EU Commission Publishes New Guidance on Abusive Conduct

December 3, 2008

The concept of abuse of a dominant position, as found in Article 82 of the EC Treaty, is one of the pillars of EU antitrust law.  Although dominance is not unlawful as such, the abuse of dominance is and cannot be exempted.

Recent years have seen much sound and fury but relatively little light shed on the subject.  The EU Courts have upheld a strict approach to defining abuse and the Commission has adopted a number of high profile decisions, particularly at the IP/antitrust interface.  High fines have been imposed even in novel cases.

In December 2005, the Commission published draft guidelines on abuses which could be considered to be exclusionary.  Criticised and praised in roughly equal measure, the Draft Guidelines adopted an "effects-based" approach that would have brought a much-needed coherence to the framework for examining abusive conduct.  There were however significant gaps in the analysis as well as the risk of over-intervention, not to mention a number of internal inconsistencies.

Three years’ on, the Commission has now published a formal Guidance paper.  It is not, however, on what constitutes an abuse but on the Commission’s enforcement priorities.

Cases over the years have confirmed that the Commission has considerable discretion in determining what its priorities are.  This comes to the fore in examining complaints where, in essence, provided the Commission has considered whether or not it is in the Community interest to pursue a case and can state its reasons in a reasonably precise but comprehensible manner, the Community courts will not interfere in the Commission’s decision.

Nevertheless, guidance on enforcement priorities does reveal quite a lot about the Commission’s thinking on abusive conduct.  For example, by focussing on what the Commission calls "anticompetitive foreclosure" the Commission has revealed that its concept of dominance is one which is based on actual market power as opposed to some notion of a hypothetical threshold above which certain types of behaviour are prohibited.  Similarly, the welcome appearance of the "as efficient competitor" test in the original draft Guidelines has been rolled into the new "anticompetitive foreclosure" test.  However, the implementation of this test, particularly in the pricing area, gives rise to fears that it will allow the Commission to attack business conduct that reflects superior efficiency. Moreover, former references to a dual test of the "opportunity and incentive" to foreclose or otherwise restrict competition have been dropped in favour of a catch-all test of "likelihood".

This approach is also apparent in the Commission’s discussion of the efficiencies which may justify conduct leading to foreclosure, although the usefulness of the discussion on efficiencies may be limited by the suggestion that in the case of very high market shares, efficiency gains may be insufficient to justify exclusionary conduct.  Since high market shares may be a result of success (as opposed, for example, to State monopolies), it would be preferable to adopt a positive test or a linear test rather than a negative one, indicating which types of efficiency gain could be sufficient and which would likely not.

In the discussion of the various different specific forms of abuse (exclusive dealing, tying and bundling, predation, refusal to supply and margin squeeze), the Guidelines explain what the Commission considers to amount to abusive conduct, albeit with regular comments to the effect that these are the factors that the Commission will look at when considering whether to intervene.

The tests proposed for Commission intervention in relation to some of these types of abuse, and by implication for what amounts to abusive conduct, are enforcement-oriented in that they rely on data and strategy information (including incentives) about the rivals which is unlikely to be available to the dominant undertaking at the time the impugned conduct was put into effect.

Given the level of detail contained in the Guidelines on Enforcement Priorities, it is perfectly fair to ask what difference there is between such "priorities" and substantive guidelines on determining problematic conduct under Article 82 EC.  In practice, the answer is probably relatively little.  The key could well lie in the extent to which the Commission is willing to limit its own future discretion, as opposed to seeking to curtail the enforcement activities of the competition authorities of the Member States.

A second difference lies in how useful the enforcement priority guidelines are in assisting companies to draw up their business compliance strategies in a reasonably prudent manner.  The answer is pretty clear that they are in fact less helpful than clear and binding substantive guidelines.

As ever, there will be difficult cases where the line between competition on the merits and anticompetitive conduct will be difficult to draw. The Guidelines on Enforcement Priorities will be of relatively little use in those cases.  Similarly, they will be less useful than substantive guidelines in those cases being dealt with at the national level. 

However, they are likely to provide useful guidance to many companies in drawing up their commercial strategies, particularly on those very frequent occasions where markets are difficult to define, market shares may seem high and prudence dictates erring on the side of over-compliance.

Gibson, Dunn & Crutcher LLP

Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn attorney with whom you work or any of the following: 
Peter Alexiadis – Brussels (+32 2 554 7200, [email protected])
David Wood – Brussels (+32 2 554 7210, [email protected])
James Ashe-Taylor – London (+44 20 7071 4221, [email protected])

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