conduct is liable to restrict competition.” 280 This is based on a practical argument that if conduct has continued for some time with no perceptible actual effects, then it is legitimate to wonder whether it had any material potential or ex ante likely anticompetitive effect to begin with. 281 “Object” abuses. Since the distinction between the disjunctive object and effect restrictions of competition is well established under Article 101 TFEU, an obvious question is whether a similar distinction can be found under Article 102 TFEU. This is a multi-faceted issue that requires unpacking several discrete points. First, there is an important legislative difference in that, in contrast to the wording of Case C-23/14, Post Danmark A/S v Konkurrencerådet, EU:C:2015:651, paras. 33-36, 46. Ibid., para. 67. 278 Case T-219/99 British Airways plc v Commission [2003] ECR II-5917, para. 297. In a somewhat surprising decision, the UK Competition and Markets Authority concluded in Remicade (Case 50236, 14 March 2019) that: (1) the dominant firm’s rebate scheme had the potential “to have an exclusionary effect on actual and potential competitors;” but (2) an exclusionary effect was not likely based on the particular factual circumstances at the time when the scheme was introduced because for the scheme to have the intended effect depended on certain broad assumptions about the market by the dominant firm that were incorrect in a number of respects. 279 British Airways, ibid., para. 298. 280 Case E-15/10 Posten Norge AS v EFTA Surveillance Authority, judgment of 12 April 2012, para. 192. 281 See also in this regard Streetmap.EU Limited v Google [2016] EWHC 253 (Ch), para. 90. 276 277

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Article 101 TFEU—which expressly contains the words “object or effect”—the wording of Article 102 TFEU does not mention either object or effect. As the General Court noted in Michelin II “unlike Article [101 TFEU], Article [102 TFEU] contains no reference to the anti-competitive aim or anti-competitive effect of the practice referred to.” 282 Second, there are a number of cases in which the EU Courts have deprecated the object and effect distinction under Article 102 TFEU. As the General Court noted in Irish Sugar “Article [102] does not distinguish between the object and the effect.” 283 But it is arguable that these cases concern a different and, now, largely irrelevant point— whether it was necessary to show at least some effect on competition to sustain a finding of abuse. Historically, this was not the case, at least generally. But it is the general position now, in which case the scope for object-type infringements under Article 102 TFEU must be correspondingly diminished. Indeed, even before these recent changes in the case law, it was doubted whether Article 102 TFEU contained any per se type infringements. 284 Third, it is certainly well arguable that Article 102 TFEU entails in certain cases the making of an “object”-type assessment. For example, pricing below average variable cost (AVC) is normally considered abusive and the same is true for pricing below average total cost but above AVC if there is a plan to eliminate a competitor. 285 Similar price-cost presumptions apply for margin squeeze. Likewise, for conditional rebates, the Commission’s Guidance Paper states that where the effective price is below average avoidable cost (AAC), as a general rule, the rebate scheme is capable of foreclosing even equally efficient competitors. 286 There are also rules under Article 102 TFEU where the case law sets out a presumption of abuse—such as the rule on exclusivity rebates being abusive in Hoffmann La-Roche 287—but the Court of Justice has held that, as a procedural matter, it is open to the defendant to put forward evidence tending to suggest an absence of a foreclosure effect, which the competition authority is then obliged to consider. 288 But adding the label “object” to such practices seems largely semantics: it does not change the underlying substantive requirements set out in the case law in this regard. Fourth, as discussed below, there is also a concept of a “naked” restraint—namely where “it appears that the conduct can only raise obstacles to competition and that it creates no efficiencies, its anticompetitive effect may be inferred.” 289 Relying on this in 282 Case T-203/01, Manufacture française des pneumatiques Michelin v Commission [2003] ECR II4071, para. 237. By contrast, for example, Section 21(1) of the Hong Kong Competition Ordinance has express statutory wording providing for abuses by object and/or effect so the concept of a standalone object abuse plainly arises there. 283 Case T-228/97 Irish Sugar v Commission [1999] ECR II-2969, para. 170. See also Case T340/03, France Télécom SA v Commission [2007] ECR II-107, para. 195. 284 See Opinion of Advocate General Ruiz-Jarabo Colomer in Joined Cases C-468/06 to C-478/06, Sot. Lélos kai Sia EE and Others v GlaxoSmithKline AEVE Farmakeftikon Proïonton, formerly Glaxowellcome AEVE [2008] ECR I-7139, para. 76. 285 Case C-62/86 AKZO Chemie BV v Commission [1991] ECR I-3359. 286 Guidance Paper, para. 44. 287 Case 85/76 Hoffmann-La Roche and Co AG v Commission [1979] ECR 461. 288 Case C-413/14 P Intel v Commission EU:C:2017:632, paras 138-139. 289 Guidance Paper, para. 22.

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Intel 290 the Commission characterised three practices as having a common strand, namely that Intel granted payments to the OEMs in order that the OEMs delay, cancel, or in some other way restrict the marketing of Intel’s competitor’s products. This approach is arguably redolent of object infringements and, indeed, is even stronger by providing something akin to a per se rule. As noted above, the Intel case was referred back to the General Court, where it remains pending, so it is difficult to be categorical about the fate of a “naked” restraint under Article 102 TFEU. Fifth, in Irish Sugar, the General Court applied a principle that conduct that appears to have no legitimate justification, and is targeted at a new rival, can be akin to an object infringement due to its impact on the structure of competition. 291 In that case, the EU Courts found that there was an abuse, since the dominant firm had agreed with one wholesaler and one retailer to swap competing retail sugar products for its own product. The General Court noted: 292 “In addition, the applicant has not in any way challenged the reference to…Tetra Pak II…to the effect that product-swapping by a dominant undertaking constitutes an abuse under Article [102] whenever it has as its object or effect the restriction or elimination of competition from a new entrant in the market. The Court has also held that, by prohibiting the abuse of a dominant position within the market in so far as it may affect trade between Member States, Article [102] covers not only practices that are capable of harming consumers directly but also those which harm them indirectly by undermining effective competition. In this case, the applicant undermined the competition structure which the Irish retail sugar market might have acquired through the entry of a new product, sugar of the Eurolux brand, by carrying out an exchange of products, in the circumstances referred to above, on a market in which it held more than 80% of the sales volume.”

Sixth, it is clear under Article 102 TFEU that it remains open to the dominant firm to argue that its conduct is justified either by considerations of necessity or efficiencies, in which case the conduct does not constitute an abuse at all. 293 But if that is correct, then it is difficult to see how there is room for an “object” infringement under Article 102 TFEU. 294 Even in an extreme case like Baltic Rail, where the dominant firm dismantled a nineteen kilometre section of track connecting Lithuania and Latvia to stymie a competitor, the Commission defined abuse in terms of a lack of objective justification. 295

Case COMP/37.990 Intel, Commission Decision of 13 May 2009. Case T-228/97 Irish Sugar v Commission [1999] ECR II-2969. 292 Ibid., paras. 231-233 (citations omitted). 293 See most recently Case C-413/14 P Intel v Commission EU:C:2017:632, para. 140. For a detailed discussion, see Section 5.5 below. 294 In theory, an object infringement can be exempted under Article 101(3). But, in practice, one can count on one hand the object restrictions which have been exempted in over 50 years of Article 101 TFEU enforcement, and, even then, they concerned exceptional cases: see Case COMP/C1/38.170 REIMS II; and Case IV.F.1/36.718. CECED. 295 Case AT.39813, Baltic Rail, Commission Decision of 2 October 2017, para. 177. The case is currently under appeal. 290 291

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Finally, in a colloquial sense, the “object” of conduct simply concerns its purpose or intention. It is clear that purpose, or intent, may be relevant to the assessment of abuse. This is discussed in detail in Section 5.4.4 below. The concept of a naked restraint. In its Guidance Paper the Commission introduced for the first time the concept of a “naked restriction,” a practice that is so pernicious as to not require any assessment of its effects on competition. The Commission stated that: 296 “There may be circumstances where it is not necessary for the Commission to carry out a detailed assessment before concluding that the conduct in question is likely to result in consumer harm. If it appears that the conduct can only raise obstacles to competition and that it creates no efficiencies, its anticompetitive effect may be inferred. This could be the case, for instance, if the dominant undertaking prevents its customers from testing the products of competitors or provides financial incentives to its customers on condition that they do not test such products, or pays a distributor or a customer to delay the introduction of a competitor’s product.”

This language was clearly intended to pave the way for the Commission’s subsequent Intel decision. 297 The Commission found that Intel restricted the commercialisation of specific AMD-based products by HP, Acer, and Lenovo by making payments to the OEM in question to delay, cancel, or in some other way, restrict the commercialisation of specific AMD-based products. The Commission classified these as “naked restrictions” that is “tactical moves to foreclose AMD from well-identified specific products or sales channels of an OEM while conditional rebates constitute more strategic devices to foreclose AMD from entire segments of OEMs’ demand.” 298 It reasoned that such conduct was analogous to the practice in Irish Sugar where the dominant firm agreed with a wholesaler and retailer to swap competing retail sugar products for its own product. 299 On appeal, the General Court upheld the Commission on this point, 300 albeit this issue is complicated by the fact that the Court of Justice set aside the General Court judgment in full, 301 and the case is back before the General Court again now. The General Court held that a foreclosure effect occurs not only where access to the market is made Guidance Paper, para. 22. Case COMP/37.990, Intel, Commission Decision of 13 May 2009, paras. 870-873. 298 Ibid., para. 1642. 299 Case T-228/97, Irish Sugar v Commission [1999] ECR II-2969. 300 Case T-286/09 Intel v Commission, EU:T:2014:547. In Swedish Competition Authority v Nasdaq (Case PMT 7000-15, judgment of 15 January 2018), the Swedish Patent and Market Court dismissed an allegation that Nasdaq’s preventing a competing exchange, Burgundy, from renting space in the datacenter where Nasdaq´s trading engine was located amounted to an abuse of dominance. The Swedish Competition Authority claimed that this conduct was akin to a “naked” abuse. The court rejected this argument on the basis that: (1) Nasdaq controlled the part of the datacenter where the trading took place and it was up to Nasdaq to decide who could access this part of the datacenter and how customers could connect to this part of the datacenter; (2) Nasdaq did not have any legal obligations to give Burgundy access to this part, to Nasdaq’s customers located there, nor to the financial infrastructure that Nasdaq had invested in and controlled; and (3) it is common practice in exchanges worldwide not let competitors locate in datacenters which an exchange controls. The judgment was upheld by the Patent and Market Court of Appeal in July 2019. 301 Case C-413/14 P Intel v Commission, EU:C:2017:632. 296 297

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impossible for competitors, but also where that access is made more difficult. 302 It added that, for 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. If it is shown that the object pursued by the conduct of an undertaking in a dominant position is to restrict competition, that conduct will also be liable to have such an effect. 303 By this, the General Court had in mind that Intel’s practices were specifically targeted at its rival, AMD: 304 “The only interest that an undertaking in a dominant position may have in preventing in a targeted manner the marketing of products equipped with a product of a specific competitor is to harm that competitor. Consequently, by applying naked restrictions vis-à-vis HP, Lenovo and Acer, the applicant pursued an anti-competitive object.”

Appreciabilty/de minimis. There is a long line of authority to the extent that once an anticompetitive effect is shown—in the sense discussed above—it is not necessary to establish, in addition, that it is of a “serious” or an “appreciable” nature, i.e., no de minimis exception applies. In Hoffmann-La Roche, the Court of Justice stated “…since the course of conduct under consideration is that of an undertaking occupying a dominant position on a market where for this reason the structure of competition has already been weakened, within the field of application of Article [102] any further weakening of the structure of competition may constitute an abuse of a dominant position.” 305 This finding has been confirmed on many occasions, including, most recently, in Post Danmark II: 306 “As regards … the serious or appreciable nature of an anti-competitive effect, although it is true that a finding that an undertaking has a dominant position is not in itself a ground of criticism of the undertaking concerned …, the conduct of such an undertaking may give rise to an abuse of its dominant position because the structure of competition on the market has already been weakened …. [S]ince the structure of competition on the market has already been weakened by the presence of the dominant undertaking, any further weakening of the structure of competition may constitute an abuse of a dominant position… It follows that fixing an appreciability (de minimis) threshold for the purposes of determining whether there is an abuse of a dominant position is not justified. That anti-competitive practice is, by its very nature, liable to give rise to not insignificant restrictions of competition, or even of eliminating competition on the market on which the undertaking concerned operates. It follows from the foregoing considerations that Article [102] must be interpreted as meaning that, in order to fall within the scope of that article, the anti-competitive effect of a rebate scheme operated by a dominant undertaking must be probable, there being no need to show that it is of a serious or appreciable nature.”

Case T-286/09 Intel v Commission, EU:T:2014:547, para. 201. Ibid., para. 203. 304 Ibid., para. 204. 305 Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 123. 306 Case C-23/14 Post Danmark II, EU:C:2015:651, paras. 70-74 (citations omitted). 302 303

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But a number of supplemental remarks bear mention. First, it is important to reiterate that the question of appreciability/de minimis threshold is distinct from the anterior question concerning the need to show anticompetitive effects using the principles outlined above. The two questions should not be conflated. Second, even if these two questions are distinct, there may be some overlap in practice. For example, for an exclusivity rebate practice, the Court of Justice judgment in Intel makes clear that, if the dominant firm raises evidence tending to show no capability to foreclose, the competition authority must assess it. This can include the low market coverage of the rebate. But if an effect is shown on this basis, the effect is likely to be appreciable as well. By contrast, if an anticompetitive effect is not established following the analysis in Intel, there is obviously no need to then go on and consider whether it is appreciable or not. Finally, there is some support for the view that, since the predicate of the rulings suggesting no de minimis threshold under Article 102 TFEU is that competition is already weakened, there is a requirement to show an appreciable effect in a leveraging case in which the firm is not dominant in the second market. 307 But this reasoning would not arguably apply where the leveraging effect is that the conduct maintains or reinforces the position in the dominant market rather than extending that position into the non-dominant market. It may also depend on whether the dominant firm is an unavoidable trading party for customers on the second market. If it is, the fact that it happens not (yet) to be dominant in the second market may be less critical to the analysis. Unimplemented conduct. In rare cases, it may be that the dominant firm considers putting into effect an abusive scheme but does not in fact do so. This issue raises a different point to the case law indicating that, where an undertaking in a dominant position actually implements a practice whose object is to oust a competitor, the fact that the result hoped for is not achieved is not sufficient to prevent that being an abuse of a dominant position. 308 In such a case, the conduct is actually implemented but does not have the desired effect. In the case being considered here, it is never implemented but is merely considered or announced. An example of this rare possibility is the Royal Mail case. 309 Royal Mail was dominant in a national (UK) market for bulk mail delivery. It announced, but did not implement, differential prices for bulk mail operators for access to its final delivery service, without which its competitors could not operate. The price differential depended on the extent to which the bulk mail providers matched Royal Mail’s own delivery patterns. The Competition Appeal Tribunal rejected the argument that the announcement but non-implementation of the access pricing shielded the conduct from review under Article 102 TFEU. It first recalled the special responsibility of a dominant undertaking 307 See Streetmap.EU Limited v Google Inc. and others, [2016] EWHC 253 (Ch), paras. 95-96. The Court also noted that such a conclusion has the support of some leading commentators: see R Whish and D Bailey, Competition Law (8th edn, 2015) (OUP), p.212; J Faull and A Nikpay, The EU Law of Competition (3rd edn, 2014) (OUP), para 4.929. 308 Case T-219/99 British Airways plc v Commission [2003] ECR II-5917, para. 297. 309 Royal Mail plc v Office of Communications [2019] CAT 27. The case is currently on appeal.

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not to allow its behaviour to impair genuine, undistorted competition on the internal market. 310 It then recalled that the list of abuses in Article 102 TFEU is not exhaustive. 311 However, the critical findings were mainly factual points, namely that: 312 (1) the access charges comprised a formal, definitive and public step necessary for the adoption of specific and detailed price and other changes to the relevant contracts; (2) the access charges were intended to, and did, cause customers to make appropriate changes to their activities, contractual and trading arrangements, and price schedules; (3) publication of the access charges was the only way in which the relevant price and other changes could be brought about and, as such, would inevitably tend to have a greater market impact than any other statement or conduct on the part of Royal Mail in relation to the access letters contracts; and (4) the contemporaneous evidence showed that Royal Mail was aware that the publication of the access charges would have an (adverse) impact on the ability of its competitor to expand its end-to-end operations in competition with Royal Mail. Recent examples of the approach to effects. There can be no doubt that in recent major decisions the Commission engages in some detail on the issue of anticompetitive effects. Major decisions now have a separate section analysing at least the question of the potential (or likely) anticompetitive effect of the conduct. Accordingly, the debate is generally focused around the correctness, depth, and robustness of the Commission’s analysis rather than whether the Commission considers such effects at all. Indeed, even in cases where the Commission has formed the conclusion that the case law does not legally require it positively to demonstrate anticompetitive effects, it has tended to do so in any event. 313 a. Qualcomm (Exclusivity). 314 Qualcomm is a leading supplier of chipsets used in smart devices such as smartphones. In terms of abuse, the Commission objected to payments to Apple on condition that Apple obtain from Qualcomm all of its requirements of baseband chipsets compliant with the Long-Term Evolution (LTE) standard, together with the Global System for Mobile Communications (GSM) and the Universal Mobile Telecommunications System (UMTS) standards. In this context, the Commission found that Qualcomm was dominant in a global market defined as the LTE chipset market, covering slim and integrated LTE chipsets but not captive production of such chipsets. A fine of €997 million was imposed. In terms of the potential anticompetitive effects of Qualcomm’s payments, the Commission relied on five main considerations: 315 1. Reduced incentives for Apple to switch. The Commission relied on a series of considerations, including: (1) the absolute and relative (as a proportion of Apple’s baseband chipset expenditure) size of Qualcomm’s payments; (2) Apple would not have obtained these payments had it launched a device Ibid., para. 341. Ibid., paras. 339-340. 312 Ibid., paras. 346-357. 313 See Case AT.40411, Google Search (AdSense), Commission Decision of 20 March 2019, paras. 430 et seq. 314 Case AT.40220 Qualcomm (Exclusivity Payments), Commission Decision of 24 January 2018. 315 Ibid., Section 11.4. 310 311

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The Law and Economics of Article 102 TFEU incorporating an LTE chipset from any supplier other than Qualcomm during the period concerned; (3) the size of the amounts affected by the repayment mechanism had Apple obtained LTE chipsets from any supplier other than Qualcomm during the relevant period; and (4) the cumulative impact of the termination clause and the repayment mechanism if Apple had ceased obtaining from Qualcomm all of its requirements for LTE chipsets during the relevant period. 2. Apple’s internal documents and explanations. The Commission relied upon Apple’s internal documents and explanations to confirm that Qualcomm’s exclusivity payments reduced Apple’s incentives to switch to competing LTE chipset suppliers, in particular Intel, whose chipsets had been evaluated seriously by Apple during the relevant period. 3. Exclusivity payments covered a significant share of the market. The Commission concluded that Qualcomm’s exclusivity payments covered a significant share of the LTE chipset market during the period concerned. The precise figures concerned are confidential but the Commission gave indicative ranges of: (1) a maximum level of up to 40-50% of the worldwide market for LTE chipsets during the period concerned; and (2) an average level of approximately 20-30% of the worldwide market for LTE chipsets during the period concerned. 4. Apple is an attractive customer for LTE chipset suppliers. The Commission’s conclusions on the importance of Apple as a customer was based on five considerations: (1) supplying Apple with LTE chipsets would have helped competing suppliers achieve scale, which was important to compete in the market; (2) supplying Apple with LTE chipsets would have reduced the R&D expenditure that a supplier must incur in relation to each device design of an OEM; (3) supplying Apple with LTE chipsets would have allowed competing suppliers to increase their ability to compete as Apple seeks to obtain high-end components that are more profitable; (4) because of its reputation and role in the development of innovative products, supplying Apple with LTE chipsets would have allowed competing suppliers to improve their credibility and reputation; and (5) the importance of Apple as a customer was supported by the fact that Broadcom ceased to supply baseband chipsets after losing an Apple tender for LTE chipsets. 5. Other considerations. These included: (1) the extent of Qualcomm’s dominant position on the worldwide market for LTE chipsets; (2) the share of the worldwide market for LTE chipsets covered by the exclusivity payments; (3) the conditions and arrangements for granting the exclusivity payments; (4) their duration and amount; and (5) the importance of Apple as a baseband chipset customer. 316

316 Ibid., Sections 10 (dominance), 11.4.3 (coverage), 11.3 (conditions and arrangements for granting the exclusivity payments), 11.4.1 and 11.8 (duration and amount of rebates), and 11.4.4 (importance of Apple as a baseband chipset customer).

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b. Android. 317 In Android, the Commission found four separate infringements that formed part of a single and continuous infringement. Two of the infringements—the tying of the Google Search app with the Play Store and the tying of Google Chrome with the Play Store and the Google Search app—were analysed as a tie. The third infringement—making the licensing of the Play Store and the Google Search app conditional on anti-fragmentation obligations in anti-fragmentation agreements—had certain elements of a tie but, in substance, turned on the question of the objective justification for the clauses in question. The fourth infringement concerned granting revenue share payments to OEMs and mobile network operators (MNOs) on condition that they preinstall no competing general search service on any device within an agreed portfolio, i.e., a type of exclusivity payment. Google was fined €4,342,865,000 in respect of these infringements—the highest fine in Article 102 TFEU history. The Commission found that Google’s portfolio-based revenue share payments were capable of restricting competition, for four main reasons: 318 1. Reduced OEM/MNO incentives to pre-install competing general search services. The Commission found that Google’s portfolio-based revenue share payments reduced the incentives of OEMs and MNOs to pre-install competing general search services because: (1) absent the portfolio-based revenue share payments, OEMs and MNOs would have had a commercial interest in preinstalling competing general search services on at least some of their Google Android devices; (2) a competing general search service could not have matched Google’s portfolio-based revenue share payments to OEMs and MNOs, on the basis that they would not have been able to offer “a sufficient absolute amount of revenues to compensate them for the loss of Google's payments across its entire portfolio of Google Android devices;” and (3) the portfolio-based revenue share payments were one cause of the OEMs and MNOs refraining from pre-installing competing general search services on their Google Android devices. This latter point was based mainly on evidence from OEMs/MNOs. 2. Access to the national markets for general search services made more difficult. The Commission concluded that Google's portfolio-based revenue share payments made access to the national markets for general search services more difficult because: (1) they reduced the incentives of the OEMs and MNOs that received such payments to pre-install competing general search services; (2) they covered “a significant part of the national markets for general search services” on the basis that they involved the “most significant” OEMs distributing Google Android smartphones in the EEA, in terms of shares of sales, and the major MNOs active in the EEA; and (3) competing general search services would have been unable to offset the competitive advantage that Google ensured for itself via the portfolio-based revenue share agreements, by using alternative distribution channels such as downloads.

317 Case COMP/AT.40099, Google Android, Commission Decision of 18 July 2018 (currently on appeal). 318 Ibid., paras. 1282 et seq.

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The Law and Economics of Article 102 TFEU 3. Deterrence of innovation. The Commission found that Google's portfoliobased revenue share payments deterred innovation because: (1) they prevented the launch of Google Android devices pre-installed with general search services other than Google Search and, absent Google’s conduct, users would, therefore, have had a wider choice, for example in terms of quality or range of products; (2) by preventing competing general search services from gaining incremental search queries and the respective revenues and data needed to improve their services, Google’s conduct reduced the incentives of competing general search services to invest in developing innovative features, such as innovation in algorithm and user experience design; (3) they reduced the incentives of Google to improve the quality of its general search service as it did not need to compete on the merits with competing general search services; and (4) even if Google’s conduct coincided with a period of improvement of its general search service, absent Google’s portfolio-based revenue share payments, Google may have improved its general search service to a greater degree. 4. Other considerations. The Commission also had regard to: (1) the extent of Google’s dominant position on the national markets for general search services; (2) the share of the general search services in the EEA covered by the portfolio-based revenue share payments; (3) the conditions and arrangements for Google's portfolio-based revenue share payments, as well as their duration and amount. 319

c. Non-EU example. A good non-EU example of the type of approach advocated above is the analysis of anticompetitive effects is the various cases pursued in South Africa against South African Airways. 320 These cases are of particular interest because they concerned rebate practices of the kind condemned by the Commission and EU Courts in Michelin II and BA/Virgin, on largely formalistic grounds. In the South African cases by contrast, the competition authority and courts looked at: (1) evidence—both contemporaneous and obtained in cross-examination—as to the priority attached by travel agents to attaining the dominant firm’s rebates over consumers’ interests (made possible by asymmetric information between agents and consumers); 321 (2) crosssectional data from one of the adversely affected rivals showing that its share increased with those intermediaries who did not have rebate schemes in place with South African Airways and decreased with those who did; 322 and (3) a wider comparison between the overall performance of South African Airways and the affected rival during the period 319 Ibid., Sections Section 9.5 (extent of dominance), Section 13.4.2 (share of coverage), and 6.3.3 and 13.3 (conditions and arrangements for Google's portfolio-based revenue share payments, as well as their duration and amount). 320 Case 18/CR/MAR01 Competition Commission v South African Airways, Decision of 28 July 2005 and Case 92/CAC/MAR10 South African Airways v Nationwide/Comair, Decision of 11 April 2011. For a discussion of the cases see G Federico, “SAA II: Abuse Of Dominance In The South African Skies,” IESE Business School Occasional Paper, OP 202 June 2012, available at ssrn.com. The author acted for one of the parties opposed to South African Airways. 321 See, e.g., Case 18/CR/MAR01 Competition Commission v. South African Airways, Decision of 28 July 2005, para 195. 322 See Case 92/CAC/MAR10 South African Airways v Nationwide/Comair, Decision of 11 April 2011, paras 116 et seq.

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of the abuse, based on flown revenue, flown passengers, and yields. Of note in connection with point (3) is that the appeal court considered—and rejected—various alternative explanations advanced by South African Airways for why the rival fared less well during the period of the conduct at issue, including the possibility that South African Airways simply had a better service that consumers preferred. 323

5.4.3

Consumer Harm

Uncertainty as to the role of consumer harm under Article 102 TFEU. As discussed in Chapter Two (History, Development, and Reform), abusive conduct under Article 102 TFEU is not confined to limitations of production that impair efficiency in a way that leads to harm to consumer welfare. In particular, the influence of ordoliberalism has led to emphasis being placed on the impact of conduct on market structure, which in turn has led to structural presumptions and a form-based analysis being applied instead of a more direct analysis of the effects of the conduct on consumer welfare. Thus it is argued that notions of economic freedom remain important under Article 102 TFEU, and, conceivably, more so than the impact of conduct on consumer welfare. 324 In more concrete terms, there is long-standing case law that direct harm to final or intermediate consumers is not always a requirement under Article 102 TFEU, and that harm to an “effective competition structure” may suffice. 325 That said, it is now at least tolerably clear that consumer welfare is, in general, the overall guiding principle under Article 102 TFEU—at least for exclusionary abuses. 326 Certainly, this is what the Commission itself has stated in the Guidance Paper. The clear focus is now said to be on those practices that cause most harm to consumers. 327 Thus, it seems that, directly or indirectly, the focus has reoriented around consumers (including of course intermediate consumers). 328 Under the Guidance Paper, efficiency and consumer welfare have assumed greater importance than market structure. 329 Ibid., paras 119-125 and 130-133. See generally L Lovdahl Gormsen, A Principled Approach to Abuse of Dominance in European Competition Law, Cambridge University Press (2010). 325 See, e.g., Case 6/72, Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 215, para. 26 (“As may further be seen from letters (c) and (d) of Article [102], the provision is not only aimed at practices which may cause damage to consumers directly, but also at those which are detrimental to them through their impact on an effective competition structure...Abuse may therefore occur if an undertaking in a dominant position strengthens such position in such a way that the degree of dominance reached substantially fetters competition, [i.e.] [t]hat only undertakings remain in the market whose behaviour depends on the dominant one.”). See more recently Case T-228/97 Irish Sugar v Commission [1999] ECR II-246, paras. 231-233 and Case C-52/09, TeliaSonera Sverige [2011] ECR I-527, para. 24. 326 For an overview see O Dayagi-Epstein, “The Evolution Of The Notion Of Consumer Interest In Light Of The Modernisation Of Article 82 EC,” in Article 82 EC: Reflections On Its Recent Evolution, Hart Publishing, A Ezrachi (ed.) (2009), p.67. 327 Guidance Paper, para. 5. See in this regard Case C-209/10, Post Danmark A/S v Konkurrencerådet EU:C:2012:172, paras. 20, 22, and 24. 328 See to this effect 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] ECR I-9291, para. 63. 329 See L Ortiz Blanco and P Ibáñez Colomo “Evolving Priorities and Rising Standards: Spanish Law on Abuses of Market Power in the Light of the 2008 Guidance Paper on Article 82 EC,” in European Competition Law: The Impact Of The Commission’s Guidance On Article 102,” Edward Elgar Publishing (LF Pace ed.) (2011), Ch. 4. 323 324

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Of course, the Commission is subject to the case law of the EU Courts. In this regard, the case law has not entirely been a model of clarity and consistency on the centrality of consumer harm to the analysis under Article 102 TFEU. In Post Danmark I—a judgment of a Grand Chamber—the Court of Justice made a number of statements that appear indirectly (if not directly) to endorse certain principles from the Guidance Paper. In particular, it stated that: (1) Article 102 TFEU covers conduct that “has the effect, to the detriment of consumers, of hindering the maintenance of the degree of competition existing in the market or the growth of that competition;” 330 (2) to the extent that a dominant firm sets its prices at a level that covers its costs, it will, as a general rule, be possible for a competitor as efficient as the dominant firm to compete with those prices without suffering losses that are unsustainable in the long term; 331 (3) an apparent lack of anticompetitive effect may be relevant to whether conduct is abusive; 332 and (4) it is open to a dominant firm to provide justification for behaviour that is liable to be caught by the prohibition under Article 102 TFEU, 333 either because of objective necessity or an efficiency that also benefits consumers. 334 These statements placed consumer welfare at the heart of the analysis, albeit subsequent judgments in Tomra and Post Danmark II appeared to cast some doubt in this regard. 335 But it is now clear from the Court of Justice judgment in Intel—another Grand Chamber case—that consumer welfare is central to the analysis of exclusionary abuses. In particular, the Court stated that “competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation.” 336 It also confirmed that a consumer efficiency defence is available for prima facie abusive conduct, and also mentioned consumer welfare in this context. 337 Consequences of adopting a consumer harm criterion. Assuming, which we submit is clearly correct as a general matter, consumer welfare is now the overriding test for abusive conduct under Article 102 TFEU, a number of elementary principles follow from this. First, harm to a competitor does not itself mean harm to competition consumers. Legitimate competition can and should harm competitors. Moreover, the fact that one or more competitors exits a market does not mean that competition has been reduced, if enough effective players remain on the market. Second, although harm to an “effective competition structure” has been mentioned as a possible alternative to direct consumer harm, the two concepts should ultimately amount to the same thing: unless there is consumer harm, there is no relevant harm to the 330 Case C-209/10, Post Danmark A/S v Konkurrencerådet EU:C:2012:172, para. 24. Of note also is that the judgment was rendered by the Grand Chamber of the Court of Justice, and so carries more weight than a judgment rendered by a smaller chamber. 331 Ibid., para. 38. 332 Ibid., para. 39. 333 Ibid., para. 40. 334 Ibid., para. 41. 335 See in particular Case C-549/10 P Tomra Systems and Others v Commission EU:C:2012:221, paras 73 and 80 and Case C-23/14, Post Danmark A/S v Konkurrencerådet EU:C:2015:651, paras. 56, 57, 61. 336 Case C-413/14 P Intel v Commission, EU:C:2017:632, para. 134. 337 Ibid., para. 140.

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“structure of competition.” 338 Put differently, there can be no case for intervention under competition law where there is harm to the competitive process, but none to consumers. Of course, at some point, the absence of a sufficient number of effective competitors, or other distortions to the competitive structure, can lead to consumer harm, but this observation is trite: the real issue remains whether adverse effects on competitors and market structure lead to actual or probable harm to consumers. This does not mean that direct harm to consumers is required but it ought to mean that a plausible and robust basis is articulated for showing at least indirect harm to consumers. Third, the burden of showing consumer harm rests with the party asserting such harm. It is not enough to identify a theory of possible harm: some effort must be made to validate it on the facts. The burden then shifts to the defendant to rebut a prima facie case of anticompetitive effects. 339 This is even true in cases where there is something akin to a presumption of harm to competition, such as exclusivity rebates. 340 Finally, evidence of consumer harm is not necessarily the end of the inquiry. In some cases, it may be possible to show that, notwithstanding such harm, a practice generates efficiencies that are large enough to off-set any harm to consumers. This defence is discussed in detail in Section 5.5. Consumer harm under the four clauses of Article 102 TFEU. A surprising feature of Article 102 TFEU is that the only clause that expressly mentions harm to consumers is Article 102(b), which uses the phrase “prejudice to consumers.” None of the other clauses contains a comparable phrase. Notwithstanding this, it would be extremely surprising if the other clauses of Article 102 TFEU involved a notion of abuse that does not necessarily include harm to consumers. Competition cannot be protected for competition’s sake: conduct only adversely affects competition where it operates to the detriment of consumer welfare. As made clear by Advocate General Jacobs in Bronner, “the primary purpose of Article [102] is to prevent distortion of competition and in particular to safeguard the interests of consumers—rather than to protect the position of particular competitors.” 341 The Commission has also clarified that “consumer welfare is See J Vickers, “Abuse of Market Power,” Speech to the 31st conference of the European Association of Research in Industrial Economics, Berlin, 3 September 2004 (“In the limit, the idea that there could be harms to the competitive process, justifying competition policy intervention, that are not even capable of harming consumers is unattractive. Competition to serve the needs of the general public of consumers—not some abstract notion of competition for its own sake—is the point of competition policy.”). See also D Evans, H Chang, and R Schmalensee, “Has The Consumer Harm Standard Lost Its Teeth?” in RW Hahn (ed.), High-Stakes Antitrust: The Last Hurrah?, Brookings Institution (2003), pp. 72 et seq. 339 See Case C-413/14 P Intel v Commission, EU:C:2017:632, paras. 138-139. See also Report by the Economic Advisory Group on Competition Policy, “An Economic Approach to Article 82,” July 2005, p. 13 (“In the first place, in deciding to bring a case, the competition authority should therefore focus on identifying the competitive harm of concern. To do so, the authority must analyse the practice in question to see whether there is a consistent and verifiable economic account of significant competitive harm. The account should be both based on sound economic analysis and grounded on facts. In particular, since many practices can have pro- as well as anti-competitive effects, merely alluding to the possibility of a story is not sufficient. The required ingredients of the story must therefore be properly spelled out and shown to be present.”) (emphasis added). 340 Ibid. 341 Opinion of Advocate General Jacobs in Case C-7/97, Oscar Bronner GmbH & Co KG v Mediaprint Zeitungs- und Zeitschriftenverlag GmbH & Co KG [1998] ECR I-7791, para. 58. 338

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now well established as the standard [for] assessing…infringements of the Treaty rules on…monopolies.” 342 Moreover, the clauses of Article 102 TFEU that do not expressly mention consumer welfare do take this into account, both implicitly and in practice. Exploitative abuses covered by Article 102(a) incorporate an element of direct loss of consumer welfare through excessive pricing. The Commission’s recent practice in tying cases under Article 102(d) has also clearly included detailed analysis of effects on consumers, as evidenced by Microsoft and Android. It is also now clear following the MEO case that consumer welfare is, or should be, part of the analysis under Article 102(c). 343 In particular, the Court of Justice cited with approval the need for the discrimination to affect as efficient competitors. 344 This is clearly correct, since many forms of discrimination can enhance consumer welfare, e.g., by allowing buyers who can only afford to pay less for a product to receive more favourable terms. 345 It would be anomalous, and itself anticompetitive, if Article 102(c) did not allow such contracts. 346 If, as is certainly the case, efficiency defences are available under the other provisions of Article 102 TFEU, it would be unreasonable if it was not a defence under Article 102(c) to show that there had been no prejudice to consumers, and that they would benefit from the different treatment. 347 If not, the criticism that Article 102 TFEU protects competitors and not competition would be true. Internally inconsistent treatment of consumer harm within the different clauses of Article 102 TFEU would also lead to haphazard outcomes. As noted, many practices could fall under more than one clause of Article 102 TFEU or, depending on the context, could fall under different clauses. It would make no sense if the outcome of a case depended on which clause under Article 102 TFEU conduct happened to be classified. Claimants, competition authorities, and defendants could then engage in “category shopping” depending on their objectives.

5.4.4

The Role Of Intent Evidence

Intent evidence in pricing abuse cases. The EU institutions have long held that abuse is “an objective concept,” implying that exclusionary intent is not relevant to the determination of whether conduct is abusive. 348 Nonetheless, it is clear that weight can

342 See former Competition Commissioner N Kroes, European Competition PolicyDelivering Better Markets and Better Choices, speech during the European Consumer and Competition Day, London, 15 September 2005. 343 Case C-525/16 MEO-Serviços De Comunicações E Multimédia EU:C:2018:270. 344 Ibid., para. 31. 345 See generally Ch. 15 (Abusive Discrimination). 346 As the US Department of Justice explained in a report on the Robinson Patman Act 1936, a wide ban on discrimination is anticompetitive and damaging to consumers. See Journal of Reprints for Antitrust Law and Economics (2000 Reprint), US Department of Justice Report on the RobinsonPatman Act, Vol. XXIX number 1, 259. 347 It would be reasonable to presume harm to consumers conclusively, however, in cases of discrimination on the basis of nationality. See Case C-18/93, Corsica Ferries Italia Srl v Corpo dei Piloti del Porto di Genova [1994] ECR I-1783 and Case C-281/98, Roman Angonese v Cassa di Risparmio di Bolzano SpA [2000] ECR I-4139. 348 See, e.g., Case 85/76, Hoffmann-La Roche & Co AG v Commission [1979] ECR 461, para. 91.

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be attached to evidence of exclusionary intent under Article 102 TFEU. 349 The clearest example is the second AKZO rule on predatory pricing. This states that prices below average total cost (ATC) but above average variable cost (AVC) are abusive if they are “part of a plan for eliminating a competitor.” 350 Applying this test, the EU institutions have relied on documentary and other evidence in several pricing abuse cases as a factor supporting a violation. 351 Moreover, reliance on intent evidence has not been limited to the rule identified in AKZO, but has also been applied to prices above average total cost where, inter alia, there was documentary evidence that a near-monopoly liner shipping conference wished to eliminate a rival. 352 The treatment of intent evidence in predatory pricing cases is discussed in detail in Chapter Six, but the salient points are as follows: 353 (1) one must distinguish between formal presentations to management and informal remarks made to or by sales staff, attaching a higher value to the former; (2) the documents must show such intent on the part of senior staff capable of having a material influence on company policy; (3) the focus is not on isolated documents, but on the totality of evidence pointing to unity of purpose in the company’s actions; and (4) for pricing below AVC predatory intent is presumed whereas for pricing above AVC but below ATC the intention to eliminate competition must be established on the basis of sound and consistent evidence. While these statements impose some necessary and useful limits, it remains extremely difficult to distinguish between the language that characterises aggressive, but legitimate, price cuts and predatory pricing. They look the same and their motive forces are also very similar. For these reasons, Chapter Six advocates the use of a more objective approach to issues of intent in predatory pricing cases based on whether the dominant firm’s strategy is incrementally profitable irrespective of its ability to exclude. If it is, then the conduct is rational for reasons other than exclusion. Intent evidence has also played a role in other pricing abuse cases, albeit a subsidiary one compared to predatory pricing. In BA/Virgin, the Commission noted that BA had designed the rebates with the aim of foreclosing competitors: “[BA’s rebates were] intended to eliminate or at least prevent the growth of competition to BA in the UK markets for air transport.” 354 In margin squeeze cases intent may also play a role in the determination of whether start-up losses are part of a normal market evolution or implicitly build in assumptions as to the (anticompetitive) exclusion of rivals. For example, it may be that the assumptions underpinning the business case for the new

349 See Guidance Paper, para. 20, final indent (“direct evidence of any exclusionary strategy: this includes internal documents which contain direct evidence of a strategy to exclude competitors, such as a detailed plan to engage in certain conduct in order to exclude a competitor, to prevent entry or to preempt the emergence of a market, or evidence of concrete threats of exclusionary action. Such direct evidence may be helpful in interpreting the dominant undertaking's conduct.”) 350 See Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3359, para. 71. 351 See also Case AT.39711, Qualcomm (Predation), Commission Decision of 18 July 2019, Section 12.8 352 See Joined Cases C–395/96 P and C-396/96P, Compagnie Maritime Belge Transports SA, Compagnie maritime belge SA and Dafra-Lines A/S v Commission [2000] ECR I-1365. 353 Case T-340/03, France Télécom SA v Commission [2007] ECR II-107, paras. 195 et seq. 354 Virgin/British Airways, OJ 2000 L 30/1, para. 118.

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product or service are based on such unjustified and implausible assumptions that the only inference is evidence of anticompetitive intent. 355 Intent evidence in other types of abuse cases. The EU Courts’ statement that abuse is an objective concept, and the problems with relying on (subjective) intent evidence in pricing abuse cases, might suggest that reliance on intent evidence in other contexts is misplaced. This is not the case, however, and common sense dictates that it should not be either. 356 A number of comments bear mention. First, the Guidance Paper now states that direct evidence of an exclusionary strategy may be relevant to the determination of whether there is anticompetitive foreclosure. This is said to include “internal documents which contain direct evidence of a strategy to exclude competitors, such as a detailed plan to engage in certain conduct in order to exclude a competitor, to prevent entry or to pre-empt the emergence of a market, or evidence of concrete threats of exclusionary action.” 357 While this evidence may not be determinative in itself, the Guidance Paper states that “such direct evidence may be helpful in interpreting the dominant undertaking's conduct.” 358 An example of the interpretative role of intent evidence is Tomra. The Commission identified a series of internal documents which, it said, evidenced the use of exclusive dealing and related practices for purposes of limiting competitors’ access to the market rather than for efficiency reasons. In particular, there were internal documents stating that “I expect that you do everything possible to block any attempt from Repant [a rival] of [sic] entering the market.” 359 Another internal document stated: 360 “[W]e are absolutely intent on denying our competitors any growth in number of installations and market share. This has to be monitored on a local basis and reported very early to me as well. Our response must be ruthless, but hopefully through measures which minimize the long term damage for us: trade-in campaigns, ‘free machines’ (e.g. buy 4, get 1 free), bundling, added value functionality/services, high volume block orders, long term financial arrangements, new machines, basic machine price cuts are always last resort!”

Tomra challenged these findings on appeal. The Court of Justice found that: 361 (1) the concept of abuse is objective, which presumably means that intent evidence is neither See further Ch. 7 (Margin Squeeze). See Case C-413/14 P Intel v Commission, EU:C:2017:632, para. 139 (“…[the Commission] is also required to assess the possible existence of a strategy aiming to exclude competitors…”). The same approach has been advocated under US antitrust law. See M Lao, “Reclaiming a Role for Intent Evidence in Monopolisation Analysis” (2004) 54 American University Law Review 151. 357 Guidance Paper, para. 20, last indent. 358 Ibid. 359 Case COMP/E-1/38.113, Prokent/Tomra, Commission Decision of 29 March 2006, para. 98. 360 Ibid., para. 99. 361 Case C-549/10 P Tomra Systems and Others v Commission, EU:C:2012:221, paras. 16-28. See also the opinion of Advocate General Mazák in Case C-549/10 P, Tomra Systems ASA and others v Commission EU:C:2012:55, para. 10 (“[E]vidence of intent...may actually be relevant to the assessment of the behaviour of a dominant undertaking, which requires an understanding of the economic rationale of that behaviour, its strategic aspects and its likely effects...[S]uch evidence may indicate whether the exclusion of competition was intended or, on the contrary, suggest another explanation for the practices under consideration. Indeed, the evidence allows the Commission to place the practices at issue in their context. For instance, if the Commission (or a national competition authority) finds on the basis of evidence in the file that an undertaking designed the rebate or discount schemes (also) for the benefit of 355 356

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necessary nor sufficient; (2) nonetheless the Commission must examine “all of the relevant facts surrounding that conduct;” (3) the Commission is necessarily required to assess the business strategy pursued by the dominant firm, and may refer in this regard to subjective factors, namely the motives underlying the business strategy in question; and (4) the existence of an anticompetitive intent thus constitutes only one of a number of factors that may be taken into account in assessing abuse: it is not dispositive in its own right. Second, for many non-price abuses, intent is part of the substantive test for an infringement of Article 102 TFEU. The best example is vexatious litigation. In ITT/Promedia the General Court held that the test for predatory litigation is whether the action: (1) cannot reasonably be considered as an attempt to establish the rights of the undertaking concerned and can therefore only serve to harass the opposite party; and (2) is conceived in the framework of a plan whose goal is to eliminate competition. 362 Third, while there are genuine difficulties in relying on subjective evidence of intent to eliminate a rival in many cases—because legitimate competition and exclusionary conduct look almost identical—this objection has less force where conduct has little or no plausible efficiency justification. For example, a dominant firm’s knowingly filing a false patent declaration has no obvious efficiency justification. It would be curious if clear documentary evidence of intent to knowingly file a false patent was ignored by courts or competition authorities. But similar issues may arise in connection with abuses that involve conduct that has no obvious efficiency, such as deliberately suppressing knowledge that a standard involves patents that have not been disclosed to the other members of the standards body. 363 Fourth, even if common sense dictates that intent evidence may be relevant in certain instances, it is important that courts and competition authorities should distinguish as clearly as possible, between statements that may be consistent with legitimate competition and statements that are only or mainly consistent with exclusionary conduct. The latter might be described as specific intent, which courts and triers of fact often deal with in other areas of law. A good example of this distinction is the Decca Navigator case, 364 which concerned the circumstances in which design changes to a dominant firm’s product can be considered exclusionary. There is of course no general principle of law that a firm, even a dominant firm, has a duty to make its products compatible with rivals’ products. But in Decca Navigator, the dominant firm deliberately changed its equipment transmission signals for the sole purpose of rendering rivals’ compatible equipment unusable, while allowing its own products to continue to work effectively. There was no plausible explanation for the frequency changes other than exclusion. Internal documents from the company left no doubt as to the intention behind these changes. They noted that “it was decided that alterations to

consumers–if the undertaking was anticipating efficiency gains, say–then that fact should result in those authorities delving deeper in their investigation.”). 362 Case T-111/96, ITT Promedia NV v Commission [1998] ECR II-2937, discussed in detail in Ch. 12 (Exclusionary Non-Price Abuses). 363 See Ch. 13 (Abusive Conduct and Standards). 364 Decca Navigator System, OJ 1989 L 43/27. See also Case C-209/10, Post Danmark A/S v Konkurrencerådet EU:C:2012:172, para. 29 (contrasting “deliberate” intent with competing).

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the transmissions would be by far the best method of preventing [rivals’] sales.” 365 Again, it would be extremely surprising if specific and unambiguous evidence of this kind was ignored. The most useful purpose of intent evidence therefore is that it helps a court or competition authority to understand the likely effects of the dominant firm’s conduct, and thus to interpret facts and to predict consequences. Fifth, as discussed in Section 5.2.3.4 above, it is now clear that the as-efficient competitor test can play an important role in the assessment of abuse under Article 102 TFEU. In Intel, the Court of Justice stated that the Commission “…is also required to assess the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant undertaking from the market.” 366 But where the as-efficient competitor test is applicable, and is passed by the defendant, it is important that the issue of intent or strategy is not then used to undermine the fact that the asefficient competitor test was passed. The as-efficient competitor test works one way: if it is passed, there is normally no abuse; if it is failed, it is then necessary to consider other factors, albeit the failure of the test is likely to be material. 367 This point seems implicit in Intel but is liable to some confusion. Sixth, an important corollary of the previous point concerns the need to correlate intent with some degree of objective capability. Unlike Section 2 of the Sherman Act 1890, there is no attempt offence under Article 102 TFEU. Accordingly, unless there is specific intent evidence that speaks for itself, and is not dependent upon any supervening act(s), it is important that evidence of intent should be cross-checked against whether the intent posited has some objective degree of capability. A good example of this is AstraZeneca. In relation to the second abuse—the deregistration of a version of Losec—the EU Courts attached limited weight to contemporaneous advice from two AstraZeneca in-house counsel expressing optimism as to adverse effects on parallel imports as a result of deregistration. The Court instead required that the Commission demonstrate some objective likelihood in this regard, which it found the Commission had not examined in any great detail. 368 It further held that any doubt in this regard should be resolved in favour of AstraZeneca given that the Commission bears the burden of proof. On this basis, the Court annulled the decision insofar as it was alleged that AstraZeneca’s deregistration had prevented parallel trade in Denmark and Norway. However, the Court held that subjective intent could nonetheless support a finding of abuse that was based primarily on objective indicators: 369 “…the fact…that the concept of abuse of a dominant position is an objective concept and implies no intention to cause harm…does not lead to the Ibid., para. 25. Case C-413/14 P Intel v Commission, EU:C:2017:632, para. 139. 367 See Guidance Paper, para. 27 (“If the data clearly suggest that an equally efficient competitor can compete effectively with the pricing conduct of the dominant undertaking, the Commission will, in principle, infer that the dominant undertaking's pricing conduct is not likely to have an adverse impact on effective competition, and thus on consumers, and will therefore be unlikely to intervene. If, on the contrary, the data suggest that the price charged by the dominant undertaking has the potential to foreclose equally efficient competitors, then the Commission will integrate this in the general assessment of anti-competitive foreclosure…taking into account other relevant quantitative and/or qualitative evidence.”). 368 Case T-321/05, AstraZeneca v Commission [2010] ECR II-2805, paras. 733, 848, 849, 852. 369 Ibid., para. 359. 365 366

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conclusion that the intention to resort to practices falling outside the scope of competition on the merits is in all events irrelevant, since that intention can still be taken into account to support the conclusion that the undertaking concerned abused a dominant position, even if that conclusion should primarily be based on an objective finding that the abusive conduct actually took place.” On the facts of that case, there was, as noted, no such objective evidence in relation to parallel imports. Finally, it is important not to lose sight of the point that the best-counselled firms will be adept at not creating such documents to avoid arousing suspicions, and may receive specific and continuing training to this effect. Accordingly, the absence of exclusionary intent should not necessarily be dispositive, not least since the question of abuse remains an objective one.

5.5

OBJECTIVE JUSTIFICATION

Objective justification generally. Although Article 102 TFEU does not contain an exemption clause similar to Article 101(3), it has long been established that “objective justification” can immunise conduct that would otherwise be an abuse under Article 102 TFEU from liability. 370 The Guidance Paper now makes the point overtly. 371 In an endorsement of this position in Post Danmark I, the Court of Justice held that: 372 “...an undertaking may demonstrate, for that purpose, either that its conduct is objectively necessary...or that the exclusionary effect produced may be counterbalanced, outweighed even, by advantages in terms of efficiency that also benefit consumers...In that last regard, it is for the dominant undertaking to show that the efficiency gains likely to result from the conduct under consideration counteract any likely negative effects on competition and consumer welfare in the affected markets, that those gains have been, or are likely to be, brought about as a result of that conduct, that such conduct is necessary for the achievement of those gains in efficiency and that it does not eliminate effective competition, by removing all or most existing sources of actual or potential competition.”

This point was most recently confirmed by the Court of Justice in Intel so there can be no doubt about the availability of this defence under Article 102 TFEU. 373

See, e.g., Case 40/70, Sirena Srl v Eda Srl and others [1971] ECR 69, para. 17; Case 24/67, Parke, Davis and Co v Probel, Reese, Beintema-Interpharm and Centrafarm [1968] ECR 55; Case 78/70, Deutsche Grammophon Gesellschaft mbH v Metro-SB-Großmärkte GmbH & Co KG [1971] ECR 487; Case 395/87, Ministère public v Jean-Louis Tournier [1989] ECR 2521; Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207; Case 77/77, Benzine en Petroleum Handelsmaatschappij BV and others v Commission [1978] ECR 1513, paras. 33– 34; Case 311/84, Centre belge d’études de marchéTélémarketing (CBEM) v SA Compagnie luxembourgeoise de télédiffusion (CLT) and Information publicité Benelux (IPB) [1985] ECR 3261; Magill TV Guide/ITP, BBC and RTE, OJ 1989 L 78/43; Eurofix-Bauco v Hilti, OJ 1988 L 65/19; Case T-83/91, Tetra Pak International SA v Commission [1994] ECR II-755; Case T-228/97, Irish Sugar plc v Commission [1999] ECR II-2969; and Case C-163/99, Portugal v Commission [2001] ECR I-2613. 371 Guidance Paper, paras. 28-31. 372 Case C-209/10, Post Danmark A/S v Konkurrencerådet EU:C:2012:172, paras. 41-42. 373 Case C-413/14 P Intel v Commission, EU:C:2017:632, para. 140. Like Post Danmark I, Intel was a judgment of a Grand Chamber of the Court of Justice. 370

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The defence of objective justification is in some ways a tautology. As Advocate General Jacobs stated in SYFAIT, “the very fact that conduct is characterised as an ‘abuse’ suggests that a negative conclusion has already been reached.” 374 It seems odd, then, that abusive conduct can be justified. A more accurate view is that objective justification means that “certain types of conduct on the part of a dominant undertaking do not fall within the category of abuse at all.” 375 Objective justification has a number of different facets under Article 102 TFEU: 376 (1) situations in which the dominant firm’s conduct is objectively necessary because of factors external to the dominant firm’s conduct; (2) situations in which the dominant firm takes defensive measures to protect its commercial interests; and (3) situations in which the dominant firm’s conduct is justified by efficiencies. The practical application of these defences is discussed in detail in subsequent chapters for specific types of abuses: only the basic elements of each defence are outlined below. Defences of objective necessity. A dominant firm’s conduct may be justified by objective necessity. The issue is whether the conduct in question is indispensable and proportionate to the goal allegedly pursued by the dominant undertaking. 377 This question must be determined on the basis of factors external to the dominant firm. 378 Exclusionary conduct may, for example, be considered objectively necessary for health or safety reasons related to the nature of the product in question, albeit in Hilti the Court of Justice made a general statement to the effect that, where there is specific legislation governing health and safety and public bodies entrusted with its supervision, “it is clearly not the task of an undertaking in a dominant position to take steps on its own initiative to eliminate products which, rightly or wrongly, it regards as dangerous or at least as inferior in quality to its own products.” 379 Similarly, in refusal to deal cases, capacity limitations or concerns about quality, security, or safety at a facility may justify a refusal to deal. Such defences will, however, be scrutinised carefully. In Frankfurt Airport, 380 the airport operator argued that its refusal to allow self-handling or additional ramp handling suppliers was justified by a lack of capacity and concerns over safety and quality degradation concerns. An expert report was also submitted by the airport operator to bolster these concerns. The Commission did not accept this report at face value, but set up a group of technical experts consisting of representatives of the airport operator and the complainant and chaired by an independent expert. When the technical group could not reach a unanimous conclusion, the Commission appointed a leading industry expert to compile a detailed independent report. The Commission evaluated 374 See Opinion of Advocate General Jacobs in Case C-53/03, Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) and Others v GlaxoSmithKline plc and GlaxoSmithKline AEVE [2005] ECR I4609, para. 53. 375 Ibid. 376 See generally E Rousseva, Rethinking Exclusionary Abuses in EU Competition Law, Hart Publishing (2010), Ch.7; PJ Loewenthal, “The Defence of ‘Objective Justification’ in the Application of Article 82 EC,” World Competition, Vol. 28(4) (2005), p.455; and T van der Vijver, “Objective Justification and Article 102 TFEU,” World Competition, Vol. 35(12) (2012), p.55. 377 Guidance Paper, para. 28. 378 Ibid. 379 Case T-30/89, Hilti AG v Commission [1991] ECR II-1439, para. 118. 380 See FAG-Flughafen Frankfurt/Main AG, OJ 1998 L 72/30.

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the various reports in reaching its conclusion that the airport operator’s defences were, for the most part, unjustified. 381 More recently in Android, Google argued that the anti-fragmentation obligations contained in its licences were objectively justified because they imposed minimum and common technical standards to ensure that Android will run properly on the large number of different Android variants. It argues that with the great benefit of a free, open-source model for the Android technology comes the responsibility for licensees to protect Android against incompatible or malfunctioning Android variants. This is necessary due to thousands of Android device types in the market (which continue to grow) and different brands, each of which could in principle have their own adapted Android variant. The Commission rejected this defence: 382 stating that: (1) anti-fragmentation obligations were not limited to promoting interoperability but also prohibited OEMs from supporting through different means Android forks that could be pre-installed on devices competing with the devices that had pre-installed Android; (2) Google profited significantly from the open-source distribution of Android and so cannot now claim that the anti-fragmentation obligations are necessary to minimise the negative consequences for Google resulting from greater competition from Android forks; (3) Google did not define precisely what “fragmentation” means; and (4) one of the benefits of developing an Android fork instead of a full-fledged alternative smart mobile OS would be to have access to the wide pool of apps developed for Google Android, meaning that fork developers have an incentive to minimise incompatibilities. Reasonable steps by a dominant firm to protect its commercial interest. A dominant firm may be justified in taking reasonable defensive measures to protect its commercial interests. This defence most commonly arises in connection with price cuts—the so-called “meeting competition” defence—and is discussed in detail in Chapter Six (Predatory Pricing). A similar principle has been elaborated in connection with acts that might be construed as reprisals by a dominant firm against customers/distributors that deal with competing firms. In United Brands, the Court of Justice held that it was abusive for a dominant supplier to terminate supplies to a distributor on the grounds that the distributor had participated in an advertising campaign for a competitor of the supplier. The Court accepted that a dominant firm can take “reasonable steps” to protect its own commercial interests if they are attacked, but that any countermeasures must still be proportionate to the threat “taking into account the economic strength of the undertakings confronting each other.” 383 Later, in Boosey & Hawkes, the Commission clarified that, in situations where a customer transfers its central activity to the promotion of a competing brand, a dominant producer is entitled to review its commercial relations with that customer, and on giving

381 See also Eurofix-Bauco v Hilti, OJ 1988 L 65/19, paras. 88–89 (defence based on safety concerns rejected). 382 Case COMP/AT.40099, Google Android, Commission Decision of 18 July 2018, paras. 1156 et seq. 383 Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, paras. 189–191.

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adequate notice to terminate any special relationship. 384 Although the notion of a proportionate response is somewhat vague, it seems to imply that the dominant firm should not terminate relations without warning but should give notice that is reasonable when the totality of the circumstances of the distributor are considered (e.g., whether the distributor relies exclusively on the dominant firm). But in most cases a distributor will have equivalent contractual or other rights anyway. Perhaps the most significant illustration of the concept of protection of legitimate commercial interests is Glaxo Greece. The Court of Justice was not prepared to accept that the features of the pharmaceutical industry—in particular State price regulation and the limited consumer price benefit from parallel trade—justified treating parallel trade refusals to deal as objectively justified as a general matter. However, re-affirming United Brands, it held that a refusal to meet the orders of an existing customer constitutes an abuse where, without objective justification, the conduct is liable to eliminate a trading party as a competitor. 385 In particular, a dominant firm, including a pharmaceutical manufacturer, is entitled under Article 102 TFEU to protect its commercial interests. On the facts of the case, this meant that the dominant firm could legitimately refuse to meet an order from an existing customer that was “out of the ordinary,” 386 which requires an appraisal of both the “previous business relations” between the pharmaceutical company and the wholesalers, and the “size of the orders in relation to the requirements of the market” concerned. 387 Efficiency defences generally. A final broad category of objective justification is where a dominant firm claims that its conduct is justified by the fact that it enhances its efficiency. Numerous examples are discussed in detail in subsequent chapters: only the principal examples are summarised here. In the area of predatory pricing, price cuts may be introduced to increase demand for the dominant firm’s products. For example, short-term promotional offers are intended to allow consumers to become familiar with a product in the hope that, when they do, they will pay a higher price once the promotional phase ends. Loss-leading has a similar rationale in that price cuts on certain products are offered in order to increase demand for other (complementary) products. Price cuts may also be intended to expand the market or increase efficiency in other ways, such as by acquiring learning experience to reduce costs over time or creating network effects. A slightly different defence is that, in situations of excess capacity, the maximum market price may not exceed any firm’s relevant costs, in which case the least inefficient option is to sell below cost for a period until the market corrects itself. The availability and scope of these defences are discussed in detail in Chapter Six. Objective justification is also a central issue in the case of exclusive dealing, loyalty, rebates, and other vertical restraints. Such restraints may be motivated by the need to recover fixed costs more efficiently, the need to provide optimal incentives to retailers, and the need to ensure that customer-specific investments by the dominant firm are BBI/Boosey & Hawkes—Interim measures, OJ 1987 L 286/36. Joined Cases C-468/06 to C-478/06, Sot. Lélos kai Sia EE and Others v GlaxoSmithKline AEVE Farmakeftikon Proïonton, formerly Glaxowellcome AEVE [2008] ECR I-7139, para. 34. For a detailed discussion see Ch. 10 (Refusal to Deal). 386 Ibid., paras. 67-69. 387 Ibid., para. 73. 384 385

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adequately protected. 388 Many of the same justifications underpin price discrimination by a dominant firm, which should generally be presumed to be efficient where it expands output more than in situations in which uniform prices apply. 389 Similarly, most forms of tying are motivated by efficiencies generated by the joint provision of two or more products or services or by price discrimination. 390 In essence, all of these defences seek to put forward explanations of why the conduct in question is efficient or justified by some legitimate consideration other than the dominant firm’s interest in excluding competitors. The basic conditions for efficiencies. The Guidance Paper now sets out a number of conditions for an efficiency defence under Article 102 TFEU that broadly mirror the conditions under Article 101(3). The Commission considers that a dominant undertaking may justify conduct leading to foreclosure of competitors on the ground of efficiencies that are sufficient to guarantee that no net harm to consumers is likely to arise. In this context, the dominant undertaking will generally be expected to demonstrate, with a sufficient degree of probability, and on the basis of verifiable evidence, that the conditions for an efficiency defence are fulfilled. The conditions are: 391 1.

The efficiencies have been, or are likely to be, realised as a result of the conduct. They may, for example, include technical improvements in the quality of goods, or a reduction in the cost of production or distribution,

2.

The conduct is indispensable to the realisation of those efficiencies. In other words, there must be no less anticompetitive alternatives to the conduct that are capable of producing the same efficiencies,

3.

The likely efficiencies brought about by the conduct outweigh any likely negative effects on competition and consumer welfare in the affected markets,

4.

Finally, the conduct should not eliminate effective competition, by removing all or most existing sources of actual or potential competition. The Guidance Paper states that rivalry between undertakings is an essential driver of economic efficiency, including dynamic efficiencies in the form of innovation. In its absence, the dominant undertaking will lack adequate incentives to continue to create and pass on efficiency gains. In the Commission's view, exclusionary conduct which maintains, creates or strengthens a market position approaching that of a monopoly can normally not be justified on the grounds that it also creates efficiency gains.

The Guidance Paper also envisages a shifting burden of proof. 392 In the first instance it is incumbent upon the dominant undertaking to provide all the evidence necessary to demonstrate that the conduct concerned is objectively justified. This makes sense, since only the dominant firm will know, in the first instance, what the relevant type of See Ch. 9 (Loyalty Rebates and Related Practices) for more detail. See Ch. 15 (Abusive Discrimination) for more detail. 390 See Ch.11 (Tying and Bundling) for more detail. 391 Guidance Paper, para. 30. 392 Guidance Paper, para. 31. 388 389

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efficiency is and what evidence might substantiate it. It then falls to the competition authority (or a claimant, if the relevant context is litigation) to make the ultimate assessment of whether the conduct concerned is not objectively necessary and, based on a weighing-up of any apparent anticompetitive effects against any advanced and substantiated efficiencies, is likely to result in consumer harm. This is consistent with the fact that the competition authority (or claimant) bears the overall burden of showing a violation of Article 102 TFEU. 393 These conditions have, broadly, been endorsed by the case law. First, in Microsoft, the General Court confirmed that the burden to raise such a defence rests with the dominant firm, albeit it also confirmed the notion of a shifting burden set out in the Guidance Paper. 394 Second, in Post Danmark I the Court of Justice clarified that the dominant firm must show that “the efficiency gains likely to result from the conduct under consideration counteract any likely negative effects on competition and consumer welfare in the affected markets, that those gains have been, or are likely to be, brought about as a result of that conduct, that such conduct is necessary for the achievement of those gains in efficiency and that it does not eliminate effective competition, by removing all or most existing sources of actual or potential competition.” 395 Finally, in the same case, the Court confirmed that the fact that the claimed efficiency was not one of the factors appearing contemporaneously in the dominant firm’s documents cannot justify an a priori refusal to take it into account, provided of course that the efficiency’s actual existence and extent has been established. 396 In practice, the notion that an efficiency arose unwittingly is likely to be greeted with some scepticism, but it is nonetheless clear in law that this is not itself a reason to reject them out of hand. 397 Cast study: Streetmap. An exceedingly rare example of a case in which an objective justification defence was accepted is Streetmap. 398 Streetmap concerned Google’s development of its Google Maps product, and whether the impacts of this development on existing online mapping providers was an abuse of dominance. The case concerned two distinct activities: (1) search services; and (2) online mapping services. When Google initially developed its general search services, they did not have a Google-developed mapping product. Google Maps was launched in the UK around April 2005, and, until late 2011, Google licensed UK mapping data from TeleAtlas. 393 See also Joined Cases C-204/00 P et al., Aalborg Portland A/S and Others v Commission [2004] ECR I-123, paras. 78–79 (“[I]t should be for the party or the authority alleging an infringement of the competition rules to prove the existence thereof and it should be for the undertaking or the association of undertakings invoking the benefit of a defence against a finding of an infringement to demonstrate that the conditions for applying such defence are satisfied, so that the authority will then have to resort to other evidence. Although according to those principles the legal burden of proof is borne either by the Commission or by the undertaking or association concerned the factual evidence on which a party relies may be of such a kind as to require the other party to provide an explanation or justification, failing which it is permissible to conclude that the burden of proof has been discharged.”) 394 See Case T-201/04, Microsoft v Commission [2007] ECR II-3601, para. 688. 395 Case C-209/10, Post Danmark A/S v Konkurrencerådet EU:C:2012:172, para. 42. 396 Ibid., para. 43. In Royal Mail plc v Office of Communications [2019] CAT 27 the court attached some importance to the absence of any contemporaneous reference in Royal Mail’s documents for the claimed purpose of its challenged pricing. 397 See Case C-307/18, Generics (UK) Ltd and others v CMA, EU:C:2020:52., paras. 169-171. 398 Streetmap.EU Limited v Google Inc. and others, [2016] EWHC 253 (Ch).

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Since then, it has used its own mapping data (while continuing to license related data, such as satellite imagery, from third parties). At the time Google launched Google Maps, there were already established third party online mapping services, such as Streetmap and Multimap. Initially, under a so-called old-style Maps OneBox, Google allowed users to choose between Google Maps and other online mapping providers by clicking on the underlined address. In 2007, a new-style Maps OneBox was launched. This included for the first time a clickable thumbnail map, initially with the address as a further hyperlink displayed to its right. The thumbnail was an extract from Google Maps, and clicking on it took the user directly to the relevant Google Maps page. A corresponding example of the new-style Maps OneBox from the US is set out below (Figure 1): 399 Figure 1: Newer-style Maps One Box

Streetmap’s claim for damages was that by the visual display at or near the very top of its search engine results page (SERP) of a clickable image from Google Maps, and no other map, in response to certain geographic queries, and the consequent relegation of a link in the general search results to Streetmap to lower down the page, Google was abusing its dominant position in the market for online search and online search advertising, contrary to Article 102 TFEU and its domestic law analogue. The claim was rejected by the English High Court. The main reason was that Streetmap had not made out its case on anti-competitive foreclosure. In particular, while Streetmap may have been an innovative pioneer in online mapping which led to its early success, Google Maps quickly became significantly more advanced in developing functionality, with the result that the success of Google Maps in the UK during the relevant period was explained by a range of factors involving competition on the merits, and was unrelated to the introduction of the new-style Maps OneBox on the Google SERP. 400

399 Subsequently, the dimensions of the thumbnail map were enlarged so that it spread across more of the page. That is the style which largely continues today. 400 Ibid., para. 119.

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Whilst the lack of causation was sufficient to dismiss the claim, the High Court also went on to consider the issue of objective justification and concluded that, in any event, Google’s conduct was objectively justified. Streetmap argued that, instead of adopting the One Box format in Figure 1 above, Google could do the following: 1.

Single thumbnail map and links. This involved having several alternative hyperlink choices in the Maps OneBox to different online mapping providers A click on any of these would bring up in the OneBox a thumbnail map from that provider, and the user could click on one of the alternative links to change the source of the map.

2.

Selection by users of their preferred provider. Google Search has a “Search Settings” page where a user can change preferences for the search engine’s behaviour, e.g. as to the number of results shown per page. There could be an additional section enabling the user to choose a map provider from a number of providers of online maps. The Maps OneBox would then display a thumbnail map from that provider. Since there was more space on this page, a more extensive choice of providers could be offered than in solution 1.

3.

Showing multiple maps. Two or three thumbnail maps, each from a different provider, could be shown adjacent to each other in the Maps OneBox.

The High Court did not consider these alternatives to be more proportionate than the status quo. In relation to solutions 1 and 2, it reasoned as follows: 401 “[A] significant issue for Google is latency: i.e. delay in generating the SERP for users. Google’s evidence emphasised the great importance of minimising delay and that even apparently slight increases in latency have a significant impact. A Google experiment reported in November 2006 revealed that a 0.5 second delay in generating the SERP caused a 20% drop in traffic, while a further experiment in 2009 found that slowing down the load time of the SERP by 0.1 to 0.4 seconds over 4-6 weeks reduced the number of searches per user by on average 0.2% to 0.6%, which is of consequence given the level of Google searches. The new-style Maps OneBox with the Google thumbnail loads on average within 71 milliseconds (ms) of the main part of the SERP, whereas Dr Emmerich recognised that under QBI the third party map could take over 0.5 seconds to load. Although, as Dr Emmerich pointed out, there is not a direct ‘read across’ from the Google experiments, since they concerned delay to the whole of the SERP for all searches (i.e. not merely for geographic searches and even then only for the Maps OneBox element of the SERP), I think it is clear that delay of that kind would have a serious impact on the quality of the Maps OneBox as perceived by users. Dr Emmerich accordingly suggested that Google could have a ‘fallback’ or ‘timeout’ mechanism whereby if the third party map was not generated within a specified time, the SERP would revert to showing a Google Maps thumbnail. But even if that ‘timeout’ were specified at, say, 300 ms, this would lead to some small further delay.”

Whilst this point did not apply to solution 3—since, under this solution, a Google Map thumbnail would be included from the outset—the High Court held that solution 3 above: (1) “has the potential disadvantage of creating clutter on the SERP, depending on the size and resolution of the user’s screen;” 402 (2) either completion of the Maps OneBox would be delayed or it would remain incomplete, which would degrade the 401 402

Ibid., para. 166. Ibid., para. 164.

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user experience; 403 and (3) there would be a problem where the third party provider could not interpret the user query. 404 Evaluating the approach to efficiency defences under Article 102 TFEU. The explicit recognition in the Guidance Paper and case law of a potential efficiency defence under Article 102 TFEU is clearly welcome, since a good deal of unilateral conduct will have a mixture of positive and negative effects on consumers. But significant difficulties remain. 405 A first point is that, despite general recognition of objective justification in the case law, there are almost no reported cases under Article 102 TFEU in which objective justification has actually been accepted by courts and competition authorities. 406 Efficiency defences in Intel and Tomra received a rather short shrift from the Commission, 407 whilst in the recent major digital platform cases all objective justification arguments advanced by the defendants were dismissed. 408 The reasons why efficiency defences have fared so poorly under Article 102 TFEU are not entirely clear. The optimistic view is that the Commission is highly effective in pursuing only those cases where the harm to competition, and absence of offsetting efficiencies, is clear. But ex post analysis of Commission decisions has led economists to argue that efficient practices were condemned by the Commission. 409 Moreover, if this view of Commission practice were correct, it is also surprising that are few if any examples of the Commission’s rejecting Article 102 TFEU complaints on efficiency grounds. Commission officials have given anecdotal evidence that they effectively invite complainants to withdraw complaints that the Commission considers would be rejected due to objective justification. But it would clearly be helpful if the

Ibid., para. 167. Ibid., para. 168. 405 See D Waelbroeck, “The Assessment Of Efficiencies Under Article 102 TFEU And The Commission’s Guidance,” in Competition Law And The Enforcement Of Article 102, Oxford University Press, F Etro and I Kokkoris (eds.) (2010), p.115 and JF Bellis and T Kasten, “Will Efficiencies Play An Increasingly Important Role In The Assessment Of Conduct Under Article 102 TFEU,” in Competition Law And The Enforcement Of Article 102, Oxford University Press, F Etro and I Kokkoris (eds.) (2010), p.129. 406 Streetmap, supra, is a notable exception. In Case AT.39097 Watch Repair, Commission Decision of 29 July 2015, the Commission stated that “the Commission cannot exclude that the selective repair systems set up by the watch manufacturers (and the corresponding refusal by the latter to continue to supply spare parts to independent watch manufacturers) are not susceptible to bring about efficiencies, as claimed by the watch manufacturers, or that they are not objectively justified.” (para. 135) But this was not an acceptance of the defence (“…the Commission cannot exclude…”). Moreover, the overarching point was that if the system was compliant with Article 101 TFEU, it probably also complied with Article 102 TFEU in so far as non-authorised third parties would be refused supplies of spare parts. 407 Case COMP/37.990, Intel, Commission Decision of 13 May 2009, paras. 1617-1639. See also Case COMP/E-1/38.113, Prokent/Tomra, Commission Decision of 29 March 2006, paras. 364 et seq. 408 See Case AT.39740, Google Search (Shopping), Commission Decision of 26 June 2017, Section 7.5; Case AT.40099, Google Android, Commission Decision of 18 July 2018, Section 11.5; Case AT.40220, Qualcomm (Exclusivity Rebates), Commission Decision of 25 January 2018, Section 11.6; Case AT.39711, Qualcomm (Predation), Commission Decision of 18 July 2019, Section 12.9; and Case AT.40411, Google Search (AdSense), Commission Decision of 20 March 2019, Section 8.3.5. 409 See B Nalebuff, “Bundling, Tying And Portfolio Effects,” DTI Economics Paper No. 1, Part 2 (2003) p.20 (discussing the Hilti case). 403 404

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Commission would publish formal rejection decisions in such cases rather than merely strong-arming the complainant to withdraw the complaint. Another argument is that there are conceptual difficulties with the notion of an efficiency being capable of off-setting a (strong) foreclosure effect found under Article 102 TFEU. 410 At the very least, it appears there is something of a disconnect between the theory and practice on objective justification. The reality is that efficiency defences have typically been rejected with cursory analysis by the Commission and EU Courts. This deficiency has not been addressed in the Guidance Paper. In particular, there is no explanation for why efficiency defences have been routinely rejected and no indication that a more flexible approach will in practice be applied by the Commission in future. This is a significant omission since a defence that is recognised in theory but not in practice is the same as no defence at all. A second point is that, although the theory of balancing procompetitive and anticompetitive effects sounds straightforward, it is often anything but. In theory, the exercise is easy: the amount of the benefits (increased consumer welfare) is compared with welfare loss caused by the exclusion of rivals (e.g., reduced consumer surplus or deadweight monopoly loss). Whichever is larger determines the outcome. But in practice it may not be easy, or indeed possible, for a dominant firm to make such detailed assessments at the time it decides on its commercial strategy, in particular if this involves detailed knowledge of the effects of a particular practice on rivals and more generally on consumer welfare. One commentator summarises these practical concerns as follows: 411 “The problem, however, is that neither economic actors nor law enforcement entities are omniscient. Given real world limitations, market-wide balancing tests that seek to assess the benefits and competitive harms of exclusionary conduct are intractable for courts and antitrust agencies, and even more so for firms trying to decide in real time what conduct is permitted and what is prohibited. Prospective defendants cannot be expected to know in real time, ex ante, whether their efficiency-generating conduct will cause disproportionate harm to their rivals or consumers because, in order to know that, the defendants would have to know more than they can be expected to know about consumer demand, their rivals’ costs and prospects for innovation and for mitigation of harm, future entry conditions, and the like. From the perspective of the defendants, therefore, a balancing test would likely either be ignored, impose excessive transaction costs (a kind of tax on entrepreneurship), or result in excessive caution. There is little reason to expect that a balancing test would create optimal ex ante incentives for marketplace behaviour.”

Third, a particular problem arises because the last condition of the efficiency defence under Article 102 TFEU—that the conduct does not “substantially eliminate competition”—is in practice likely to preclude the availability of the defence. Under Article 102 TFEU, an efficiency defence would be raised in circumstances where, first, 410 Indeed, in Atlantic Container, the General Court appeared to suggest that abusive practices could never be justified by benefits to the dominant firm or third parties. See Joined Cases T-191/98, T212/98 to T-214/98, Atlantic Container Line AB and Others v Commission [2003] ECR II-3275, para. 1114. But the judgment clearly acknowledges the existence of an objective justification defence (para. 1113), and its status is now beyond question following the Court of Justice judgment in Intel. 411 See AD Melamed, “Exclusionary Conduct Under the Antitrust Laws: Balancing, Sacrifice, and Refusals to Deal” (2005) 20 Berkeley Technology Law Journal 1249.

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a firm is already dominant and, second, its conduct has been found to have an actual or likely exclusionary effect on competition. Although the EU institutions have made clear that dominance does not necessarily mean that competition is “substantially eliminated,” 412 a finding of dominance and material foreclosure effect under Article 102 TFEU may, for practical purposes, mean that competition is substantially eliminated. But, even then, the conduct in question may still enhance consumer welfare overall. In other words, there appears to be a logical contradiction between the substantive test for abuse and the availability of an efficiency defence: because of the addition of the “substantial elimination of competition” condition, the former seems to preclude the latter. Of course, it can be argued that the same issue arises for agreements under Article 101 TFEU where the parties to the agreement have high levels of market power. However, firms are not obliged to enter into agreements falling within Article 101 TFEU, and it will often be possible to modify an agreement to make it more compliant. The same cannot be said of a dominant firm engaged in unilateral conduct in relation to its own output. And, for many unilateral practices (e.g., tying), it will not be possible to modify them to make them compliant: the benefit may be entirely dependent on having a practice of that kind. Fourth, many economists question whether balancing anticompetitive effects is meaningful where those effects are a function of a restriction that is indispensable to achieve the stated efficiency. 413 For example, if exclusive dealing is indispensable to achieve an efficiency (e.g., to justify a customer-specific investment), the source of the anticompetitive concern is the same as the source of the efficiency. In Microsoft the General Court appeared to suggest that a dominant firm may not be able to rely on efficiencies under Article 102 TFEU where the source of the harm to competition and the efficiency are the same. The Court held that the fact that that tying enabled software developers and Internet site creators to be sure that Windows Media Player was present on PCs worldwide was “precisely one of the main reasons why the Commission correctly took the view that the bundling led to the foreclosure of competing media players from the market.” 414 A final important point is that the scope and availability of an efficiency defence cannot be looked at in isolation from the substantive rules that apply for specific practices. Fundamentally, conduct that represents legitimate competition does not need any efficiency defence, even if it causes material harm to rivals. One unintended effect of the Guidance Paper’s rather open-ended concept of “anticompetitive foreclosure” may be to shunt defendants into having to put forward efficiency defences even in circumstances where the conduct at issue is legitimate. The Guidance Paper does not

412 See Commission Notice—Guidelines on the application of Article 81(3) of the Treaty, OJ 2004 C 101/97, para. 106 and Joined Cases T-191/98 and T-212/98 to T-214/98, Atlantic Container Line AB and Others v Commission [2003] ECR II-3275, para. 939 (“As the concept of eliminating competition is narrower than that of the existence or acquisition of a dominant position, an undertaking holding such a position is capable of benefiting from an exemption.”). 413 See Selective Price Cuts And Fidelity Rebates, Economic Discussion paper prepared by RBB for the Office of Fair Trading, July 2005, para. 4.146 et seq. 414 Case T-201/04, Microsoft v Commission [2007] ECR II-3601, para. 1151.

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sufficiently distinguish between conduct that harms rivals and conduct that harms competition. The lack of a clear and consistent notion of what is abusive conduct also spills into individual practices. For example, the non-discrimination clause in Article 102(c) has sometimes been applied in a mechanical fashion, with little regard for the many legitimate reasons why firms charge different prices or offer different terms. 415 The effect of this rule may be to require dominant firms to put forward efficiency justifications for everyday business decisions. But most differences in prices or terms result from the relative skills and bargaining power of customers and do not have (or need) a formal efficiency justification beyond this. It makes no sense to require a dominant firm to provide an elaborate explanation for something as innocuous as other firms’ negotiation skills or bargaining power. However, the recent judgment in the MEO case does signal a more sensible, consumer welfare based approach to discrimination under Article 102 TFEU. 416 The same could be said of tying. There is strong consensus among economists that tying is usually motivated by efficiencies and that the circumstances in which it can harm consumer welfare are narrow and specific, and unlikely to arise very often in practice. And, yet, the substantive rules on tying effectively require a dominant firm to put forward an efficiency defence where there are two or more separate products and tying has a non-trivial impact on competition. Applying a detailed efficiency justification test in every instance to such practices is unnecessary and wrong. Indeed, it can be argued that the defence of objective justification, as now articulated by the Commission in the Guidance Paper, amounts in some respects to a practical reversal of the burden of proof. 417 It is questionable whether it is correct in law to require the dominant firm to show that the efficiencies outweigh the anticompetitive effects. Article 2 of Regulation 1/2003 provides that “the burden of proving an infringement of…Article [102]…shall rest on the party or the authority alleging the infringement.” 418 In SYFAIT, Advocate General Jacobs made clear that proof of objective justification means that “certain types of conduct on the part of a dominant undertaking do not fall within the category of abuse at all.” 419 It is true that Article 2 of Regulation 1/2003 places the burden of proving the benefit of the conditions of Article 101(3) on the defendant, but it does not apply the same principle to Article 102 TFEU and objective justification. Whilst the dominant firm has an obligation to raise the evidence necessary to establish a defence, the legal burden to prove abuse remains with the Commission (or competition authority or, in litigation, plaintiff).

See Ch. 15 (Abusive Discrimination). Case C-525/16 MEO-Serviços De Comunicações E Multimédia EU:C:2018:270, para. 31. 417 See D Waelbroeck, “The Assessment Of Efficiencies Under Article 102 TFEU And The Commission’s Guidance,” in Competition Law And The Enforcement Of Article 102, Oxford University Press, F Etro and I Kokkoris (eds.) (2010), pp.125-126. 418 Council Regulation 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ 2003 L 1/1. 419 See Opinion of Advocate General Jacobs in Case C-53/03, Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) and Others v GlaxoSmithKline plc and GlaxoSmithKline AEVE [2005] ECR I4609, para. 53. 415 416

Chapter 6 PREDATORY PRICING 6.1

INTRODUCTION

The importance of price competition. Encouraging firms to compete on price is a basic tenet of competition law and policy. The fundamental goal of competition is that rivalry and price competition should force firms to maximise their output thereby selling their products as close as possible to the minimum profitable price—in theory their marginal cost of production (i.e., pricing at the level of the extra cost of producing the last unit of production). The notion that firms should price as close as possible to their lowest profitable price applies with equal force in the case of firms with a dominant position, since the existence of market power gives rise to the possibility that a dominant firm will seek to increase prices above the level that a competitive market would bring about. It is therefore desirable that firms, including dominant firms, are strongly encouraged to offer lower prices. The above principles are widely reflected in case law under Article 102 TFEU. In Eurofix-Bauco/Hilti, for example, the Commission emphasised that “aggressive price rivalry is an essential competitive instrument.” 1 Likewise, in AKZO, the Commission stated that “a dominant firm is entitled to compete on the merits” and that the Commission does not suggest that “larger producers should be under an obligation to refrain from competing vigorously with smaller competitors or new entrants.” 2 In Compagnie Maritime Belge, Advocate General Fennelly made clear that EU competition law’s fundamental goal of encouraging price competition applies equally to dominant firms: 3 “Price competition is the essence of the free and open competition which it is the objective of the Community policy to establish on the internal market. It favours more efficient firms and it is for the benefit of consumers both in the short and the long run. Dominant firms not only have the right but should be encouraged to compete on price...Community competition law...should not offer less efficient undertakings a safe haven against vigorous competition even from dominant undertakings.”

Price competition that can harm consumers. Not all forms of price competition are legitimate under Article 102 TFEU. The most obvious example concerns predatory pricing, discussed in this chapter. Although there is no universal definition of predation, Eurofix-Bauco v Hilti, OJ 1988 L 65/19, para. 81. ECS/AKZO, OJ 1985 L 374/1, para. 81, upheld on appeal in Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3359. 3 See Opinion of Advocate General Fennelly in Joined Cases C–395/96 P and C-396/96P, Compagnie Maritime Belge Transports SA, Compagnie maritime belge SA and Dafra-Lines A/S v Commission [2000] ECR I-1365, paras. 117, 132. See also Cewal, Cowac and Ukwal, OJ 1993 L 34/20, upheld on appeal in Joined Cases T-24/93, T-25/93, T-26/93, and T-28/93, Compagnie Maritime Belge Transports SA and Others v Commission [1996] ECR II-1201. 1 2

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it generally refers to strategies whereby a firm offers low prices in the short-term in order to induce competitors’ market exit (or marginalisation), followed by higher prices in the medium- to long-term. It may be rational and profitable for a dominant firm to invest in loss-making activities for a certain period if the elimination of a rival allows it to increase prices following market exit to a level that compensates for the losses suffered during the predation phase. Predation thus involves reduced short-term profits, or even losses, that exclude actual or potential rivals, followed by higher prices in the medium- to long-term as a result of the additional market power that rivals’ exit (or marginalisation) confers. The challenge faced by a court or competition authority in predatory pricing cases is therefore to identify those limited situations in which the very conduct that competition law is intended to encourage—low prices—operates to consumer detriment. Rules that deal with predatory pricing must decide, first, which economic model should determine whether price-cutting is rational (but for its exclusionary effects) and, second, what legal rules should govern the application of the underlying economic model to determine when price-cutting should be unlawful. The overriding objectives are to ensure that the chosen approach does not allow predatory behaviour to go undetected, and to allow firms to compete on price to the widest possible extent. Consumers benefit from low prices, including, in the short-term at least, low predatory prices. Objections to low prices should be looked at critically to ensure that the rules are clear and no more than necessary in the circumstances. If the rules are not clear or unnecessarily restrictive, there is a significant risk that companies will be cautious about lowering prices. This in turn could lead to a chilling of desirable price competition, with potentially significant welfare implications. In addition, enforcement of whatever approach is chosen must not be too complicated, since a rule that is difficult to enforce creates enforcement and welfare costs of its own. It should also be borne in mind that perfect information will almost never be available in the context of litigation or administrative action. In other words, the optimal framework may not be possible to apply in practice, which has important implications for the choice of economic and legal rules, i.e., administrability. Decisional practice and case law. Whilst the decisional practice and case law is well developed in relation to conditional rebate practices and margin squeeze abuses, cases of pure predatory pricing have been very rare under Article 102 TFEU at the EU level. 4 There are literally only a handful of decisions and judgments. The first case is AKZO, a case from the 1980s, 5 in which the basic rules governing predatory pricing were laid National decisions and judgments on predatory pricing are not uncommon. For recent examples see Bottin Cartographes v Google, Paris Court of Appeal, 25 November 2015 (predatory pricing rejected), French Competition Authority decision No. 18-D-07 of 31 May 2018 on practices implemented in the sector of maritime passenger crossing services between the mainland and the Island of Yeu (predatory pricing dismissed), and Rotterdam District Court, N.V. Nederlandse Spoorwegen, ROT 18/2537, 27 June 2019 (€41 million fine of predatory pricing overturned on appeal). For national decisions and judgments see generally The Dominance And Monopolies Review, 7th Edition (M Dolmans and H Mostyn), August 2019, available at https://thelawreviews.co.uk/edition/1001363/thedominance-and-monopolies-review-edition-7. 5 ECS/AKZO, OJ 1985 L 374/1, upheld on appeal in Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3359. 4

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down. This was followed by Tetra Pak II, 6 which concerned a series of long-standing cumulative abuses by a major carton manufacturer, and Wanadoo, 7 which concerned pricing in internet services markets. An unusual case, concerning selective above-cost pricing by a liner shipping conference, was pursued in CEWAL as a form of predatory pricing. 8 The most recent case, from 2019, is Qualcomm, 9 where Qualcomm was fined in excess of €242 million for two years of predatory pricing. The Commission’s findings are striking, since the case concerns three chipsets supplied by Qualcomm to only two customers, Huawei and ZTE—comprising a very tiny proportion of the relevant market (