The Commission’s Art.102 TFEU guidelines: consolidation or creation?

While the granting of rebates is a common commercial practice largely used by dominant and non-dominant firms, the assessment of rebates is one of the most complex and unsettled areas of competition law. In the EU, the decisional practice of the European Commission and the case-law of the Community courts have been harshly criticized as unnecessarily strict, following a form-based approach that sits uneasily with modern economic theory. In response, DG COMP published in December 2005 a Discussion Paper that promotes an effects-based approach to the assessment of rebates. This approach was recently confirmed in the Guidance Paper of the Commission on Article 82 EC published by in December 2008. US courts have generally shown greater deference to conditional rebates adopted by dominant firms, but the case-law remains unsettled, notably in the area of bundled rebates. Against this background, this paper proposes an analytical framework, based on a three-step test, designed to separate pro-competitive rebates from anti-competitive ones. A particular emphasis will be placed on the treatment of single product retroactive rebates, which create complex issues.

While the granting of rebates is a common commercial practice largely used by dominant and non–dominant fi rms, the assessment of rebates is one of the most complex and unsettled areas of competition law. In the EU, the decisional practice of the European Commission and the case–law of the Community courts have been harshly criticized as unnecessarily strict, following a form–based approach that sits uneasily with modern economic theory. In response, DG COMP published in December 2005 a Discussion Paper that promotes an effects–based approach to the assessment of rebates. This approach was recently confi rmed in the Guidance Paper of the Commission on Article 82 EC published by in December 2008. US courts have generally shown greater deference to conditional rebates adopted by dominant fi rms, but the case–law remains unsettled, notably in the area of bundled rebates. Against this background, this paper proposes an analytical framework, based on a three–step test, designed to separate pro–competitive rebates from anticompetitive ones. A particular emphasis will be placed on the treatment of single product “retroactive” rebates, which create complex issues.

Separating Pro-Competitive from Anti-Competitive Loyalty Rebates: A Conceptual Framework

In recent years divergence between United States (US) and European Union (EU) competition policy has garnered a lot of attention. One particular area where these differences are evident is the treatment of vertical restraints. In the USA, an antitrust plaintiff must show that a vertical agreement is likely to harm competition - that is, reduce economic welfare. EU competition law, on the other hand, places a lower burden on the European Commission (EC). The EC recently has promulgated a block exemption regulation (BER) that defines circumstances under which vertical arrangements are automatically exempted under Article (Art.) 81(3); still, European competition law condemns many more vertical agreements than does US antitrust law. Dominant firms entering into vertical agreements receive even harsher treatment under EU competition law. Because the Guidelines to the BER explicitly exclude dominant firms from exemption under Art. 81(3), it appears that Art. 81 proscribes dominant firms from entering into vertical agreements that restrict the behavior of the contracting parties. Additionally, Art. 82 discourages dominant firms from entering into vertical agreements. This paper uses a Bayesian framework to analyze the disparate treatment of vertical arrangements in the USA and EU. The practice of antitrust is the problem of inferring the competitive consequences of various types of market conduct. We argue that an optimal enforcement estimator would minimize an expected social loss function, where the expectation is taken over the posterior probability that a given practice is anticompetitive, given evidence in a particular case. Empirical literature informs priors, whereas theory informs the likelihood. We show how differences in antitrust treatment of vertical practices can be explained by different loss functions, even when each jurisdiction shares the same beliefs regarding the theoretical and empirical effects of vertical restraints.

This paper reviews the 2014 Intel judgment of the General Court of the EU in relation to exclusivity rebates given by dominant firms. It distinguishes between the positive issue – ie the legal standard currently applicable to the assessment of dominant firms' rebates – and the prospective discussion – ie the legal standard that should optimally apply to dominant firms rebates. On the positive debate, the paper argues that Intel affirms a modified per se prohibition rule against dominant firms' exclusivity rebates. The scope of this standard is confined to leveraging rebates, and does not cover non-leveraging rebates, which must be analysed under the rule of reason. The paper also draws a distinction between exclusivity obligations and exclusivity options for which agencies and courts should undertake more economic analysis. On the prospective debate, the paper starts from the assumption made by several scholars that Intel endorses a non-welfarist view of the goals of Article 102 TFEU. With this background, it questions which non-welfarist alternative goal can be ascribed to Article 102 TFEU. The paper finds that none of the three classic non-welfarist goals (ie competitive process, consumer choice and raising rivals' costs) can be acclimated in modern EU competition law. It concludes that it would help all stakeholders, and in the first place the Commission, the national competition agencies, the General Court and the national courts – who are in the driving seat of competition enforcement – to benefit from a clear dicta of the Court of Justice of the EU (CJEU) on the rationale underpinning the Article 102 TFEU prohibition, in so far as exclusionary conduct is concerned. The Court already sought to advance on this complex journey in Post Danmark, which remains a model of judicial clarity and literacy. Future cases – and in particular the pending appeal of the GC Intel judgment before the CJEU – offer a welcome opportunity to settle once and for all the current purposivist controversy, or whatever other label is used.

In December 2008, the European Commission (hereafter, the “Commission”) published a guidance paper on its enforcement priorities in applying Article 82 of the EC Treaty (now Article 102 TFEU) to abusive exclusionary conduct by dominant undertakings (hereafter, the “Guidance Paper”). This document is of a sui generis nature as it “sets out the enforcement priorities that will guide the Commission’s action in applying Article [102] to exclusionary conduct by dominant undertakings.” The Commission does not therefore state or restate the way in which Article 102 should be interpreted, a task which falls within the exclusive remit of the European Court of Justice (hereafter, the ECJ”), but explains the circumstances in which a given dominant firm’s conduct is likely to be subject to enforcement action by the Commission. Against this background, this paper seeks to answer the following question: Is the Guidance Paper useful? Considering that the Guidance Paper has generally been well received by commentators, one could be tempted to respond to this question positively, but a careful review of the document suggests that the answer may be less straightforward than would appear at first blush. To respond to the question posed above, this paper is divided into five parts. Part I explains the context leading to the adoption of the Guidance Paper. Part II briefly describes the content of the Guidance Paper, focusing on the general principles that will guide the Commission’s assessment of foreclosure rather than on its review of the various types of conduct that are likely to fall within the purview of Article 102. Part III addresses the question of whether the Guidance Paper provides sufficient guidance to dominant firms and their advisors as to whether certain conduct they may wish to pursue is compatible with Article 102. Part IV discusses whether the Commission is likely to comply with the effects-based approach promoted in its Guidance Paper or is likely to revert to a form-based approach when this better suits its enforcement objectives. Finally, Part V concludes that while the Guidance Paper gives encouraging signs that the Commission will adopt a modern, effects-based approach when defining its enforcement priorities questions remain as to the practical impact of this document for dominant firms. First, the principles contained in the Guidance Paper are subject to significant exceptions and caveats and provide no safe harbors, hence reducing the overall level of guidance provided for in this document. Second, the approach taken by the Commission in the Intel case suggests that the Commission may still be tempted to rely on the formalistic case-law of the ECJ in order to ensure that its decision does not become subject to a successful appeal.

This study concerns the way agreements between a dominant supplier and its customers that restrict the ability of those customers to buy from the dominant firm’s rivals, including exclusive dealing, conditional rebates and tying and bundling (hereafter, “vertical restraints”) have been assessed by the EU and Brazilian competition authorities and courts.For several decades, vertical restraints have been a subject of debate among lawyers and economists, and views as to how such restraints should be assessed have fluctuated. In recent years, however, a consensus has emerged that per se rules of illegality (or of legality) should not be applied to vertical restraints. Instead, such restraints should be assessed pursuant to an effects-based analysis balancing their pro- and anti-competitive effects. The difficulty, however, is to devise legal tests that allow this balancing to take place in a coherent and rigorous manner.Following an analysis of the economics of vertical restraints, this paper shows that the European Commission, which has the power to enforce EU competition rules, has recently opted for an effects-based approach to vertical restraints, and has developed a Guidance Paper that offers a legal and economic methodology describing how it intends to analyse such restraints. This paper shows, however, that the EU courts are still reluctant to follow such a methodology preferring instead to continue to apply formalistic rules. The situation is different in Brazil where, at least since the enactment of Law 8.884 in 1994, there has been a consensus that vertical restraints had to be analysed under an effects-based approach. However, such an approach has been pursued through balancing tests relying on qualitative criteria and intuitive reasoning, rather than and a rigorous and structured assessment, including quantitative elements, hence leading to inconsistency and uncertainty. The Brazilian competition law system would thus benefit from the adoption of guidelines, which as in the case of the EU Guidance Paper, provides a clear legal and economic methodology as to how an effects-based approach should be implemented.This paper also analyses the extent to which the legal and institutional framework in place in the EU and in Brazil is well suited to the implementation of a rigorous effects-based approach relying on economic analysis. There is no doubt that the mature EU system possesses the legal and institutional framework to apply such a rigorous approach, the problem being however that the EU courts, which are composed of generalist judges, are still reluctant to pursue it. The European Commission, which is a sophisticated institution, can however pursue an economic based approach.Although the Brazilian competition law system is not yet fully mature, it has gone a long way, and the entry into force of the new Brazilian Competition Act 12.529/2011 and the setting up of the New CADE will further contribute to its development. The paper argues that the Brazilian system would greatly benefit from the adoption of guidelines, which, like the European Commission Guidance Paper, would offer a clear legal and economic methodology to implement an effects-based approach to vertical restraints.

This study concerns the way agreements between a dominant supplier and its customers that restrict the ability of those customers to buy from the dominant firm’s rivals, including exclusive dealing, conditional rebates and tying and bundling (hereafter, “vertical restraints”) have been assessed by the EU and Brazilian competition authorities and courts.For several decades, vertical restraints have been a subject of debate among lawyers and economists, and views as to how such restraints should be assessed have fluctuated. In recent years, however, a consensus has emerged that per se rules of illegality (or of legality) should not be applied to vertical restraints. Instead, such restraints should be assessed pursuant to an effects-based analysis balancing their pro- and anti-competitive effects. The difficulty, however, is to devise legal tests that allow this balancing to take place in a coherent and rigorous manner.Following an analysis of the economics of vertical restraints, this paper shows that the European Commission, which has the power to enforce EU competition rules, has recently opted for an effects-based approach to vertical restraints, and has developed a Guidance Paper that offers a legal and economic methodology describing how it intends to analyse such restraints. This paper shows, however, that the EU courts are still reluctant to follow such a methodology preferring instead to continue to apply formalistic rules. The situation is different in Brazil where, at least since the enactment of Law 8.884 in 1994, there has been a consensus that vertical restraints had to be analysed under an effects-based approach. However, such an approach has been pursued through balancing tests relying on qualitative criteria and intuitive reasoning, rather than and a rigorous and structured assessment, including quantitative elements, hence leading to inconsistency and uncertainty. The Brazilian competition law system would thus benefit from the adoption of guidelines, which as in the case of the EU Guidance Paper, provides a clear legal and economic methodology as to how an effects-based approach should be implemented.This paper also analyses the extent to which the legal and institutional framework in place in the EU and in Brazil is well suited to the implementation of a rigorous effects-based approach relying on economic analysis. There is no doubt that the mature EU system possesses the legal and institutional framework to apply such a rigorous approach, the problem being however that the EU courts, which are composed of generalist judges, are still reluctant to pursue it. The European Commission, which is a sophisticated institution, can however pursue an economic based approach.Although the Brazilian competition law system is not yet fully mature, it has gone a long way, and the entry into force of the new Brazilian Competition Act 12.529/2011 and the setting up of the New CADE will further contribute to its development. The paper argues that the Brazilian system would greatly benefit from the adoption of guidelines, which, like the European Commission Guidance Paper, would offer a clear legal and economic methodology to implement an effects-based approach to vertical restraints.

When can a (potentially) dominant firm rely on the “meeting competition defence” to prevent a selective discount falling foul of Article 102(b) or (c) TFEU? And does the firm need to worry about whether its discount discriminates between clients, or is the Commission only really interested in exclusion? These are critical questions for any dominant firm in today's economic climate. Existing case law is however confusing and there is a lack of official Commission guidance. This gives rise to real practical problems and, it is submitted, has more than just the potential to chill competition. This article explores the issues and tries to provide answers. It ends with a plea to the EU Courts and Commission to make clear their reasoning when handling cases in this area, and suggests that jurisprudence and doctrine are now sufficiently mature for the Commission to start work on enforcement guidance.

This compilation of original essays by an international cast of top scholars addresses some of the major issues now facing postal and delivery services throughout the world. The European Commission and member states wrestle with the problem of how to implement the scheduled liberalization of these sectors and maintain the universal service obligation while the United States Postal Service is coming to terms with the Postal Accountability and Enhancement Act. In addition, the book addresses the impact of electronic competition as well as other problems facing the field.

In 2009, The EU Commission’s priority notice (guidance paper) appeared to introduce a new era in the treatment of price-related exclusionary conduct. Being an implementation of the more economic approach the “as efficient competitor” test (hereinafter “AEC test”) entered the stage as the relevant yardstick for assessing conditional rebates. Recently, the European courts have ruled on conditional rebates in Tomra and Intel. Beyond assessing the specific facts at hand, the General Court and the Court of Justice took a stand on the application of the more economic approach to abusive rebates by dominant firms. This article will analyse these rulings and their potential impact on the treatment of rebates under EU competition law.

Purpose This study aims to investigate whether the Indian airline industry operates in a competitive market environment or exhibits collusive behavior. Design/methodology/approach The study explores the impact of key market structure variables – coefficient of variation (CV), four-firm concentration ratio, Hirschman–Herfindahl index and dominant firms’ market share, alongside operational factors – passenger load factor (PLF) and fuel costs on industry profitability. Findings The analysis yields two key insights: first, CV proves to be the most significant concentration measure, effectively reflecting the market’s structural dynamics; second, PLF plays a critical role in driving airline competitiveness and long-term sustainability. Practical implications The study underscores the importance of operational efficiency, aligns with the revisionist perspective on market dynamics and offers actionable insights for airlines striving to succeed in a concentrated yet competitive industry. Originality/value Grounded in the collusion and efficiency hypotheses, this study establishes a theoretical basis to interpret market outcomes. Davidson and MacKinnon’s J-test is employed to assess the validity of hypotheses.

In the on-going EU Commission investigation into Google with respect to online search, a new non-discrimination theory is being proposed: complainants allege that under Article 102 TFEU, a dominant firm must provide its customers access to competitors’ products or content, and must design its own products or manage its own distribution channel so as to not preference their own operations over those of competitors. If this theory is upheld, it will have unexpected adverse effects on firms in a variety of markets, online and offline. This article shows, however, that such a claim has no support in EU jurisprudence or policy. In EU law, only firms controlling truly indispensable or essential facilities can be required to deal with rivals on any terms, and if dominant firms have no duty to deal with rivals, any ‘favouring’ of their own businesses and differential treatment of their competitors cannot be considered abusive.

It has been a well-established principle of EC competition law that there is no inherent conflict between competition laws and intellectual property laws. However, there are indications that this view is coming under pressure. The European Commission’s pharmaceutical sector inquiry has identified a toolbox of practices engaged in by originator firms, which allegedly aims at hindering or delaying generic entry or competition from other originators. A number of these practices involve the strategic use of patents. As sector inquiries aim at giving effect to Articles 81 and 82 EC, the Commission’s preliminary findings raise the question whether strategic patenting engaged in by dominant firms is caught by Article 82 EC and, if so, in what circumstances. This article discusses these questions in light of the existing case law on the application of Article 82 EC to refusals to license intellectual property rights, in particular the Microsoft case, which has extended this case law to patents. The article discusses in particular whether practices involving patent clustering, secondary patenting, and defensive patenting may be caught by Article 82 EC.

Long-term vertical contracts remain a pervasive feature of European electricity markets and despite wide concerns over the ability of de-integrated markets to ensure an optimal allocation of risks, the Commission has constantly voiced strong concerns over their anti-competitive effects. However, due to the lack of decisions in electricity and the on-going modernization of EC competition policy, perceived legal uncertainty is strong. This article proposes to explore the degree of uncertainty in the Commission decisional practice following the recent line of cases in other energy sectors. The article comes up with two conclusions. First, legal uncertainty is largely overstated as both the methodology to analyze these contracts in energy and its implementation principles are clearly emerging. Second, competition enforcement in energy quickly converges with enforcement in other sectors.