To Prove or Presume? The EC’s Draft Guidelines on exclusionary abuses

The Draft Guidelines were announced in March 2023 together with the publication of a policy brief and updated Guidance on Enforcement Priorities for Exclusionary Abuses (the Amending Communication; see our April 2023 Newsletter). The Commission’s highly anticipated Draft Guidelines were now published on 1 August 2024. Despite the Commission’s press statement that the Guidelines aim to reflect the Commission's interpretation of the existing EU case law and the Commission’s decisional practice, they introduce a number of novelties. This suggests a shift away from the Commission having to conduct a detailed effects-based analysis, arguably simplifying the required assessment of exclusionary abuses under Article 102 TFEU. 

This shift may be the Commission’s response to criticism of its enforcement against exclusionary abuses. The effects-based assessment, which was the cornerstone of the Commission’s 2008 guidance on exclusionary abuses, has been perceived as a likely culprit, due to its complexity. Margrethe Vestager, Executive Vice President for Competition, said as much in her speech in March 2024:

“[T]he effects-based approach does not exclude learning from experience. And if experience tells us that there are certain types of conduct that are particularly harmful for competition, then it should not be necessary to reinvent the wheel over and over again. This means that we will seek to maintain a “workable” effects-based approach, which is informed by economic thinking and EU case law.”

As such, the novelties introduced in the Draft Guidelines, particularly the shifting of some of the evidentiary burden and the move away from the AEC test, could be the Commission’s attempt to ensure easier enforcement against exclusionary abuses:

Evidentiary burden shifted?

A novelty is that the Draft Guidelines seem to practically shift the evidentiary burden required to establish an exclusionary abuse for certain types or conduct. Where the Commission can rely on the presumptions, it is for the company to demonstrate the absence of abuse. 

The Draft Guidelines set out a three-pronged assessment to establish abuse, which can be summarised as follows: 

1. Does the conduct depart from competition on the merits? 
2. Is the conduct capable of having exclusionary effects? 
3. Is the conduct demonstrated to be objectively justified?

The Commission provides guidance on each prong of the test, including definitions and assessment methodology. The Commission defines the concept of ‘competition on the merits’ as conduct that does not go beyond the scope of ‘normal competition’ based on the performance of economic operators. The Commission describes ‘normal competition’ as a competitive situation in which consumers benefit from lower prices, better quality and a wider choice of new or improved goods and services. 

Similarly, the Commission delineates elements that are relevant to the assessment of a conduct’s capability to produce exclusionary effects. Generally, the bar appears low: a capacity to produce exclusionary effects must be demonstrated based on “specific, tangible points of analysis and evidence,” without the need to prove actual exclusionary effects beyond a mere hypothetical. Interestingly, the conduct does not need be the sole cause of these exclusionary effects either.

Additionally, the Commission introduces two categories of conduct for which the first two prongs may be “presumed” to be fulfilled: (a) so-called ‘naked restrictions’ and (b) restrictions that fulfil a specified legal test. To date, the EU Court of Justice has not specifically endorsed the use of general presumptions in the context of article 102 TFEU. Rather, the Court has endorsed a case-specific effects analysis (for example, paragraph 51 of Servizio Elettrico Nazionale). 

a. ‘Naked restrictions’

According to the Draft Guidelines, a ‘naked restriction’ is conduct by a dominant company that can have no economic interest for that company, other than that of restricting competition. The Draft Guidelines specify three examples of such conduct: (i) payments made by the dominant company to customers in exchange for postponing or cancelling the launch of certain products; (ii) the dominant company agreeing with its distributors to swap a competing product with its own product under the threat of withdrawing discounts; or (iii) the dominant company actively dismantling infrastructure used by a competitor.

b. Restrictions satisfying specific legal tests

Specific legal tests are set out in relation to five types of conduct, namely (i) exclusive dealing; (ii) predatory pricing; (iii) tying and budling; (iv) margin squeeze; and (v) refusal to supply. If the legal test is fulfilled, the conduct – in the European Commission’s view – is deemed to depart from competition on the merits. Moreover, in relation to exclusive dealings, predatory pricing and certain forms of margin squeezes and tying, the conduct is also presumed to have the capability of having exclusionary effects. The Draft Guidelines provide little guidance on how companies can subsequently rebut a presumption: 

• For so-called ‘naked restrictions’, the Guidelines note that the presumption of exclusionary effects is rebuttable only in "very exceptional circumstances," without giving examples of such exceptional circumstances. In addition, it is branded as “highly unlikely” that such behaviour could be justified based on an objective justification.
• Only slightly more guidance is given on how to rebut presumptions linked to the specified legal tests. Rebuttals must have sufficient probative value and arguments must not be based on theoretical assumptions, for instance by showing that “the circumstances of the case are substantially different from the background assumptions upon which the presumption is based”.

The ‘As-efficient Competitor’ test takes a backseat 

The AEC principle is a competition law framework that can be used to identify anti-competitive conduct by assessing whether a dominant firm's actions would exclude a hypothetical competitor of equal efficiency. AEC tests are mathematical models made to evaluate specific types of conduct, based on the AEC principle. 

In our April 2023 Newsletter, we flagged the Commission’s apparent intention to move away from the test. The Draft Guidelines clearly follow suit: outside the context of margin squeeze cases, the Commission explicitly mentions it is “not necessary” to apply the AEC principle to demonstrate a capability to produce exclusionary effects. For the assessment of competition on the merits, the use of the AEC test is listed as only one of several factors deemed relevant for the assessment. 

With this statement, the Commission seems to clarify that it may indeed no longer opt for the AEC test in Article 102 TFEU cases. This change in approach could be a response to recent exclusionary abuse cases like Qualcomm, Intel and Unilever.

Other novelties 

Aside from the two elements described above, other notable statements include: 

• Digitalisation: The Commission has kept digitalisation and the growth of digital markets in mind in drafting the Guidelines. For example, network effects and data-driven advantages are mentioned explicitly in the assessment of barriers to entry. In addition, violations of data protection law are listed as a relevant factor to establish that conduct departs from competition on the merits;
• Collective dominance: The Commission devotes extensive attention to the concept of collective dominance. This could indicate a recommitment to perusing these types of cases; and
• Exploitative abuses: The Draft Guidelines only cover exclusionary abuses. However, they explicitly recognise that the principles relevant to the assessment of exclusionary abuses and the justifications based on objective necessity and efficiencies are relevant for the assessment of exploitative abuses as well.

Conclusion

With the Draft Guidelines, the Commission appears to aim for a more workable approach than the effects-based approach, as seen in the EU case law and Commission practice in abuse of dominance cases over the last 20 years. 

Unclarities on how the assessment will and should be conducted, particularly when the burden of proof shifts to the company under investigation, could have ramifications on companies’ ability to defend themselves in this context. It remains to be seen whether the public consultation will result in further clarifications. 

Parties can respond to the consultation until 31 October 2024 and the guidelines are set to be adopted in the fourth quarter of 2025. Ultimately, it will be up to the EU Court of Justice to decide on the validity of the Commission’s Guidelines in the context of the Commission’s enforcement of Article 102 TFEU.