European Commission's draft guidelines on exclusionary conduct by dominant companies

In August 2024, the European Commission (Commission) published draft guidelines on exclusionary conduct by dominant companies under article 102 TFEU (Draft Guidelines) and called on stakeholders for comments.

 

Where the Commission stands with its Draft Guidelines

With the Draft Guidelines the Commission summarises, and possibly clarifies, the European competition law on exclusionary abuses and its interpretation by the European Courts. The Draft Guidelines are meant to enhance understanding and improve application of the law by concerned companies. They are however not binding on courts or the legislator.

This is the first time the Commission has published draft guidelines on exclusionary conduct by dominant undertakings. In 2009, the Commission restrained itself to a so-called “Guidance on the Commission’s enforcement priorities” (Enforcement Priorities), which stopped short of being introduced as “Guidelines” which would be understood as self-binding on the Commission.

The Guidelines were published alongside a public consultation, inviting all interested parties to comment on the Draft Guidelines by 31 October 2024.

 

What’s new in the Draft Guidelines?

Dominant market position

The Draft Guidelines only share a few findings on the definition of the relevant markets and dominance over them. Instead, the Draft Guidelines broadly refer to the Market Definition Notice published in February 2024. However, a rather long section deals with so-called collective dominance.

Two-step approach

The first main new element in the Draft Guidelines is a two-step approach for determining abusive behaviour. The current Enforcement Priorities still focus on whether a conduct leads to market foreclosure and, consequently, is capable of harming consumer welfare. Instead, the Draft Guidelines require to establish (i) that the conduct departs from the competition on the merits, and (ii) is capable of having exclusionary effects.

(i) Departing from the competition on the merits

According to European case-law, dominant undertakings have a special responsibility for the remaining competition on the market. They are, however, still allowed to pursue and protect their own commercial interests in line with competition principles. Accordingly, European antitrust law does not go as far as protecting less efficient competitors against meritorious activities by dominant players. Fronting this particularly challenging grey area, the Draft Guidelines define competition on the merits as “normal competition on the basis of the performance of economic operators and which, in principle, relates to a competitive situation in which consumers benefit from lower prices, better quality and a wider choice of new or improved goods and services." (para. 51).

This rather generic and effects-oriented approach is supplemented by more practical indicators of unmerited, ie abusive behaviour, including: (for the full list cf. Draft Guidelines, para. 55)

• whether the dominant undertaking prevents consumers from exercising their choice based on the merits of the products, including product quality;
• whether the dominant undertaking provides misleading information to administrative or judicial authorities or other bodies, or misuses regulatory procedures, to prevent or make it more difficult for competitors to enter the market; and
• whether the dominant undertaking violates rules in other areas of law (for instance, data protection law) and thereby affects a relevant parameter of competition, such as price, choice, quality or innovation.

(ii) Capability of having exclusionary effects

According to the Draft Guidelines, for a conduct to be considered abusive, the European Courts have established rules for the evidentiary burden to prove a conduct is capable of producing exclusionary effects. This requires demonstrating – on the basis of specific, tangible points of analysis and evidence – the relevant conduct is capable of having exclusionary effects.

Categorisation

The second main new element in the Draft Guidelines is the Commission’s categorisation of abusive conduct into (i) naked restrictions, (ii) conduct subject to specific legal tests, and (iii) any other conduct, which does not fall into the first two categories, so-called “conducts with no specific legal test”.

(i) Naked restrictions

According to the Commission naked restrictions are certain types of conduct by a dominant undertaking that have no economic interest for that undertaking, other than that of restricting competition. The following three practices are listed as examples of naked restrictions:

• payments by the dominant undertaking to customers that are conditional on the customers postponing or cancelling the launch of products that are based on products offered by the dominant undertaking’s competitors (citing Intel Corp. v Commission, judgment of 26 January 2022, T-286/09);
• the dominant undertaking agreeing with its distributors that they will swap a competing product with its own under the threat of withdrawing discounts benefiting the distributors (citing Irish Sugar v Commission, judgment of 7 October 1999, T-228/97); or
• the dominant undertaking actively dismantling an infrastructure used by a competitor (citing Lietuvos geležinkeliai v Commission, judgment of 12 January 2023, C-42/21 P).

(ii) Specific legal test

The second category lists conducts, for which a specific legal test has been developed by the courts (or the Commission in the Draft Guidelines). The Commission lists the following conducts:

• Exclusive dealing: While exclusive dealing refers to various forms of obligations to purchase or sell all (or most) of a supply to/from the dominant undertaking, the Commission does not name one specific legal test. In fact, the “obligation” can take many shapes or forms, eg, the dealing does not have to be explicitly exclusive, de facto or incentive-based schemes can also fulfil the requirement.
• Tying and bundling: Tying, on the other hand, has a specific legal test and is constituted where (1) a (on the tying product market) dominant undertaking (2) ties two separate products in a way that customers do not have the choice to obtain the tying without the tied product (so-called coercion), and (3) the conduct is capable of having exclusionary effects.
• Refusal to supply: When a dominant undertaking controls the input to a downstream market where there is still competition its refusal to supply is liable to be abusive if two conditions are met: Firstly, the input is indispensable for the undertaking requesting access to compete with the dominant undertaking in a downstream market. Secondly, the refusal is capable of having exclusionary effects, which in this specific context means the capability to eliminate all competition on the part of the requesting undertaking (so-called Bronner-criteria, cf. Bronner, C-7/97, judgment of 26 November 1998, para. 41).
• Predatory pricing: The dominant company seeks to drive competitors out of the market by below-cost pricing. In such a case, no specific legal test applies, but rather the Commission is required to conduct a case-by-case analysis by comparing the average prices charged and the average costs incurred by the dominant undertaking to establish predation (AKZO v Commission, C-62/86, judgment of 3 July 1991, paras. 71-73). Here, the Draft Guidelines provide for extensive guidance on the application of the price-cost test to be applied.
• Margin squeeze: Characterizing a situation where a dominant undertaking, active, both, on an input upstream and a downstream market sets its upstream or downstream prices at a level that prevents downstream competitors relying on that input from operating profitably on a lasting basis. Such a “margin squeeze” is considered abusive where the three following conditions are fulfilled: (1) the vertically integrated undertaking is dominant on the upstream market, (2) the spread between the upstream and downstream prices prevents equally efficient competitors that rely on the dominant undertaking’s input from operating profitably on a lasting basis on the downstream market, and (3) the conduct is capable of producing exclusionary effects. There is no case law by a European court confirming these requirements.

(iii) Conduct with no specific legal test

Any other conduct that is not covered by the groups (i) and (ii) falls into the third category. To this end, the Commission provides a few examples, namely conditional rebates not being subject to exclusive purchase or supply requirements, multi-product rebates, self-preferencing, as well as access restrictions.

The following table summarises the Commission’s new categories:

	Category I	Category II	Category III
	Naked restriction	Specific legal test	No specific legal test
Definition	Restrictions that have no economic interest for that undertaking, other than that of restricting competition	For five types of conduct specific legal tests have been developed	Conduct not covered by Categories I and II: Does the conduct depart from competition on the merits and is it capable to produce exclusionary effects?
Conduct	Examples: (i) Payment to customers conditional on postponing/cancelling of product launch (ii) Coercing distributors into swapping competing products for own (iii) Actively dismantling infrastructure used by a competitor	(i) Exclusive Dealing (ii) Tying and Bundling (iii) Refusal to Supply (iv) Predatory Pricing (v) Margin Squeeze	Examples: (i) Conditional Rebates (ii) Multi-Product Rebates (iii) Self-Preferencing (iv) Access Restriction Any other not-mentioned conduct

 

Combining the categorisation with the two-step approach: Introducing presumptions

From the categories, which the Commission newly introduces in the Draft Guidelines, it takes the next step to qualify the burden of proof: subject to the category a conduct falls into – according to the Commission in the Draft Guidelines – the abusive behaviour must either be demonstrated and proved by the Commission, or can be presumed, if not rebutted by the dominant undertaking, whereas this presumption varies for each of category I or II behaviour:

• For naked restrictions, the Commission presumes that they depart from the competition on the merits and that they are capable of producing exclusionary effects. According to the Commission, here the presumption can only be rebutted under very exceptional circumstances.

• For Category II conduct, once the factual existence of the relevant conduct is established, its exclusionary effects can be presumed – however, subject to a few classifications and exceptions the Commission introduces into the Draft Guidelines, which, in fact, spoil the seemingly systematic presumption approach (see in various instances in the paras. 77-136 of the Draft Guidelines).

In any event, for Category II behaviour the dominant undertaking can seek to rebut the presumption by submitting, on the basis of supporting evidence, that the conduct is not capable of having exclusionary effects. Given that even a behaviour capable of producing exclusionary effects can be abusive, it will not be enough to demonstrate that there are no actual effects. More practical details on the rebuttal are however left open by the Commission.

	Category I	Category II	Category III
	Naked restriction	Specific legal test	No specific legal test
Departing from competition on the merits?	Presumed. By definition, the conduct does not hold any economic interest other than restricting competition	Presumed. Conduct passing the specific legal test are “deemed” to fall outside the scope of competition on the merits	Not presumed. Burden of proof lies with the Commission
Capability to produce exclusionary effects?	Presumed. Rebuttable "only in very exceptional circumstances"	Presumed, but rebuttable	Not presumed. Burden of proof lies with the Commission

 

Justifications and efficiencies

The Draft Guidelines do not provide any significantly new concepts here but summarise the existing framework of the “objective necessity defence” and the “efficiency defence”. It can be concluded that it remains unchanged that the Commission allows defences only under very strict conditions.

Outlook

During the finalisation of the Draft Guidelines the Commission pointed to its view that in digital markets “it is paramount to ensure an effective and swift enforcement of Article 102 TFEU to intervene before tipping occurs and entrenched market positions are created” (Competition Policy Brief No 1/2023: A dynamic and workable effects-based approach to abuse of dominance, page 2). It can be assumed that the new presumption approach in the Draft Guidelines is part of these efficiency enhancement intentions. Whether the new approach could be successfully defended before the European Courts in case of an appeal seems at least questionable. Although the Commission makes remarkable interpretation efforts to ground such presumptions in the existing case-law, overarching rule of law and due process principles raise significant concerns against such a “fast-track enforcement”. If you do have any questions or want to discuss details, do not hesitate to reach out to your DLA Piper contact.