European Commission proposes new guidelines on exclusionary abuses

The draft guidelines are based on the case law of the Court of Justice of the European Union (CJEU), but contain several new inventions that both dominant undertakings and their competitors should be aware of.

Consultation responses from relevant players were recently published on the Commission's website, and the draft has been met with some skepticism. In this newsletter, we will examine the key changes in the draft guidelines and evaluate how we anticipate the final guidelines will be shaped based on the feedback received.

Background information

In 2008, the Commission published a note outlining the cases it would prioritize under the enforcement of Article 102 TFEU. This established an effects-based economic approach to the assessment of abuse. Since 2008, the CJEU has delivered more than 30 judgments on exclusionary abuses - including landmark decisions such as Intel (2017), SEN (2022) and Unilever (2023), and the Commission has sought to codify this case law in the draft guidelines. Through a presumption-based approach, the Commission's stated purpose is to increase legal certainty and help undertakings to self-assess their own conduct.

The draft guidelines are not legally binding, and only the CJEU has the authority to interpret and define the content of Article 102 TFEU. However, the draft guidelines reflect Commission's own understanding of the CJEU's case of law, and it can be assumed that they will have a significant influence on the practice of the Commission and European competition authorities in future abuse cases. The Norwegian Competition Authority has contributed to the drafting of the guidelines through its participation in the European Competition Network (ECN) and has stated that it supports the Commission's initiative for such guidelines.

Key innovations in the draft guidelines

More companies may risk being considered dominant

THE COMMISSION MOVES AWAY FROM 40% MARKET SHARE AS A "SAFE HARBOR"

The Commission has previously assumed that undertakings with a market share of less than 40% are unlikely to have a dominant position. This safe harbor is proposed to be significantly adjusted, and the draft guidelines emphasize that a market share of less than 10% excludes the existence of a dominant position, except in specific cases.

For undertakings with a market share of more than 10%, it may be more difficult to assess whether or not they have a dominant position. In such cases, in addition to its market share, the undertaking will also have to assess the size of its competitors, barriers to entry, and the degree of buyer power to a greater extent than previously.

The commission introduces tacit collective dominance in the guidelines

The new guidelines contain a reference to collective dominance, which occurs when, from an economic point of view, two or more undertakings present themselves or act together on a particular market as a collective entity. In such a case, it is not decisive that the individual undertaking is not dominant, as long as the group of undertakings can be considered dominant. Collective dominance can be demonstrated through:

1. Structural links.
2. Economic incentives.
3. A mixture of structural links and economic incentives.

The common understanding has been that there must be some form of agreement underlying the collective behavior, showing that the individual undertakings act together on the market. The Commission rejects this. Instead, it argues that tacit coordination may be sufficient to establish collective dominance:

• • The undertakings must have the opportunity to form a common understanding of how to coordinate their behavior.
  • The undertakings must be able to monitor each other's behavior.
  • There must be a credible deterrence mechanism against deviating from the coordinated behavior.
  • The coordinated behavior must be protected from the influence of competitors and customers.
    

It is remarkable that market conditions enabling coordinated effects can be used as an argument to establish collective dominance. The consequence of this change is that undertakings in so-called oligopolistic markets may risk being collectively dominant based on rather vague criteria, which at the same time makes it difficult for the individual undertaking to make an independent assessment of whether they can be considered to have collective dominance.

The existing guidelines limit the scope of collective dominance, and it has been a long time since there has been a case on the subject before the CJEU. The fact that the Commission nevertheless chooses to address collective dominance may indicate a change in what the Commission will focus on in the future.

The guidelines introduce a two-step test for the assessment of abuse

The draft guidelines set out two cumulative conditions that must be met for the conduct to constitute an abuse:

1. The conduct must depart from competition on the merits; and
2. The conduct must be capable of producing exclusionary effects.

If these conditions are met, it will still be possible for the dominant undertaking to prove that the conduct is objectively justified or efficiency-promoting.

Presumption-based approach - three categories of abuse

The draft guidelines categorize various forms of exclusionary conduct into three categories, depending on, according to the case law of the CJEU, what is required for conduct to constitute an abuse. The first category includes conduct that is capable of having exclusionary effects, but it is up to the Commission to prove the effect in each case.

The second category is the most significant innovation and includes conduct that, in the Commission's view, is presumed to lead to exclusionary effects, meaning that the Commission does not need to demonstrate exclusionary effects in the specific case. The undertaking can challenge this presumption.

The third and final category includes conduct that constitutes obvious abuse, making it unnecessary for the Commission to demonstrate exclusionary effects.

Details on the three categories

Category 1: Conduct that is capable of having exclusionary effects.

Conduct that is not covered by categories 2 or 3, but may still constitute abuse, belongs to category 1.

Step 1: The guidelines identify a number of factors relevant for the assessment of whether the conduct departs from competition on the merits, including: (i) whether the conduct prevents customers from choosing a product based on competition on the merits, and (ii) whether the dominant undertaking's conduct conflicts with other legislation affecting relevant competition. The guidelines provide guidance, especially in relation to:

• non-exclusive / near exclusive conditional rebates;

• self-preferencing; and
• access restrictions.

Step 2: The Commission must prove that the conduct is capable of having exclusionary effects, which requires specific analysis and evidence.

Category 2: Conduct that is presumed to lead to exclusionary effects.

In category 2, the conduct has been considered abuse of a dominant position in the case law of the CJEU, including:

• Exclusivity agreements
• Predatory pricing
• Margin squeeze in the presence of negative spreads
• Certain forms of tying ("bundling")

Step 1: The draft includes various tests for the different types of conduct. Where the conduct meets the relevant test, it will be considered to depart from competition on the merits.

Step 2: There is a presumption that the conduct is likely to result in exclusionary effects; however, this presumption can be challenged by the dominant undertaking.

Category 3: Conduct that constitutes obvious abuse ("Naked restrictions")

Category 3 comprises behavior lacking an economic interest for the dominant undertaking. The guidelines refer to conduct that has been the subject of decisions by the CJEU as examples of such conduct, including

• the dominant undertaking paying customers on condition that the customers postpone or cancel the launch of products based on products offered by the dominant undertaking's competitors;
• the dominant undertaking making agreements with its own distributors to swap a competing product with the dominant undertaking's product under the threat of withdrawing discounts benefiting the distributors; and
• the dominant undertaking actively dismantling infrastructure used by a competitor.

Step 1: Naked restrictions depart from competition on the merits.

Step 2: It is assumed that the conduct restricts competition and it is not necessary to investigate whether the conduct has exclusionary effects, so that step 2 is also fulfilled. The dominant undertaking will only be able to disprove the absence of exclusionary effects in exceptional cases.

How has the draft been received?

Most players support the Commission's stated purpose of creating a greater degree of predictability for businesses while also ensuring more efficient case handling. However, a clear majority of various organizations, businesses and academics are negative to the draft. The overall criticism is that the draft is too formalistic, and several consultation responses question whether the draft guidelines are in line with the case law of the CJEU. The majority is thus concerned that the new guidelines will lead to less legal certainty, not more.

With regard to the specific innovations mentioned above, the consultation responses can be summarized as follows:

• Threshold for dominance: A clear majority of the consultation responses are negative to the Commission moving away from 40% market share as a safe harbor. It is pointed out that the Commission's own practice in recent years has mainly involved companies with a market share of more than 50%, and that the proposed threshold of 10% does not provide meaningful guidance on dominance. The draft is also criticized for placing too much emphasis on market shares alone. Furthermore, it is pointed out that the Commission does not take into account the connection between dominance and market power, despite the fact that the link between them is recognized by the CJEU, and that the draft guidelines appear inconsistent with the Horizontal Guidelines, which acknowledge that the degree of market power normally required to establish an infringement under Article 101 is lower than the degree of market power required to establish dominance under Article 102 TFEU.
• Introduction of tacit collective dominance: The majority of consultation responses do not address tacit collective dominance. Those that do seem to be mainly negative. Again, the need for a consistent approach to the enforcement of Articles 101 and 102 TFEU is emphasized.
• The two-step test: The Commission's two-step test is consistently criticized in the majority of the consultation responses, as recent case law may indicate that departure from competition on the merits is not an independent condition, but rather part of the assessment of whether the conduct is capable of producing exclusionary effects. Two important judgements in this discussion, Intel (2024) and Google Shopping (2024), which were delivered after the draft was published, may indicate that the Commission needs to rethink certain types of conduct and that the draft may need to be revised on this point.
• Exclusionary effects: The draft is also criticized for not providing clear and consistent guidance on what is meant by "exclusionary effects", including which effects that must be proven and how this should be done. Some consultation responses point out that the draft is so broad that almost all effects on competition are deemed sufficient.
• Presumption-based approach: The Commission's use of presumptions for conduct in category 2 has been the subject of much discussion. The majority of consultation responses argue that the draft is contrary to recent case law, in particular Intel (2024), which finally established that the Commission had to take into account evidence from the undertaking that demonstrated that exclusivity rebates did not have an exclusionary effect.

The many critical consultation responses may lead to some changes in the Commission's use of presumptions, but the Commission appears determined to simplify the enforcement of Article 102 TFEU. In that case, the use of presumptions will probably be an indispensable tool.

The Commission will finalize the guidelines by the end of 2025. Once the final guidelines have been published, Thommessen will follow up with further analyses of how they will change the state of the law and affect both undertakings with a dominant position and their competitors.