Overview
On August 1, 2024, the European Commission launched a public consultation inviting interested parties to comment on its draft Guidelines on exclusionary abuses of dominance. This step was long awaited and overdue. In its 2008 Guidance document, the Commission had initially set out its enforcement priorities with regard to exclusionary abuses and promoted a new approach focused on the potential effects of alleged abusive conduct, through the analysis of market dynamics.
Since then the EU Courts have delivered over thirty judgments on exclusionary abuses, clarifying the scope and application of Article 102 TFEU. Through its enforcement practice, the Commission also has gained extensive experience with regard to exclusionary abuses. Building on this experience, the draft 2024 Guidelines shall now help to increase legal certainty for consumers, businesses, national competition authorities, and national courts on key issues concerning exclusionary abuses by dominant companies. Interested parties are invited to submit their comments on this draft by October 31, 2024. The Commission plans to finalize and adopt its Guidelines, on the basis of the comments received in response to this public consultation, during the course of 2025.
The draft Guidelines shall ensure that Article 102 TFEU is applied in a way to keep markets open and dynamic, affording new opportunities for innovative players, ensuring innovation and an efficient allocation of resources, contributing to sustainable development, and enabling strong and diversified supply chains. The Commission emphasizes the need for this provision to be applied in a predictable and transparent manner so that companies can operate freely in the internal market. The draft Guidelines are also intended to guide national courts and national competition authorities in their application of Article 102 TFEU, notwithstanding any stricter national rules.
The question therefore is whether the draft Guidelines will be able to deliver on these objectives. Upon first reading of the draft Guidelines, this does not seem so obvious. The text underlines that for dominant companies, virtually every form of conduct can potentially lead to an abuse if it is capable of producing exclusionary effects, without suggesting any safe harbor. Unsurprisingly, Article 102 TFEU applies to all commercial practices by dominant undertakings that may directly or indirectly harm consumer welfare, including by undermining an effective competition structure.
The Commission however essentially limits itself in describing the relevant legal criteria for selected forms of abusive conduct, based on the established case law of the EU Courts. In doing so, the Commission refers to well-known legal categories and does not add much of its own thinking about its own enforcement practice and priorities. By underlining the prevailing importance of a case-by-case analysis, the Commission retains wide discretion for its investigations and decisions. The draft Guidelines read more like a “state of play” report than a forward-looking outline of the way in which emerging and upcoming novel questions might be assessed going forward.
1. Assessment of Dominance
As set out in section 2 of the draft Guidelines, the definition of dominance remains unchanged compared to the 2008 Guidelines. Dominance is measured by the extent to which an undertaking is able to act to an appreciable extent independently of its competitors, customers and suppliers. Defining the relevant market based on the Commission’s revised Market Definition Notice requires identifying the competitive constraints exerted on undertakings when offering products or services in a given territory. In doing so, the companies’ existing market power must be considered. Thus, market definition and the assessment of dominance are interrelated.
Generally, market shares above 50% will constitute evidence of dominance, but even lower market shares do not preclude a finding of dominance. In fast-growing markets with short innovation cycles, high market shares may be momentary, which in practice may however be difficult to ascertain. Entry barriers are explained with a special focus on platform markets, where network effects can make it more difficult for entrants to simultaneously attract sufficient users on both sides of the platform. Countervailing buyer power, if sufficiently strong, may deter or defeat an attempt by the undertaking concerned to exercise market power.
For collective dominance to be found, two or more legally independent entities must present themselves or act together as a collective entity from an economic point of view. Competition between these entities does not need to be completely eliminated, nor is it required that the undertakings adopt identical market conduct. It is sufficient that the abusive action can be identified as a manifestation of a joint dominant position, which requires a look at economic links or factors giving rise to a connection. These may result from an agreement, from structural or other links, or from an economic assessment of the market structure in question and the way in which the undertakings interact. It shall be sufficient to find that the market characteristics facilitate the adoption of a common policy. While consistent with some past precedents, such cases have however remained rare, and the draft Guidelines do not contain any new elements in this regard.
2. General Principles on Abusive Conduct
According to the draft Guidelines’ section 3, the concept of abuse remains objective so there is no requirement of bad intent. Abusive conduct may be found if the conduct in question departs from competition on the merits and is capable of having exclusionary effects. Dominant companies may protect their commercial interests as long as their purpose is not to strengthen or abuse their dominant position. This is the case when they compete on the merits, i.e. normal competition relying on their performance including some consumer benefits. The mere intention to compete on the merits is, by contrast, insufficient to deny the abuse.
In the draft Guidelines, the Commission identifies certain categories of conduct that are subject to specific legal tests when assessing whether they fall within or outside the scope of competition of the merits. These include inter alia exclusive dealing, tying and bundling, refusal to supply, predatory pricing, and margin squeeze. For other forms of conduct, the general test to be applied may include the consideration of restricted consumer choice, misleading information or misuse of regulatory processes, violation of other laws having an impact on parameters of competition, biased or discriminatory treatment of competitors, or unreasonable changes of conduct.
With regard to the required evidence to demonstrate abusive conduct, the draft Guidelines identify three different categories of conduct:
(i) For certain types of conduct it is necessary to demonstrate the capability of producing exclusionary effects. These effects must be shown on the basis of specific, tangible points of analysis. This suggests that the effects must be likely to occur rather than being merely hypothetical, but it is not necessary to show that they have actually materialized. This exercise is case- and fact-specific.
(ii) Certain types of conduct are presumed to lead to exclusionary effects, due to their high potential to restrict competition. While the concept of presumption has not been explicitly used or confirmed by the EU Courts in this context, the Commission uses this term to allocate the evidentiary burden to dominant companies, rather than the enforcement authorities. This applies notably to exclusive supply and purchasing, rebates made conditional on exclusivity, predatory pricing, margin squeeze with negative spread, and certain forms of tying, all listed in section 4.2 of the draft Guidelines. Dominant companies can try to rebut these presumptions by submitting evidence to the Commission showing that their specific case differs from the underlying assumptions upon which the relevant presumptions set out in the draft Guidelines are based. It is then for the Commission to either accept or reject the rebuttal.
(iii) For “naked restrictions”, which by their very nature lead to exclusionary effects, the presumption of being abusive is very difficult to rebut and will thus only succeed under exceptional circumstances. These cases are defined as conduct not pursuing any economic interest for the dominant company other than the restriction of competition. Examples for this category of conduct include payments to customers conditional on postponing or cancelling the launch of their products that are based on products offered by the dominant company’s competitors (derived from the Intel case) and the dismantling of infrastructure used by a competitor (derived from the Lithuanian Railways case).
Any exclusionary effects identified need to be attributable to the conduct at issue, but need not be their sole cause. It is sufficient to establish that the conduct increases the likelihood of the exclusionary effects materializing on the market. This capability analysis requires a counterfactual comparison with the situation absent the conduct, comparing the market situation before and after the implementation of the conduct.
In certain cases, it may be appropriate to use as counterfactual an alternative hypothetical scenario, in which the conduct would be absent and certain likely developments are also considered, notably when market developments most likely have occurred anyway. In such cases, it is sufficient to establish a plausible outcome amongst various possible others. In any event, such comparison may not be required where the conduct of the undertaking has made it difficult or impossible to ascertain the objective causes of observed market developments.
A single substantive legal standard applies to establish the capability to produce exclusionary effects on dominated and non-dominated markets. However, in a dominated market, the assessment should pay attention to the fact that competition is already weakened and consider all facts and circumstances relevant to the conduct, so as to establish whether the conduct is capable of producing exclusionary effects. The relevant criteria to be considered may include the position of the dominant undertaking and of its rivals, suppliers and customers, entry and exit conditions, economies of scale and network effects on the relevant markets, the share of total sales on the relevant market affected by the conduct, evidence of exclusionary strategies (intent), or actual harmful effects on the relevant market, among others. This non-exhaustive list leaves a lot of discretion to the Commission as an enforcer.
The draft guidelines also contain a list of elements that are not required for the capability assessment, such as actual harm to competition or consumers, profitability of the conduct, or evidence that affected competitors are as efficient as the dominant undertaking. Likewise, it is not necessary to show that the potentially exclusionary conduct is enabled by the dominant position.
This threefold approach based on three different levels allocating the burden of proof is new compared to the 2008 Guidance. While the presumptions set out in the two latter categories are presented as deriving from the case law of the EU Courts, it is not easy to conceive that the Commission will adopt decisions with hefty sanctions only relying on such presumptions, rather than upon a demonstration of all relevant elements with sufficient evidence. Such an approach would come close to the DMA mechanism which is deliberately different from the competition law enforcement system.
3. Categories of Abusive Conduct
In an attempt to shed more light on the Commission’s enforcement practice regarding the different categories of abusive conduct, section 4 of the draft Guidelines distinguishes between conduct subject to specific legal tests set out in EU case law and other forms of conduct not subject to any specific legal test. The Commission obviously seeks to move away from existing economic concepts such as ‘anti-competitive foreclosure’ and ‘consumer harm’ while emphasizing more formalistic tests. The Guidelines also attempt to establish various presumptions of harm in certain scenarios. Whether or not going beyond existing jurisprudence, it remains to be seen whether cases taken on the basis of this guidance will be eventually approved or overturned by the EU Courts.
Section 4.2 provides guidance for five categories of conduct subject to specific legal tests, established by the EU Courts, to determine whether they infringe Article 102 TFEU. When a given conduct meets the conditions set out in one of the specific legal tests, it is presumed to be potentially abusive, because it falls outside the scope of competition on the merits and can have exclusionary effects (see point 3 above).
(i) Exclusive sale or purchase obligations may be abusive, even if they were agreed among the parties in a formal contract. Stocking and volume requirements may fall under this category as well. They are deemed to produce exclusionary effects by depriving or restricting the seller or customer’s choice of possible sources of supply and demand. It is for the dominant company to present evidence to rebut this presumption which the Commission will have to assess with regard to several criteria listed in the draft Guidelines. This guidance relies e.g. on the CJEU’s Intel ruling of 2017, backed up by other cases.
(ii) Tying and bundling can be pro-competitive under certain circumstances, but the draft Guidelines set out in great detail the specific criteria for them to be abusive, essentially relying on the Google Android ruling of 2022 and the Microsoft ruling of 2007. The presumption of abusive conduct applies when the tying and tied products are separate, the undertaking is dominant in the market for the tying product and does not give customers a choice to purchase both products separately, and the tying of the products is capable of having exclusionary effects.
(iii) Refusal to supply continues to be considered as a self-standing form of abuse, different from cases of exclusionary access conditions. This section draws on the CJEU’s rulings in Slovak Telekom and Lithuanian Railways, in addition to older case law, such as Bronner and IMS. The key criterion for finding abusive conduct is the presence of a truly indispensable input in the hands of the dominant undertaking, which is not the case if actual or potential, even less advantageous, substitutes are available.
(iv) Predatory pricing remains to be assessed with a price-cost test comparing the actual sales prices on the dominant firm with its average variable cost (AVC) and/or average total costs (ATC), as per the AKZO and Post Denmark For prices below ATC, the intent of the dominant firm to foreclose the market becomes relevant, exceptionally, based on relevant evidence, as occurred e.g. in the France Télécom case. The draft guidelines contain some useful explanations about the cost benchmarks and the data to be considered and possibly adjusted as part of the price-cost test.
(v) Margin squeeze cases are defined in great detail, relying on the CJEU rulings in Deutsche Telekom, Telefonica and TeliaSonera. Depending on the scope of the spread between the wholesale and the retails prices charged by a vertically integrated dominant firm on related up- and downstream markets, the relevant test may either be limited to a mere price-price comparison (in case of a negative spread) or require the consideration of the dominant firm’s own downstream cost (in case of a positive spread).
Section 4.3 of the draft Guidelines addresses four other types of abusive conduct for which no specific legal tests have been established in the EU case law, but certain more general guidance can be derived from Court rulings. These include conditional and multi-product rebates, with reference to recent rulings in Google Android, Unilever Italia, and Servizio Elettrico Nazionale, self-preferencing with reference to the Google Shopping case, and access restrictions falling short of an access refusal, referring to the Slovak Telekom case.
In the entire Section 4, the draft Guidelines basically only summarize the existing case-law around the different categories of cases. While they do not individually cover other forms of conduct that may arise out of emerging or future business practices by dominant firms, the draft Guidelines should not be understood as exhaustive in any way. The Commission retains significant discretion to decide whether or not to investigate any form of abusive conduct, even when it is not explicitly mentioned in the draft Guidelines. This is due to the overall enforcement system and the existing procedural framework, which are not likely to change, and certainly not as part of the adoption of the Commission’s Guidelines on Article 102 TFEU. In that regard, the added value of the draft Guidelines appears somewhat limited.
4. Objective Justifications
The draft Guidelines conclude, in section 5, with some limited explanations on the criteria under which the Commission assesses any claims for objective justification of allegedly abusive potentially exclusionary conduct by dominant firms. For that purpose, the conduct in question must either be objectively necessary or produce efficiencies that counterbalance, or even outweigh, the negative effect of the conduct on competition.
The objective necessity defense may be based on legitimate commercial considerations of the dominant firm, such as the protection against unfair competition or the maintenance of technical product performance. By contrast, public health, safety or other public interest considerations are not likely to pass this test, as the EU Courts have determined that their preservation is not the duty of undertakings, even when they hold a dominant position. The efficiency defense requires a demonstration that the exclusionary effects are counterbalanced or outweighed by efficiencies that also benefit consumers, provided there is a link between the consumer benefits and the potentially exclusionary effects, and the conduct is proportionate.
The burden of proof for both of these defenses falls upon the dominant undertaking, which requires the collection and presentation of consistent and convincing evidence. The draft Guidelines specify, once again without really innovating, that vague, general and merely theoretical claims or claims relying exclusively on the dominant undertaking’s own commercial interests, would be insufficient in this regard. It remains for the Commission to decide whether the required standard has been met, subject to scrutiny by the European Union courts.
5. Outlook
While the draft has in the meantime received unbiased support from national competition authorities through the ECN, it can be expected that the Commission will receive many critical comments on its draft Guidelines before the end of October, claiming that more tangible guidance be provided. In this moment of expansive antitrust enforcement, regulators are taking increasingly strict positions in their guidelines, also in the US.
The new set of presumptions with wide discretion for the Commission to assess any rebuttals may however lead to less antitrust compliance rather than more. Introducing more safe harbors and clearer lines allowing companies to structure their behavior around the guidance would be more suited to enhance legal certainty and increase compliance.
This would also be in line with the renewed role of competition law enforcement in a world with many new challenges, as recently articulated by Commission President von der Leyen. It will be interesting to observe whether the next Competition Commissioner will step up the efforts in this direction next year.
