Faculteit Rechtsgeleerdheid
Universiteit Gent
Academiejaar 2015-2016
Abuse of Dominance after Post Danmark II
Masterproef van de opleiding
‘Master in de rechten’
Ingediend door
Janick Van Daele
studentennr. 01004154
Promotor
Prof. dr. Jacques Bourgeois
Co-promotor
Jan Bocken
Table of Contents
Acknowledgements .............................................................................................................. 1
Summary
..................................................................................................................... 2
Chapter: 1
INTRODUCTION....................................................................................... 3
1.1 Background ....................................................................................................... 3
1.2 Purpose .............................................................................................................. 3
1.3 Research Questions ........................................................................................... 5
1.4 Research Method .............................................................................................. 5
1.5 Structure ............................................................................................................ 6
Chapter: 2
HISTORICAL CONTEXT OF ART. 102 TFEU ...................................... 7
2.1 Overview ........................................................................................................... 7
2.2 Summary Conclusion ...................................................................................... 15
Chapter: 3
THE CONCEPT OF ABUSE UNDER ART. 102 TFEU ....................... 15
3.1 General ............................................................................................................ 15
3.2 Objective of Article 102 TFEU....................................................................... 18
3.3 Special responsibility ...................................................................................... 21
3.4 Exclusionairy vs. Exploitative Abuses ........................................................... 22
3.5 Summary conclusion ....................................................................................... 24
Chapter: 4
REBATE SCHEMES AS AN ABUSE OF DOMINANCE .................... 26
4.1 Per se illegal rebate schemes........................................................................... 27
4.1.1 Presumption of illegality of loyalty rebates or the by object
prohibition .................................................................................... 27
4.1.2 Anti-competitive vs. pro-competitive effects of loyalty
rebates .......................................................................................... 32
4.1.3 Residual category of rebates and Michelin I................................ 35
4.2 Presumed legality of quantity rebates ............................................................. 38
4.2.1 Definition ..................................................................................... 38
4.2.2 Michelin II and the abandonment of the presumption ................. 39
4.2.3 British Airways ............................................................................ 42
4.3 Objective Justification .................................................................................... 45
4.3.1 Overview ...................................................................................... 45
4.3.2 Legitimate business interest ......................................................... 47
4.3.3 Legitimate public interest. ........................................................... 47
3
4.3.4 Econocmic jusifcation. ................................................................. 48
4.4 Summary Conclusion. ..................................................................................... 49
Chapter: 5
MODERNIZATION OF ART 102 TFEU AND THE GUIDANCE
PAPER
................................................................................................................... 51
5.1 The As-efficient-competitor test ..................................................................... 54
5.2 The legal nature of the as-efficient-competitor test ........................................ 58
5.3 The As-efficient competitor test following the Post Danmark II
judgment .................................................................................................... 60
5.4 Summary conclusion ....................................................................................... 63
Chapter: 6
A BY EFFECT APPROACH OF REBATE SCHEMES UNDER
ARTICLE 102 TFEU ........................................................................................................ 65
6.1 A new legal framework for rebate schemes .................................................... 67
6.2 Summary conclusion ....................................................................................... 72
Chapter: 7
POST DANMARK II ................................................................................ 73
7.1 Facts ................................................................................................................ 73
7.2 Opinion AG Kokott......................................................................................... 77
7.3 The judgement of the Court ............................................................................ 82
7.4 Summary conclusion ....................................................................................... 91
Chapter: 8
CONCLUSION ......................................................................................... 93
1-1
Acknowledgements
To obtain the title of Master of Laws, the writing of a thesis is a required hurdle to pass. It is customary
to start off by acknowledging and thanking the people who had a positive impact in the coming about
of the paper. In my case, these are certainly due.
First of I would like to thank my mother for haven given me the opportunity to pursue a higher education.
These past five years have been a tremendous gift and I will accordingly forever be indebted.
I would also like to thank Prof. dr. Jochen Mohr of the Technische Universität Dresden. My interest in
EU competition law was sparked by his enthusiastic teachings during the lectures ‘Kartellrecht’.
Gratitude is also due to Prof. dr. Bourgeois and Jan Bocken for suggesting the topic of my thesis and
supporting me throughout the whole process. The discussions during the classes ‘EU Competition law’
have led me to many engaging insights. Overall the writing of this thesis has been an enriching
experience considering the interesting topic of the paper.
Lastly, I would like to thank my friends for the many coffee breaks at the law faculty and the general
collective support. Their words of encouragement and advice pushed me to continue writing when
writer’s block was looming.
1
Summary
The main topic of this thesis will be the abuse of dominance under EU law. Abuse of dominance can
cover several topics, but this paper will limit itself to an assessment of the current state of rebate schemes
granted by dominant undertakings under EU law. On the 6th of October 2015 the Court of Justice of the
European Union issued its judgment in the Post Danmark II case. This case was seen by many1 as an
excellent opportunity for the Court to provide guidance on the state of rebate schemes under Article 102
TFEU.
The case law concerning this topic has been highly contested throughout the years as the framework put
forward by the EU courts was too focused on the ‘form’ of the rebates as opposed to the concrete
negative effect it had on the internal market. Contrary to this approach is a more ‘effects based’ approach
put forward by the Commission in the publication of its Guidance Paper. In order to assess the impact
of the Post Danmark II judgement on the abuse of dominance, the preceding relevant case-law by the
EU courts will be analyzed and put in the broad historical context of Article 102 TFEU.
L. PEEPERKORN., “Conditional pricing: Why the General Court is wrong in Intel and what the Court of Justice
can do to rebalance the assessment of rebates”, Concurrences Review 2015,43-63; COLOMO, P., “Intel and Article
102 TFEU Case Law: Making Sense of a Perpetual Controversy”, LSE Working Papers, 62.
1
1.1 BACKGROUND
1.
Article 102 of the Treaty on the Functioning of the European Union2 prohibits the abuse of
dominance by a dominant undertaking. This Article is in line with the economic policy provisions
and principles listed in the founding Treaties of the European Union3. Protocol 27 of the TFEU
states the following:
“The High Contracting Parties, considering that the internal market as set out in article
3 of the treaty on European union includes a system ensuring that competition is not
distorted, have agreed that: to this end, the Union shall, if necessary, take action under
the provisions of the Treaties, including under Article 352 of the Treaty on the
Functioning of the European Union. This protocol shall be annexed to the Treaty on
European Union and to the Treaty on the functioning of the European Union.”
2.
Dominant undertakings are ultimately the subject of this provision. Article 102 TFEU provides
limitations to the possible conduct of dominant undertakings. Non-dominant undertakings are not
subject to the rules of Article 102 TFEU and therefore do not need to fear prosecution by a
competition authority or private enforcement. Having found a violation of Article 102 TFEU can
have far reaching consequences for a dominant undertaking. In 2009, Intel, for example, was fined
€1.06 billion for the abuse of its dominant position on the market of CPU’s. It is therefore necessary
that, in line with the principle of legal certainty4, there is a clear set of rules by which dominant
undertakings can assess whether they are liable to violate Article 102 TFEU.
1.2 PURPOSE
3.
The purpose of this paper is twofold. First, I will indicate that, as it stands now, Article 102 TFEU
lacks the necessary clarity for dominant undertakings to assess their conduct in advance under
Article 102 TFEU. Under Article 102 TFEU, a rough distinction is generally made between two
2
Consolidated version of the Treaty on the Functioning of the European Union, OJ C 326, 26.10.2012, p. 47–390.
(hereafter ‘TFEU’.
3
Being the TFEU and TEU. See to that extent Article 120 TFEU, 119 TFEU and Article 3 TEU.
4
A PORTUESE, O. GOUGH, J. TANEGA, “The Principle of Legal Certainty as a Principle of Economic
Efficiency”, Research Paper No. 13-13, University of Westminster School of Law, p. 3.
3
categories of abusive conduct.5 On the one hand there is conduct that has an exclusionary6 effect
on the market and on the other there is conduct which can exploit7 certain actors in the relevant
market. The scope of this paper will be limited to one specific variant of conduct scrutinized by
Article 102, being price-based exclusionary conduct. More specifically, this thesis will limit itself
to rebates issued by dominant undertakings. Second, I will discuss the future and impact of abuse of
dominance under Article 102 TFEU after Post Danmark II judgement of the CJEU. The status of
the recently adopted ‘As efficient Competitor –test’ by the Commission in the context of rebates
will also be assessed.
4.
In Post Danmark II a Danish court asked several questions concerning the assessment of rebates to
the European Court of Justice. The Post Danmark II case is a good example of the ails plaguing
Article 102 TFEU. It was also seen in the legal doctrine as an excellent opportunity for the Court to
clarify certain aspects of the case law concerning rebates, and more specifically standardized
rebates, under Article 102 TFEU. The Post Danmark II judgement is the product of a line of case
law that, at times, has been highly contested8. The main criticism of these judgements is that they
are not based on any sound economy reasoning or rather do not involve an assessment of the effects
the conduct has. In short, certain conduct by dominant undertakings, like loyalty rebates, are seen
to have a negative effect on the competitive structure of the market. Once the rebate scheme is seen
to have characteristics similar to other exclusive conduct it will be considered as being exclusionary.
The EU Courts assume that this is the case without performing any assessment of the effects.
5.
Two lines of case-law run through the judgements of the EU Courts with regards to abuse of
dominance. On one hand there is a per se violation of Article 102 TFEU of certain conduct, much
like the ‘by object’ restriction of Article 101 TFEU, where the Courts will presume that the conduct
is abusive as such and therefore has a negative effect on the competitive structure of the market and
therefore ultimately the consumer. Whether there are, in fact, any negative effects on the relevant
market is not of relevance. The Court will accordingly not go in to an assessment of these anticompetitive effects. This is commonly called the ‘form-based approach’ as an assessment of the
concrete or potential effects is not needed, an assessment of the form of the rebate scheme will
suffice. On the other hand, there are different types of conduct which are assessed under a standard
5
See to that extent paragraph on the distinction between exclusionary and exploitative conduct.
A dominant undertaking who sets its prices under average variable cost level would reasonably have no other
incentive to do so than to attract customers away from its main competitors.
7
By charging excessive prices to customers for example.
8
P. COLOMO,“Intel and Article 102 TFEU Case Law: Making Sense of a Perpetual Controversy”, LSE Working
Papers, 2-31.
6
instead of a rule. Again, with regards to this approach, similarities can be found with a ‘by effect’
violation of Article 101 TFEU. For these types of conduct the Courts will assess whether the conduct
has anti-competitive effects. In other words, the presumption of negative effects on the internal
market is not at play here.
6.
As I will indicate, the EU Courts have traditionally upheld this per se violation approach to rebates
schemes applied by dominant undertakings. This presumption implies that certain rebates schemes
applied by dominant undertakings will always have negative effects. This presumption is however
not in line with economic assessments of rebate schemes. I will argue in further paragraphs that it
is possible for certain rebate schemes to have pro-competitive effects on the relevant market.
7.
Pleas for a reform of this ‘orthodox’, form-based approach do not only stem from legal practitioners
and economists alike, but also from within the Commission. It is therefore not without reason that
the Commission published its Guidance Paper9 on its enforcement priorities in applying Article 102
TFEU in which it urged for a ‘more effects-based’ approach’ of Article 102, inter alia with regards
to rebates. In this Guidance Paper the Commission pushed for an effect-based framework through
the introduction of an ‘as-efficient-competitor’ test. The referring Court asked for clarity on the
legally binding nature of the AEC-test.
1.3 RESEARCH QUESTIONS
8.
This thesis will be centered around the following research questions:
1. How are rebates assessed under current EU law?
2. Is there a need to reform the approach of rebates under Article 102 TFEU? If so, what would be
the preferred legal framework?
3. What is the relevance of the ‘As-efficient-competitor’ test after Post Danmark II?
4. What is the state of abuse of dominance in EU law after the Post Danmark II judgement?
1.4 RESEARCH METHOD
9.
The main focal point of this thesis will be the state of rebates under EU law. The recent Post
Danmark II case will be used as a way to put the practices of the Commission and EU Courts into
perspective. The Post Danmark II judgement of the European Court of Justice was hailed with much
Guidance Paper on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive
exclusionary conduct by dominant undertakings.
9
5
anticipation as it offered an opportunity for the Court to adopt a different approach to standardized
rebates and to shed clarity on the status of the AEC . As the judgement is relatively new, not much
has been written as of yet on the case.
10. In my research I will apply a traditional dogmatic legal method. First, I will assess the relevant legal
sources of EU law on rebates, i.e. relevant case law and legislation. Article 102 TFEU is a relatively
ambiguous article in the sense that it does not contain any concrete definitions of key concepts 10
relevant for the application of Article 102 TFEU. Ultimately, it is for the judicial branch of the
European Union to fill up these gaps in the law. Therefore a thorough assessment of the relevant
case-law of the EU Courts11 preceding Post Danmark II is justified. Next to legislation and
jurisprudence of the Courts I will also utilize the works of legal commentators who are authoritative
in the field of EU competition law.
1.5
STRUCTURE
11. In the chapter following this introduction I will first discus the historical context of Article 102
TFEU. I will argue that the issues concerning the decisional practices and judgements on Article
102 TFEU can be traced back to its inception. As the scope of this thesis is limited, I will however
not go into a detailed assessment of the history of Article 102 TFEU. By way of introduction to the
case-law, I will, in chapter 3, give an overview of the general concept of abuse of dominance under
Article 102 TFEU. I will however refrain to discussing abuse. Other concepts relevant for the
application of Article 102 TFEU like ‘dominance’ and ‘relevant market’ fall outside the scope of
this thesis and will therefore not be discussed.
12. Following chapter three, I will assess the case-law on abuse of dominance in the context of rebates
in chapter four. I will make a distinction between the on the one hand case-law where rebates have
been held to be a per se violation of Article 102 TFEU and on the other hand case-law where this
presumption was not applied. The main judgements discussed in this chapter will be the Hoffman
La Roche, Michelin I, Michelin II and British Airways cases.
13. In chapter five I will discuss the Guidance Paper released by the Commission and the therein
proposed as-efficient-competitor test. In this chapter I will also examine the AEC-test in the context
of the Post Danmark II judgement.
10
11
Concepts like ‘abuse’, ‘dominance’ are not defined in the article. See paragraph 40.
Being the General Court and the European Court of Justice.
14. In chapter six I will consider chapters three to five to assess, from a normative point of view, whether
the legal framework concerning rebate schemes up until the Post Danmark II judgement is a
desirable one. I will also question whether there is a more effective approach open to the assessment
of rebate schemes under Article 102 TFEU.
15. In chapter seven the Post Danmark II case will be assessed and the concrete impact of the judgement
on the abuse of dominance in EU competition law will be discussed.
16. In the final chapter I will conclude this thesis by summarizing the research done throughout the
aforementioned chapters and answering the research questions mentioned above.
2.1 OVERVIEW
17. To have a better understanding of the interpretation and future of art. 102 TFEU it is important to
have a look at the historical context of art. 102 TFEU. To understand the future of a legal provision
it must be known, first and foremost, what the reason was why the provision was created in the first
place. In the case of art. 102 TFEU it has been stated numerous times in relevant literature that the
provision is founded in ‘ordoliberalism’.12 If this were the case, it would be possible to shine a light
on the, sometimes inconsistent, case law and the consequent policy of the Commission with regards
to art. 102 TFEU. Moreover, it would be able to provide the Commission with a teleological basis
for its ‘more effects-based approach’ policy. Seeing as the scope of this thesis is limited, I will, in
the following paragraphs, only refer to the essentials.
18. Gerber13 notes that, for the origins of abuse of dominance in the EU, and more specifically art. 102
TFEU, it is important to have a look at the origins of German competition law.14 The first ‘modern’
set of competition rules were enacted in post-war Germany15 with the German Law Against
12
K. PATEL, AND H., SCHWEITZER, The Historical Foundations of EU Competition Law, Oxford, Oxford
University Press, 19-20.
13
David. J. Gerber is a professor of law at the Chicago-Kent College of Law, most outspoken for correlating abuse
of dominance in the EU with the ordoliberal school.
14
D. GERBER, “ Constituionalizing the Economy: German Neoliberalism, Competition Law and the “New
Europe”, Americian Journal of Comparative law 1994. 25-84.
15
D. GERBER,, “The Future of Article 82: Dissecting the Conflict”, European Competition Law Annual 2007,
39-54.
7
Restraints on Competition16. The authors of this act were predominantly influenced by the
ordoliberal school (also known as the ‘Freiburg School’).17 This refers to a group of legal and
economic thinkers, originating from Germany, who started, in the 1930’s, to develop a way of
structuring the German market in such a way that it could not be distorted by either public or private
influences.18 In essence, they wanted to protect the competitive process from public or private
actors.19
19. Seeing as ordoliberals were mostly concerned with outside interferences on the competitive process,
they saw competition policy and competition law as an excellent tool to protect the market.20 From
an ordoliberal point of view, competition policy serves to protect ‘economic freedom’ and therefore
not consumer welfare, which is only a desirable consequence of competition.21 The market and,
more specifically, the competitive process has to be protected from excessive economic power
which could impede on the economic freedom of other actors in the market.22 Ordoliberals therefore
strife to decentralize economic power, be it private or public.23 Important to note for the further
following paragraphs is that ordoliberals did not consider efficiency24 as a goal of competition policy
but rather a desirable consequence.
20. When assuming that the ordoliberal school had a significant impact on the implementation of Article
102 TFEU in the original treaties, the question is then in what way it impacted that article. The first
implication would be that maximizing welfare would not be a determining goal of Article 102
TFEU.25 Consequently, by striving for economic freedom certain authors have argued that an
ordoliberal competition policy could actually cause consumer harm.26
16
Geszetz gegen Wettbewerbsbeschränkungen.
Gerber (n15) 39.
18
P. AKMAN, The Concept of Abuse in EU Competition Law, Oxford, Hart Publishing, 2015, 55.
19
Gerber (n15) 40.
20
Ibid.
21
Akman (n18) 49.
22
A. PEACOCK, Germany's Social Market Economy: Origins and Evolution, Basingstoke, Palgrave Macmillan,
1989, 149.
23
Ibid. 68.
24
Which can be understood as productive efficiency, dynamic efficiency or allocative efficiency.
25
P. AKMAN, “Searching for the Long-lost Soul of Article 82 EC”, Oxford Journal of Legal Studies 2009, 271.
26
C. AHLBORN, C and GRAVE, “Walter Eucken and Ordoliberalism: An Introduction from a Consumer Welfare
Perspective, Competition Policy International 2006, 214.
17
21. Recent research27 however states that Article 102 TFEU was historically not based on ordoliberal
thoughts.28 In her research, Pinar Akman refers to the fact that this assumption is not based on a
study of the travaux préparatoires of the Treaties.29 Instead it is based on events that took place
after the Treaties were signed into law.30 31
22. Akman has put forward several convincing arguments that refute the notion of Article 102 TFEU
being rooted in ordoliberalism.32 In the following paragraphs I will summarize her main arguments
and conclude with the implications of these insights. These include the different positions of the
parties responsible with drafting the first EU competition law, most notably the drafting procedure
of the treaties of the European Coal and Steel Community and the Treaty of Rome.
23. A study of these positions is relevant when one tries to understand art. 101 and 102 TFEU. Akman
justifies this as follows:
“The positions of the delegations negotiating the Treaty establishing the European Coal
and Steel Community (ESCS Treaty) and the competition rules in that Treaty are directly
relevant for putting Articles 101 and 102 in the appropriate context also because the
former set or rules can be seen as the beginning of a tradition of competition in Europe
that is continued by the latter.”33
24. After the Second World War, American delegations pushed for anti-cartel legislation in post-war
Europe.34 It was clear for the heads of government that in order to rebuild Europe, the coal and steel
had to be integrated at the European level.35 It was Jean Monet who was the main personality
responsible for the drafting procedure.36 Therefore, it were not German ordoliberals who were
27
Akman (n25) 271.
Akman (n18) 50.
29
Ibid.
30
Akman, (n25) 270.
31
Most notably, in his work Law and Competition in Twentieth Centruy Europe, Gerber acknowledges that he did
not have access to the travaux préparatoires. D. GERBER, Law and Competition in Twentieth-Century Europe:
Protecting Prometheus, Oxford University Press, Oxford,1990, 270.
32
Akman, (n18) 50.
33
Akman, (n18) 69.
34
D. GERBER, Law and Competition in Twentieth-Century Europe: Protecting Prometheus, Oxford University
Press, Oxford,1990, 270.
35
Ibid, 336.
36
Ibid, 270.
28
9
responsible for the drafting procedure but rather the French, who held a different opinion on
competition policy.3738 Moreover, Jean Monet and his delegation were directly supported by a group
of Americans at the American embassy, obviously influenced by an American perspective of
competition law and policy.39 The main worry of the French delegation was to cull the power of the
German coal and steel industry.40
25. Several commentators have actually noted that it were the Germans that strongly opposed the
adaption of article 6641 in the ESCS, which would prevent dominant concentrations.42 This is
important to point out as an ordoliberal competition policy would not allow a dominant undertaking
on the market. 43 The German delegation were only persuaded to accept the drafts with the prospect
of the US imposing their competition legislation. 44
26. A further level of European integration was reached with the Rome Treaty of 1 January 1958.45 A
major step in the drafting of the Rome Treaty was the coming about of the Spaak Report.46 The
discussions for the Spaak Report (named after Paul-Henri Spaak) took place in Messina on 29 and
30 May 1955 with the attendance of delegations of the original ‘six founding fathers’ of Europe,
meaning France, Italy, Germany and the Benelex countries. 47
37
Akman, (n18) 71.
Akman, (n25) 285.
39
Akman (n18) 71; GILLINGHAM, J. Coal, steel and the Rebirth of Europe, 1945 – 1955, Cambridge, Cambridge
University Press, 397p.
40
Akman (n18) 71.
41
This provision would have allowed the High Authority “to address to public or private enterprises, which, in
law or in fact, have or acquire on the market for of the product subject to the treaty… a dominant position which
protects them from effective competition in a substantial part of the common market, any recommendations
required to prevent the use of such position for purposes contrary to those of the present Treaty.
42
Y. KARAGIANNIS, Preference Heteregeneity and Equilibrium Institutions: The Case of European Compeititon
Policy, Florence, European University Institute, 2007, not published.
43
Gerber (n34) 341.
44
Akman, (n18) 71.
45
Gerber (n34) 343.
46
Akman,(n18) 74.
47
Gerber (n34) 343.
38
27. D. G Goyder notes:
“The Spaak Report is a seminal document of great importance, which comprises the most
important of the various preparatory works (travaux préparatoires) upon which the
subsequent Treaty of Rome is based” 48
28. The delegations of the original six realized that Europe needed a united front if it wanted to still play
a role on the international level. The creation of a common market was seen as a key element in
stabilizing continental Europe and avoiding future conflicts. Integral for this common market was a
common competition policy. Paragraph 55 of the Spaak Report reads as follows:
“In the final period, the elimination of trade barriers will lead to the disappearance of
the opportunities for discrimination by competing enterprises. The problem only remains
because there are enterprises which, owing to their size or specialization or the
agreements they have concluded, enjoy a monopoly position. The action against
discrimination, therefore, links up with the action that will be necessary to counteract the
formation of monopolies within the Common Market. The Treaty will have to lay down
basic rules on these points…More generally, the Treaty will have to provide means of
ensuring that monopoly situations or practices do not stand in the way of the fundamental
objectives of the Common Market. To this end, it will be necessary to prevent-
A division of markets by agreement between enterprises, since this would be tantamount
to re-establishing the compartmentalization of the market
Agreements to limit production or curb technical progress because they would run
counter to progress and productivity.
The absorption or domination of the market for a product by a single enterprise since this
would eliminate one of the essential advantages of a vast market, namely that it reconciles
the use of mass production techniques with the maintenance of competition.”
29. The first paragraph of the Spaak Report reads as follows49:
48
D.G. GOYDER, EC Competition Law, Oxford, Oxford University Press, 2003, 23.
Intergovernmental Committee of the Messina Conference, ‘Report by the Heads of Delegations to the Foreign
Ministers’ (Spaak Report’) 21 April 1956, paragraph 1.
49
11
« L’objet d’un marché commun européen doit être de créer une vaste zone de politique
économique, constituant une puissante unité de production, et permettant une expansion
continue, une stabilité accrue, un relèvement accéléré du niveau de vie, et le développement de
relations harmonieuses entre les Etats qu’il réunit.
Pour atteindre ces objectifs, une fusion des marches sépares est une nécessité absolue. C' est
elle qui permet, par la division accrue du travail, d'éliminer un gaspillage des ressources, et,
par une sécurité accrue d'approvisionnement, de renoncer à des productions poursuivies sans
considération de coût. Dans une économie en expansion, cette division du travail s’exprime
moins par un déplacement des productions existantes que par un développement d'autant plus
rapide, dans intérêt commun, des productions les plus économiques. «
30. Akman notes that from the aforementioned wording it can be deduced that the drafters were
preoccupied by the efficiency, more specifically product efficiency50 of the European
undertakings.51 The drafters were concerned about the state of producing at high prices and low
wages.52 She clarifies that this cannot follow from an ordoliberal philosophy as this
«…does not totally reflect the ordoliberal approach since the ordoliberals contemplated
the instance of workers having ‘just as strong an in the monopoly.. as the entrepreneur’
and possibly agreeing to higher prices so long as wages were increased. Thus,
ordoliberals did not see the interests of consumers as identical or always in conformity
with the interests of workers. »53
31. At the start of the negotiations, there was a provision in the Spaak report on competition that did not
allow undertakings to have a dominant position, i.e. there was a per se prohibition.54 It was actually
Müller-Armack, a German ordoliberal, who fought against having this provision in the Treaty.55 For
the German delegation, only the abuse of a dominant position was an issue, not the dominant
position in itself. 56
50
Akman (n25) 279.
Akman (n18) 76.
52
Ibid., 77.
53
Ibid.
54
Ibid., 81.
55
Ibid., 82.
56
Ibid., 83.
51
32. Based on the foregoing, it is possible to rebut the assumption that art. 102 TFEU was founded in
ordoliberalism. In the end, the wording of art. 102 TFEU57 and the case law do not prohibit a
undertaking of having a dominant position, as it will only be an abuse of that dominant position that
would be contrary to art. 102 TFEU.58 Moreover, there was a clear absence of merger control in the
original treaties, which indicates that the drafters were not contrary to the idea of dominance per
se.59 Pinar Akman also refers to the importance of efficiency for the drafters of the original Treaties:
“This signifies the most important difference between the intent behind Article 102 and
ordoliberalism: whereas efficiency was only a derived result of competition for
ordoliberals, it was an aim for the drafters of the Treaty. Article 102 TFEU departs from
classic ordoliberalism significantly by not prohibiting a dominant position itself, but only
its abuse.”60
33. As stated earlier, the drafters did not prohibit an undertaking to hold a dominant position, only the
abuse of a dominant position was seen as contrary to the competitive structure of the market.
61
Harming competitors was not seen as a major threat to the competitive process by the drafters. 62
They were more worried, however, about the harm done to customers. 63 The Court amended this,
however, in their Continental Can case.64 The fact that article 102 TFEU originally did not prohibit
exclusionary abuse has also been confirmed by early commentators of Article 86 EC (now Article
102 TFEU.65
34. Based on the foregoing, it is clear that there is validity with regards to the statement that Article 102
TFEU is, in fact not, based on an ordoliberal philosophy. This is mostly based on the concern of the
drafters for efficient undertakings, whether they are dominant or not.66 Also, they were more
57
See also the french and german text which speak of missbrauchverbot e.g.
Ibid., 96.
59
Akman (n25), 271.
60
Akman (n18), 96.
61
Paragraph 68.
62
Akman (n18), 97.
63
Akman (n25), 271.
64
See paragraph 61 and following.
65
R. JOLLIET, Monopolization and Abuse of Dominant Position: A Comparative Study of the American and
European Approaches to the Control of Economic Power, Michigan, Faculté de droit, 1970, 250.
66
Akman (n25), 294.
58
13
preoccupied with protecting the customer of the dominant undertaking rather than the competitors.67
This had to lead to the improvement of living of all European citizens, consumers and producers
alike. This could imply that a ‘total welfare’ standard instead of a ‘consumer welfare’ standard is in
order.68 According to Pinar Akman, the main argument in support of this is the fact that Article 102
TFEU does not have a similar provision as Article 101 (3) TFEU. Namely, there is no provision in
Article 102 TFEU that allows a dominant undertaking guilty of abusive conduct to escape
prosecution when it can prove that benefits are being passed on to consumers.69
35. This understanding is of importance for the interpretation of Article 102 TFEU and of the subsequent
policy of the Commission.70 The concrete implication would be that the Commission and the Court
can take efficiencies into account when assessing abuse under Article 102 TFEU.71
36. In the case law of Article 102 TFEU, however, the Court has been reluctant to take efficiencies into
account with regards to rebate schemes. It is clear that the main worry of the Court is to protect the
access of the competitors to the market and their economic freedom.72 In their assessment there is
little to no attention being given to efficiencies, so therefore it can be concluded that the Court does
not hold efficiency as an object or value in itself.73
37. Rousseva therefore notes that the Court is, contrary to the drafters of the Treaties, to a large extent
influenced by the ordoliberal school in its judgements concerning Article 102 TFEU. A good
example of this is the reoccurring notion74 of ‘special responsibility’ of dominant undertakings in
the market, which was also referred to in the Post Danmark II75 case.
67
Ibid., 296.
Ibid., 300.
69
Akman (n18), 100.
70
Akman (n25), 294.
71
Akman (n18), 97.
72
E. ROUSSEVA, Rethinking Exclusionary Abuses in EU Competition Law, Oxford, Hart Publishing, 173.
73
Ibid.
74
Michelin I, C-322/81, ECLI:EU:C:1983:313, paragraph 71 (hereafter ‘Michelin I’); Irish Sugar, T-228/97,
ECLI:EU:T:1999:246, paragraph 111.
75
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 71, (hereafter ‘Post Danmark II).
68
2.2 SUMMARY CONCLUSION
38. In this chapter I have tried to put Article 102 TFEU into its historical context. This is necessary as
there is a gap between the origins and intent of Article 102 TFEU and how it is applied by the EU
institutions in the present day legal practice. I have argued, based on recent research, that Article
102 TFEU is not based on an ordoliberal philosophy. The fact that dominance of undertakings as
such is not illegal under the EU treaties and the preoccupation of the drafters with efficiencies serve
as the main arguments.76 These insights lead to a basis for further reform of Article 102 by the
European Commission and the EU Courts, which as I will indicate in the following chapters is sorely
needed.
3.1 GENERAL
39. Article 102 TFEU states the following:
Any abuse by one or more undertakings of a dominant position within the internal market
or in a substantial part of it shall be prohibited as incompatible with the internal market
in so far as it may affect trade between Member States. Such abuse may, in particular,
consist in:
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair
trading conditions;
(b) limiting production, markets or technical development to the prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading parties,
thereby placing them at a competitive disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage,
have no connection with the subject of such contracts.
76
Akman (n18), 103.
15
40. Whereas Article 101 TFEU targets agreements between undertakings that can or could affect the
competitive structure of the the internal market, Article 102 focuses on undertakings which hold a
dominant position on a certain relevant market. As I have mentioned in the introduction77, one of
the goals of the European Union is to establish an internal market. A workable competition policy
forms an integral part of the means to achieve this goal. Dominant undertakings have the means to
disturb competition on the internal market by abusing their dominance.
41. Article 102 TFEU thus requires five criteria for its application, being78:

one or more undertaking;

that has/have a dominant position;

in the internal market;

an abuse of the dominant position;

in a relevant market.
42. In EU competition law the dominant position of an undertaking as such is not illegal.
79
Relevant
for the application of Article 102 TFEU therefore is the abuse of that dominant position. Article 102
TFEU fails however to provide the reader with a definition of abuse. 80
43. Due to the lack of a workable definition, it can be difficult for undertakings to estimate when its
conduct will be abusive. Bellamy and Child note81 several factors that the undertaking can take into
account, such as:
77

“how far the conduct in issue is of a kind that is plainly restrictive of competition or unfair;

how far the conduct is normal industry practice;

how far competition on the market is already weakened by the dominance;

the effect, direct and indirect, of the conduct on competitors or customer;
See paragraph 1 and following.
Michelin I (n75), paragraph 30.
79
Ibid, paragraph 57; Merci convenzionali porto di Genova SpA v Siderurgica Gabrielli SpA., Case C-179/90,
ECLI:EU:C:1991:464, para 16; GlaxoSmithKline Services and Others v Commission and Others, C-501/06,
ECLI:EU:C:2009:610, paragraph 35.
para 35.
80
R. O’DONOGHUE and J. PADILLA, The Law and Economics of Article 102 TFEU, Oxford, Hart Publishing,
2013, 214.
81
V. ROSE, and D. BAILEY, European Union Law of Competition, Oxford, Oxford University Press, 717.
78

whether the intention of the dominant firm is exclusionary or constitute a legitimate
response to competition;

whether the conduct in issue is “proportional” to any legitimate interest which is being
pursued;

the connection between the conduct and the general principle of the Treaty, especially the
elimination of national boundaries and the absence of discrimination between nationals of
different Member States.”
44. In paragraph 91 of the Hoffmann-La Roche82 case the Court defined the concept of abuse as follows:
“The concept of abuse is an objective concept relating to the behavior of an undertaking
in a dominant position which I such a to influence the structure of a market where, as a
result of the very presence of the undertaking in question, the degree of competition is
weakened and which, through recourse to methods different from those which condition
normal competition in products or services on the basis of the transactions of commercial
operators, has the effect of hindering the maintenance of the degree of competition still
existing in the market or the growth of that competition.”
45. The fact that abuse is an ‘objective concept’ does not, according to Advocate General Kirschner 83,
imply that “the use of the economic power bestowed by the dominant position is the means whereby
abuse has been brought about”.84
Hoffman/La Roche, C-85/76, ECLI:EU:C:1979:36. (hereafter ‘Hoffmann La Roche’).
Tetra Pak International SA v Commission of the European Communities, Case T-83/91 ECLI:EU:T:1994:246,
Opinion of Advocate Kirschner.
84
Tetra Pak International SA v Commission of the European Communities, Case T-83/91 ECLI:EU:T:1994:246,
Opinion of Advocate Kirschner, paragraph 64.
82
83
17
3.2 OBJECTIVE OF ARTICLE 102 TFEU
46. In the Post Danmark85 case the Court added a consumer dimension to this definition86, namely:
“In that regard, it is also to be borne in mind that Article 102 applies, in particular, to
the conduct of a dominant undertaking that, through recourse to methods different from
those governing normal competition on the basis of the performance of commercial
operators, has the effect, to the detriment of consumers, of hindering the maintenance of
the degree of competition existing in the market or the growth of that competition (see to
that
effect,
AKZO
v
Commission,
paragraph
69;
France
Télécom
v
Commission…paragraphs 104 and 105; and Case-280/08 P Deutsche Telekom v
Commission…paras 174, 176 and 180 and case-law cited).”87
With the aforementioned paragraph, the Court affirmed that consumer welfare is
ultimately the goal of abuse of dominance under Article 102 TFEU. This is also said
explicitly by the Court in paragraph 20:
“ It is apparent from case-law that Article 82 EC covers not only those practices that
directly cause harm to consumers but also practices that cause consumers harm through
their impact on competition (see Case C-52/09 TeliaSonera Sverige [2011] ECR I-527,
paragraph 24 and case-law cited). It is in the latter sense that the expression
‘exclusionary abuse’ appearing in the questions referred is to be understood.”88
47. With this paragraph the Court seemed to have corrected the Intel judgment by the General Court
with regards to the goal of Article 102 TFEU. In paragraph 77 the General Court stated the
following:
Such exclusivity rebates, when applied by an undertaking in a dominant position, are
incompatible with the objective of undistorted competition within the common market,
because they are not based — save in exceptional circumstances — on an economic
transaction which justifies this burden or benefit but are designed to remove or restrict
Post Danmark I, C-209/10, ECLI:EU:C:2012:172. (hereafter ‘Post Danmark I).
A. JONES and B. SUFRIN, EU Competition Law, Oxford, Oxford University Press, 2014, 373.
87
Post Danmark I (n86), paragraph 24.
88
Ibid., paragraph 20.
85
86
the purchaser’s freedom to choose his sources of supply and to deny other producers
access to the market (see, to that effect, Hoffmann-La Roche, paragraph 71 above,
paragraph 90, and Case T-155/06 Tomra, paragraph 72 above, paragraph 209). Such
rebates are designed, through the grant of a financial advantage, to prevent customers
from obtaining their supplies from competing producers (Hoffmann-La Roche,
paragraph 71 above, paragraph 90, and Case T-155/06 Tomra, paragraph 72 above,
paragraph 210).89
This was followed up by paragraph 105:
“Lastly, the Court would point out that, a fortiori, the Commission is not required to
prove either direct damage to consumers or a causal link between such damage and the
practices at issue in the contested decision. It is apparent from the case-law that
Article 82 EC is aimed not only at practices which may cause damage to consumers
directly, but also at those which are detrimental to them through their impact on an
effective competition structure (Case C-95/04 P British Airways, paragraph 74 above,
paragraph 106).”90
48. This correction done by the Court, sitting in Grand Chamber, was welcoming as this brought the
goal of Article 102 closer to the objective of Article 101 TFEU. Seeing as Article 101(3) TFEU
allows for efficiencies to be passed onto consumers through otherwise anti-competitive practices, it
is clear that consumer welfare is the objective of Article 101 TFEU. The competitive structure is
affected but ultimately the consumer benefits from the practice, therefore the agreement or practice
in question will be allowed.91
49. A de facto Article 102(3) TFEU provision was introduced in the Post Danmark I judgment by the
Court. This is clear from paragraphs 40 to 42 of the judgment. Paragraph 41 states:
“In particular, such an undertaking may demonstrate, for that purpose, either that its
conduct is objectively necessary (see, to that effect, Case 311/84 CBEM [1985]
89
Ibid., paragraph 77.
Ibid., paragraph 105.
91
L. PEEPERKORN., “Conditional pricing: Why the General Court is wrong in Intel and what the Court of Justice
can do to rebalance the assessment of rebates”, Concurrences Review 2015, 47.
90
19
ECR 3261, paragraph 27), or that the exclusionary effect produced may be
counterbalanced, outweighed even, by advantages in terms of efficiency that also benefit
consumers (Case C-95/04 P British Airways v. Commission [2007] ECR I-2331,
paragraph 86, and TeliaSonera Sverige, paragraph 76). “92
50. Peeperkorn argues that this is a positive development as it gives orientation to competition policy.93
This cannot be expected from the goal of preserving the competitive structure of the market as it
lacks a certain benchmark. This insight is important for later chapters as this also justifies a
modernized approach of Article 102 involving an effects based framework.
51. In its Guidance Paper the Commission also confirmed that consumer welfare is the ultimate goal of
Article 102 TFEU:
“The aim of the Commission's enforcement activity in relation to exclusionary conduct is
to ensure that dominant undertakings do not impair effective competition by foreclosing
their competitors in an anti-competitive way, thus having an adverse impact on consumer
welfare..”94
52. As a side-remark I would like to end this part with a reference to the stance of Advocate General
Juliane Kokott. Her stance on this point is not without relevance as she was also appointed as
Advocate General to deliver the opinion in the Post Danmark II case. In her opinion in the British
Airways case she stated:
“The starting-point here must be the protective purpose of Article 82 EC. The provision
forms part of a system designed to protect competition within the internal market from
distortions (Article 3(1)(g) EC). Accordingly, Article 82 EC, like the other competition
rules of the Treaty, is not designed only or primarily to protect the immediate interests of
individual competitors or consumers, but to protect the structure of the market and thus
competition as such (as an institution), which has already been weakened by the presence
of the dominant undertaking on the market. 71 In this way, consumers are also indirectly
92
Post Danmark I (n86), paragraph 41.
Peeperkorn (n92) 48.
94
Guidance on the Commission’s Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive
Exclusionary Conduct by Dominant Undertakings, 2009, OJ C45/2, paragraph 19. (hereafter ‘Guidance Paper’).
93
protected. 72 Because where competition as such is damaged, disadvantages for
consumers are also to be feared.”95
53. This paragraph is a good example of how ordoliberalism still has its adherents in the ranks of the
EU Courts. The Advocate-General is clearly influenced by this philosophy with regards to EU
competition law. This consideration will provide some context when her opinion in the Post
Danmark II case is discussed in later chapters.
3.3 SPECIAL RESPONSIBILITY
54. In its case-law concerning Article 102 TFEU, the Court has developed the concept of ‘special
responsibility’.
55. This concept was first clarified by the Court in the Michelin I96 case. In paragraph 57 the Court
stated that:
“A finding that an undertaking has a dominant position is not in itself a recrimination
but simply means that, irrespective of the reasons for which it has such a position, the
undertaking concerned has a special responsibility not to allow its conduct to impair
genuine undistorted competition on the internal market.”97
56. This concepts states that seeing as dominant undertakings have a big hold on the market they are in,
they are not allowed to behave in the same way as a non-dominant undertaking. It is as if the Court
wants to chastise the dominant position in itself, even though it has held several times in its case law
that dominance is not contrary to Article 102 TFEU98. Rousseva notes that it has to be seen as ‘an
axiomatic rule, enabling prohibition on the basis of dominance’.99
95
British Airways, C-95/04, ECLI:EU:C:2007:166, Opinion of Advocate-General Kokott.
96
Michelin I (n75).
Ibid, paragraph 57.
98
Vereist verwijzing.
99
E, ROUSSEVA “Modernizing By Eradicating: How the Commission's New Approach to Article 81 Ec
Dispenses with the Need to Apply Article 82 EC to Vertical Restraints”, Common Market Law Review 2005, 59
97
21
57. Nazzini notes that this concept does not further add to the Hoffmann-La Roche concept of abuse.100
Instead, it adds to the notion that only dominant undertakings are liable to be prosecuted under
Article 102 TFEU. It is for this reason not possible, based on the concept of ‘special responsibility’,
to distill further legal implications for dominant undertakings.101 The Court was consequently not
trying to lay down a test for abuse.102
58. In several cases following the Michelin I case, including Post Danmark II103, the Court has affirmed
this concept in its case law.104 Rather than being a legal doctrine, it is a concept whereby the Court
wants to clarify that the extent of the application of Article 102 is dependent on the facts of each
case.105106 The concrete implications of this ‘special responsibility’ for dominant undertakings thus
remain vague at best.
3.4 EXCLUSIONAIRY VS. EXPLOITATIVE ABUSES
59. The Conintental Can107 case was a pioneering case for the development and interpretation of abuse
under Article 102 TFEU.108 First, in paragraph 26109 of the Contintental Can case, the Court stated
that Article 102 TFEU does not entail an exhaustive list of illicit conduct by a dominant
undertaking.110 In the case law there are several examples of this.111 Secondly, the Court clarified
that not only is exploitative conduct contrary to art. 102 TFEU, exclusionary conduct is also
prohibited. Since the Continental Can case, an abuse can be categorized as either one of two illegal
100
NAZINNI, R., The Foundations of European Union Competition Law, Oxford, Oxford University Press, 2011,
175.
101
Ibid.
102
Ibid., 174.
103
See paragraph 123.
104
Irish Sugar, T-228/97, ECLI:EU:T:1999:246, paragraph 112. , Compagnie Maritime Belge, C-95/04,
ECLI:EU:C:2007:166, paragraph 37.
105
Nazinni (n101) 175.
106
Compagnie Maritime Belge, C-95/04, ECLI:EU:C:2007:166, paragraph 114: “the actual scope of the special
responsibility imposed on a dominant undertaking must be considered in the light of the specific circumstances of
each case which show that competition has been weakened. “
107
Continental Can, Case 6-72, ECLI:EU:C:1973:22. (hereafter ‘Continental Can’).
108
Jones and Suffrin (n87) 370.
109
Continental Can (n111) paragraph 26.
110
Ibid. 26-27.
111
British Airways, C-95/04, ECLI:EU:C:2007:166 paragraph 57 – 58, Deutsche Telekom AG v European
Commission. C-280/08, ECLI:EU:C:2010:603. paragraph 173.
conducts. They are not mutually exclusive so it is possible that certain conduct can be seen as both
exclusionary and exploitative in nature.112
60. A dominant undertaking cannot only affect the consumers due to direct exploitative conduct but it
could also affect consumers indirectly by affecting the normal workings of the market. The Court
stated113:
“As may further be seen from letters (c) and (d) of Article 86 (now article 102 TFEU) (2), the
provision is not only aimed at practices which may cause damage to consumers directly, but
also at those which are detrimental to them through their impact on an effective competition
structure, such as is mentioned in Article 3 (f) of the Treaty (now article 3 (b) TFEU). Abuse
may therefore occur if an undertaking in a dominant position strengthen such position in such
a way that the degree of dominance reached substantially fetters competition, i.e., that only
undertakings remain in the market whose behavior depends on the dominant one.”
The Court thus accepted exclusionary abuse to fall under Article 102 because of the implications
for consumers.114
61. O’Donoghue and Padilla define exploitative abuse as: “pricing and other practices that result in a
direct loss of consumer welfare”.115 Predatory pricing, as mentioned in Article 102 (a) TFEU,
implemented by a dominant undertaking is, inter alia, a good example of an exclusionary abuse.116
Exclusionary abuse117 can be defined118 as ‘anti-competitive’ abuses as they are abuses that harm
the competitive structure of the market.119 Exclusionary abuses generally fall under Article 102 (b)
TFEU.120
112
Jones and Suffrin (n87) 372.
Continental Can (n111) paragraph 30.
114
Jones and Suffrin (n87) 370.
115
O’Donoghue & Padilla (n81) 241.
116
V. ROSE, and, D. BAILEY, European Union Law of Competition, Oxford, Oxford University Press, 721.
117
E.g. loyalty rebates.
118
The extent of this definition is still highly debated amongst some commentators, see for example, A EZRACHI,
Article 82 EC: Reflections on its Recent Evolution, Oxford, Hart Pubishing, 2009,232p.;I. VAN BAEL and J.F.
BELLIS,, Competition Law of the European of the European Community, Alphen aan Den Rijn, Kluwer Law
International, 717.
119
I. VAN BAEL and J.F. BELLIS,, Competition Law of the European of the European Community, Alphen aan
Den Rijn, Kluwer Law International, 904.
120
O’Donoghue & Padilla (n81) 293.
113
23
3.5 SUMMARY CONCLUSION
62. The aim of this chapter was to flesh out the concept of abuse under Article 102 TFEU. When an
undertaking has acted contrary to Article 102 TFEU this can have far reaching consequences, as
indicated in the introduction121. It is therefore unfortunate that the article in question is at times
ambiguous. The EU courts have had to clarify the extent of the article in numerous seminal
judgements. One of these essential judgements was the Hoffmann La Roche judgement where the
Court of Justice gave guidance on the concept of abuse of dominance in paragraphs 90122 and 91123.
It has to be seen as an objective concept which leaves no room for intent or fault. In the Continental
Can case the Court made the rough distinction between two types of categories of abusive conduct.
The one being exploitative conduct, the other exclusionary conduct. These distinctions have no real
practical implications as a certain type of conduct can be both exploitative and exclusionary at the
same time. Since the Post Danmark I judgement, the Court has affirmed that the main goal of Article
102 TFEU is to protect consumers from harm and thus to increase consumer welfare. This is
important as this approach is similar to the one applied in Article 101(3) TFEU. Since the Michelin
I judgement the Court has added that dominant undertakings have a ‘special responsibilty’ when
interacting with other actors of the market. This concept is at best vague and thus not add any legal
implications for dominant undertakings.
121
Verwijzing naar introduction.
Hoffmann La Roche (n83) paragraph 90.
123
Ibid. paragraph 91.
122
25
63. To conclude, within the factual context of the Hoffmann La Roche case, the reasoning of the Court
might have been justified. Applying the same reasoning in subsequent cases, however, was not.
64. The presumed legality of quantity rebates and the per se illegality of loyalty rebates could have
caused dominant undertakings in following cases to mask their rebates as a quantity rebate. One
way to accomplish this would have been to estimate the total sales of a dominant undertakings
product by a customer and to grant a rebate when the estimated sales have been reached.
124
In the
Deutsche Post125 case the Commission said that this would not pass the Hoffmann La Roche test as:
“In Hoffmann-La Roche, the Court of justice drew the following distinction between ‘fidelity
rebates’ and quantity rebates’:
- The quantity rebate is linked exclusively to the volume of purchases form the producer
concerned. It is calculated on the basis of quantities fixed objectively and applicable to all
possible purchasers,
-
The fidelity rebate is linked, not to a specific quantity, but to the customer’s requirements or a
large proportion thereof. The reduction is granted ‘in return’ for the exclusivity in satisfying
the demand. “126
In the Deutsche Post case the Commission stated that the conduct of the dominant undertaking could
be seen as a loyalty rebate, and therefore illegal.127
65. In paragraph 90 of its judgement, the Court distinguished loyalty rebates from quantity rebates based
on the assumption that the only incentive for offering loyalty rebates to ones customers would be
the exclusion of its competitors (much like exclusive dealing obligations). Quantity rebates,
124
Jones & Suffrin (n87) 458.
Deutsche Post, C-399/08, ECLI:EU:C:2010:48.
126
Deutsche Post (I) [2001] OJ L 125/27. Decision Commission.
127
Verwijzing in die commission decision.
125
however, could serve legitimate business interests if they were solely based on the volume of
purchases.128
66. The Post Danmark II case is another step in the evolution of settled case law on art. 102 TFEU with
regards to rebates. Seeing as the Court has reaffirmed earlier case law in its Post Danmark II
judgement, it will be necessary to have a closer look at the relevant cases preceding the Post
Danmark II judgement. From this overview I will try to indicate that there are two lines of case law
in the judgements of the Court with regards to art. 102 TFEU. One the one hand you have cases
where the conduct is presumed to be illegal per se as a qualified rule, while on the other hand there
are practices that have to pass a certain standard in order to be found contrary to Article 102
TFEU.129 Colomo notes that predatory pricing and loyalty rebates are a good example of the former,
whereas margin squeezing is an example of the latter.130 De facto they introduce an abuse by object
and an abuse by effect approach to Article 102 TFEU.
67. With regards to the per se illegal conduct, anti-competitive effects are assumed.131 Whereas conduct
under Article 102 TFEU that is not per se illegal, anti-competitive effects will have to be shown in
order for the conduct to be illegal. 132
4.1 PER SE ILLEGAL REBATE SCHEMES
4.1.1 Presumption of illegality of loyalty rebates or the by object prohibition
68. The term loyalty rebates or exclusivity rebates was first used in the seminal Hoffmann La Roche133
case where the Court defined term as follows:
P. COLOMO, “Intel and Article 102 TFEU Case Law: Making Sense of a Perpetual Controversy”, LSE Working
Papers 28.
129
Colomo (n133) 4.
130
Ibid., 13.
131
See paragraph 78 and following.
132
Ibid.
133
Hoffmann La Roche (n83).
128
27
“…discounts conditional on the customer’s obtaining all or most of its require
requirements – whether the quantity of its purchases be large or small – from the
undertaking in a dominant position”134
69. Another definition was given in the OECD Report of 4 February 2003135 where it was defined as:
“pricing structures offering lower prices in return for a buyer’s agreed or de facto
commitment to source a large and/or increasing share of his requirements with the
discounter”.
According to this definition, a loyalty rebate does not necessarily have to be concluded in a contract.
70. The Hoffmann La Roche judgement forms the basis for following case law where the Court held
that loyalty rebates are per se illegal. This line of case law was confirmed in later judgements, which
will be discussed in later paragraphs.
71. The Suiker Unie136 case formed the legal groundwork for the Hoffmann La Roche case. In the Suiker
Unie judgement the Court had to assess the legality of exclusive dealing arrangements under Article
102. The Court found these to be illegal as they ‘were likely to limit markets to the prejudice of
consumers within the meaning of Article 86 (now Article 102 TFEU)¸ because it gave other
producers and especially those having their places of business in other Member States no chance
or restricted their opportunities of competing with sugar sold by SZV (being the dominant
undertaking in the Suiker Unie case).”137
72. With regards to loyalty rebates the Court stated, in the Hoffmann La Roche case, the following in
paragraph 89138:
“An undertaking which is in a dominant position on a market and ties purchasers, even
if it does so at their request, by an obligation or promise on their part to obtain all or
most of their requirements exclusively from the said undertaking abuses its dominant
134
Ibid., paragraph 89.
Loyalty and fidelity discounts and rebates, OECD report of 4 February 2003, DAFEE COMP (2002) 21), p. 7.
136
Suiker Unie, C-40/73, ECLI:EU:C:1975:174.
137
Suiker Unie, C-40/73, ECLI:EU:C:1975:174, paragraph 526.
138
Hoffmann La Roche (n83) paragraph 89.
135
position within the meaning of Article 86 of the Treaty (now art. 102 TFEU), whether the
obligation in question is stipulated without further qualification or whether it is
undertaking in consideration of the grant of a rebate.
The same applies if the said undertaking, without tying the purchases by a formal
obligation, applies, either under terms of agreements concluded with these purchasers or
unilaterally, a system of fidelity rebates, that is to say discounts conditional on the
customer’s obtaining all or most of its requirements - whether the quantity of its
purchases be large or small – from the undertaking in a dominant position”139
73. It is important to see the cases involving loyalty rebates in their respective factual context, seeing as
several commentators have noted that a too formal approach of loyalty rebates under Article 102
TFEU originated from Courts applying case-law without considering the relevant facts of those
cases and applying previous case law in factually different contexts.140
74. For a full and in depth overview of the facts in the Hoffmann La Roche case, I refer to the decision
of the Commission.141 The Hoffmann La Roche case concerned a dominant producer of vitamins
(Hoffmann La Roche, hereafter ‘HLR’) which had concluded exclusivity contracts with several of
its largest customers. At the time when the facts took place, HLR was one of the biggest vitamin
producers in the world.
75. The contracts between HLR and its customers held the following features142:

Purchasers were to obtain most or all of their vitamin requirements in the form of vitamins
from HLR;

HLR paid a rebate each year or every six months that was calculated on total purchases to
those customers who have obtained all or most of their requirements form HLR. This
involved a rebate which varied between 1% and 5% ;
139
Hoffmann La Roche (n83) paragraph 89.
Jones & Suffrin (n87) 458.
141
Vitamins, OJ 1976 L223/27.
142
Hoffmann La Roche (n87) paragraph 1.
140
29

in the contracts there was a so called ‘English clause’, which provided that customers were
to inform Roche if any ‘reputable ‘manufacturer charged a price lower than was charged by
HLR. If HLR did not lower its price to that level, customers were free to obtain supplies
from the other manufacturer without losing the fidelity rebate on their purchases from HLR.
Most of these contracts were concluded for an indefinite period of time, with some contracts
including a tacit renewal of the contracts after the agreed upon time had expired.143 The Court noted
that this indicated that HLR had the intention of building a long lasting trade relationship with its
customers. 144
76. Paragraph 90145of the judgement is one of the more important paragraphs of the judgement as it
differentiates loyalty rebates from quantity rebates. This paragraph was also repeated in several
other cases.146 Following the Hoffman La Roche case, the Court has systematically held147 that
quantity rebates, are by a way of a qualified rule, allowed under Article 102 TFEU.
Paragraph 90 states the following:
“Obligations of this kind to obtain supplies exclusively from a particular undertaking,
whether or not they are in consideration of rebates or of the granting of fidelity rebates
intended to give the purchaser an incentive to obtain his supplies exclusively from the
undertaking in a dominant position, are incompatible with the objective of undistorted
competition within the Common Market, because – unless there are exceptional
circumstances which may make an agreement between undertakings in the context of
Article 85 and in particular of paragraph (3) of that article, permissible, they are not
based on an economic transaction which justifies this burden or benefit but are designed
to deprive the purchaser of or restrict his possible choices of sources of supply and to
deny other producers access to the market.
143
Ibid., paragraph 86.
Ibid.
145
Hoffmann La Roche (n87) paragraph 90.
146
Irish Sugar, T-228/97, ECLI:EU:T:1999:246. 7, paragraph 114, Michelin I, C-322/81, ECLI:EU:C:1983:313.,
paragraph 73.
147
British Airways, C-95/04, ECLI:EU:C:2007:166., paragraph 84,
BPB Industries, T-65/89 ,
ECLI:EU:T:1993:31, paragraph 68.
144
The fidelity rebate, unlike quantity rebates exclusively linked with the volume of
purchases from the producer concerned, is designed through the grant of a financial
advantage to prevent customers from obtaining their supplies from competing producers.
Furthermore the effect of fidelity rebates is to apply dissimilar conditions to equivalent
transactions with other trading parties in that two purchasers pay a different price for
the same quantity of the same product depending on whether they obtain their supplies
exclusively from the undertaking in a dominant position or have several sources of supply.
Finally these practices by an undertaking in a dominant potion and especially on an
expanding market tend to consolidate this position by means of a form of competition
which is not based on the transactions effected and is therefore distorted.”148
77. To conclude, within the factual context of the Hoffmann La Roche case, the reasoning of the Court
might have been justified.149 Applying the same reasoning in subsequent cases, however, was not.
78. The presumed legality of quantity rebates and the per se illegality of loyalty rebates could have
caused dominant undertakings in following cases to mask their rebates as a quantity rebate. One
way to accomplish this would have been to estimate the total sales of a dominant undertakings
product by a customer and to grant a rebate when the estimated sales have been reached.
151
Deutsche Post
150
In the
case the Commission said that this would not pass the Hoffmann La Roche test as:
“In Hoffmann-La Roche, the Court of justice drew the following distinction between
‘fidelity rebates’ and quantity rebates’:
The quantity rebate is linked exclusively to the volume of purchases form the producer
concerned. It is calculated on the basis of quantities fixed objectively and applicable to
all possible purchasers,
The fidelity rebate is linked, not to a specific quantity, but to the customer’s requirements
or a large proportion thereof. The reduction is granted ‘in return’ for the exclusivity in
satisfying the demand. “152
148
Hoffmann La Roche (n83) paragraph 90.
Cololmo (n133) 21.
150
Jones& Suffrin (n87) 458.
151
Deutsche Post, C-399/08, ECLI:EU:C:2010:48.
152
Deutsche Post, C-399/08, ECLI:EU:C:2010:48, OJ 2002 L 247, p. 27, paragraph 33.
149
31
In the Deutsche Post case the Commission stated that the conduct of the dominant undertaking could
be seen as a loyalty rebate, and therefore illegal.153
79. In paragraph 90 of its Hoffmann La Roche judgement, the Court distinguished loyalty rebates from
quantity rebates based on the assumption that the only incentive for offering loyalty rebates to ones
customers would be the exclusion of its competitors (much like exclusive dealing obligations).
Quantity rebates, however, could serve legitimate business interests if they were solely based on the
volume of purchases.154
4.1.2 Anti-competitive vs. pro-competitive effects of loyalty rebates
80. The assumed negative effects of fidelity rebates are the following155:

they deprive the purchasers of the ability to freely choose sources of supply;

they bar competitors from accessing the market;

they strengthen the dominant position of the supplier.
81. The Court treats loyalty rebates in the same manner as exclusive purchasing obligations as it is
assumed that they will have the same negative effects on competitors.156 Therefore once a rebate
has the characteristics of a loyalty rebate and can be defined as such, they “will be past
redemption”.157
82. What is clear from the facts in the Hoffmann La Roche case, is that the dominant undertaking, being
HLR, had set up a system that was comparable to exclusive buying contracts. As I have mentioned
earlier, it is unfortunate that the Court has repeated the Hoffmann La Roche reasoning in subsequent
cases158 where it did not involve rebates linked to exclusive dealing requirements. The Court has
153
Verwijzing in die commission decision.
Cololmo (n133) 28
155
Rousseva (n73) 177.
156
Jones& Suffrin (n87) 458.
157
Rousseva (n73) 175.
158
BPB Industries, T-65/89 ,ECLI:EU:T:1993:31; Irish Sugar, T-228/97, ECLI:EU:T:1999:246.; Michelin I,
154
C-322/81, ECLI:EU:C:1983:313.
since then always held in its case law159 that exclusive purchasing contracts in return for loyalty
rebates are illegal. This was also the case in the Suiker Unie judgement.160
83. With regards to loyalty rebates, the Court and the Commission have, for a long time, upheld a
formalistic approach in their assessment of rebates under Article 102 TFEU. This approach has been
widely criticized161 in legal doctrine as it is not based on a convincing economic argumentation.
84. What is thus unfortunate, is that the Court stated that the loyalty rebates were not based on a so
called ‘economic transaction’ even though it refused to even analyze the possible effects of such a
rebate on, not only competitors, but also on consumers.162
85. In the BPB Industries163 case the General Court had to deliver a judgement on a Commission
decision prohibiting a system implemented by BPB Industries Inc. rewarding the loyalty of several
large customers who acquired most their purchases from BPB Industries Inc. BPB Industries
rewarded its customers with promotional expenses and contributed to advertising. In its judgement
the General Court refrained from analyzing the possible effects of the acclaimed abuse by stating
that:
“…those considerations, which apply in a normal competitive market situation, cannot
be unreservedly accepted in the case of a market where, precisely because of the
dominant position of one of the economic operators, competition is already restricted. An
undertaking in a dominant position has a special responsibility no to allow its conduct to
impair genuine undistorted competition in the common market.“164
159
Irish Sugar, T-228/97, ECLI:EU:T:1999:246, paragraph198. BPB Industries, T-65/89
,ECLI:EU:T:1993:31, paragraph 67.
160
Suiker Unie, C-40/73, ECLI:EU:C:1975:174.
161
E. ROUSSEVA, “Modernizing By Eradicating: How the Commission's New Approach to Article 81 Ec
Dispenses with the Need to Apply Article 82 Ec to Vertical Restraints”, Common Market Law Review 2005, 1 L.
GORMSEN, “Article 82 EC: Where Are We Coming From and Where Are We Going To?”, The Competition
Law Review 2006, 4-26.
J. TEMPLE LANG,, “How Can The Problems of Exclusionary Abuses under Article 102 TFEU be
Resolved?”, ELRev 2012, 141-142; Jones& Suffrin (n87) 382.
162
Jones& Suffrin (n87) 458.
BPB Industries, T-65/89 ,ECLI:EU:T:1993:31.
164
BPB Industries, T-65/89 ,ECLI:EU:T:1993:31, paragraph 67.
163
33
Accordingly, the General Court referred to this notion of ‘special responsibility’165 to avoid
assessing the effects of the actual conduct.166 BPB had a dominant position on the relevant market
and therefore the competitive structure was already affected. The fact that BPB concluded the
aforementioned agreements with its customers was enough to from an obstacle for ‘market entry’.
167
86. Several economists have actually proven that loyalty rebates can in fact entail procompetitive
effects.168169The main procompetitive effects being170171:

more efficient recovery of fixed costs;

providing better incentives to retailers;

reducing double marginalization;

resolving “hold up” problems.
87. The Court has not recognized these procompetitive effects in its case law. A good illustration of this
is paragraph 16 in the British Airways case172:
“BA can have no interest in applying its reward schemes other than ousting rival airlines
and thereby hindering maintenance of the existing level of competition or the development
of that competition on the United Kingdom market for air travel agency services.”173
88. In the Solvay case Advocate General Kokott (who also wrote the opinion in the Post Danmark II
case) rebutted the notion that the case law on loyalty rebates had no economic basis. She stated in
paragraph 80174:
165
See paragraph 74.
Rousseva (n73) 176.
167
BPB Industries (n172) paragraph 68.
168
D. RIDYARD, “Exclusionary Pricing and Price Discrimination Abuses Under Article 82 An Economic
Analysis”, European Competition Law Review 2003, 286-303.
169
Peeperkorn (n92) 51.
170
Padilla pagina 465-467.
166
171
SPECTOR, D., “Loyalty Rebates: An Assessment of Competition concerns and a Proposed Rule of Reason”,
Competition Policty International 2005, 89-114.
172
O’Donoghue & Padilla (n81) 464.
173
British Airways plc v. commission arrest T219/99 verwijzing, zie ook Padilla pagina 464.
174
BPB Industries (n172) paragraph 80.
“I would add merely for the sake of completeness that Solvay’s (ill-substantiated)
complaint to the effect that the case-law of the Court of Justice concerning fidelity rebates
is formalistic and has no economic basis is also unfounded. As has already been said,
when assessing rebate schemes, the Court of Justice takes into account all the
circumstances of the individual case and expressly recognizes the possibility of an
objective economic justification…This is anything but formalistic”
4.1.3 Residual category of rebates and Michelin I
89. The concept of loyalty rebates being illegal was expanded, for the first time, to target rebates in the
Michelin I175 case.176 As is the case for the other case law involving rebates, it is important to first
discuss the factual context of the case. These rebates can be seen as a residual category as they do
not seem to fit within the definition of neither a quantity or loyalty rebate.
90. In the Michelin I case, Michelin, a dominant undertaking in the tire market, offered rebates to its
customers upon reaching a certain target. These targets were personalized for each customer
individually. Michelin took several factors into account when deciding on the sales target, including
the estimated sales of the customer of that reference year and the amount Michelin tires that were
represented in the total amount of sold tires by the customer. These criteria were however not known
or, at least, unclear for the customer. 177
91. From the facts of the case it is clear that there was no explicit exclusivity concluded between
Michelin and its customers.178 It was therefore hard for the Court, in the light of previous case law,
to categorize the rebate operated by Michelin as a loyalty rebate. If it was not a loyalty rebate, could
the rebate scheme then be seen as a quantity rebate? The Court answered this negatively in paragraph
72 of its judgement:
“As regards the system at issue in this case, which is characterized by the use of sales
targets, it must be observed that this system does not amount to a mere quantity discount
175
Michelin I (n75).
Jones & Suffrin (n87) 460.
177
J. TEMPLE LANG and R. O’ DONOGHUE Defining Legitimate Competition: How to Clarify Pricing Abuses
Under Article 82 EC, Fordham Int Lt. 2002, 98.
178
Michelin I (n75) page 3472.
176
35
linked solely to the volume of goods purchased since the progressive scale of the previous
year’s turnover indicates only the limits within which the system applies.
...On the other hand the system in question did not require dealers to enter into any
exclusive dealing agreements or to obtain a specific proportion of their supplies form
Michelin NV, and that this point distinguishes it from loyalty rebates of the type which
the Court had to consider in its judgement of 13 February 1979 in Hoffmann-La
Roche.”179
92. The Court therefore could not rely on its sole formal distinction between loyalty rebates and quantity
rebates to hold the rebate scheme applied by Michelin NV as abusive. Instead it stated that it was
necessary to:
“..consider all the circumstances, particularly the criteria and rules for the grant of the
discount, and to investigate whether, in providing an advantage not based on any
economic service justifying it, the discount tends to remove or restrict the buyer’s freedom
to choose his sources of supply, to bar competitors from access to the market, to apply
dissimilar conditions to equivalent transactions with other trading parties or to
strengthen the dominant position by distorting competition.“180
93. To conclude whether the rebate scheme was abusive, the Court thus posited that it would investigate
if the rebate scheme had similar negative effects as a loyalty rebate181. However it is clear that the
Court, rather disappointingly182, did no such thing. Instead it referred to the inherent effect183 of a
discount system with a long reference period. In paragraph 81 the Court notes:
“The discount system in question was based on an annual reference period. However,
any system under which discount are granted according to the quantities sold during a
relatively long reference period has the inherent effect, at the end of that period, of
increasing pressure on the buyer to reach the purchase figure needed to obtain the
discount or to avoid suffering the expected loss for the entire period In this case the
179
Michelin I (n75) paragraph 72.
Michelin I (n75) paragraph 73.
181
Ibid. paragraph 91.
182
Rousseva (n73) 178.
183
Ibid.
180
variations in the rate of discount over a year as a result of one last order, even a small
one, affected the dealer’s margin of profit on the whole year’s sales of Michelin heavyvehicle tires. In such circumstances, even quite slight variations might put dealers under
appreciable pressure.”184
94. Therefore the Court assumed that there was considerable pressure on customers that was “further
accentuated” by following factors:

wide divergence between Michelin NV’s market share and those of its main competitors185;

lack of transparency of the rebate scheme186;
95. This led the Court to conclude that the rebate scheme had similar negative effects on the relevant
market as loyalty rebates, and was therefore abusive under art. 102 TFEU. 187
96. As Rousseva notes188, Michelin NV was to a certain extent punished for holding a dominant position
as the accentuating factors189 followed from the dominant position that Michelin NV held at the
time.190 The loyalty-inducing effect191 and dominant position of Michelin NV were sufficient to
conclude that the rebate scheme operated by Michelin NV was abusive. 192
97. In the Michelin I case the Court holds that once a rebate cannot be seen as a quantity rebate, which
is presumed to be legal, it will consider all the relevant circumstances193 in order to determine the
abusive nature of the rebate scheme. The purpose or function of this ‘all the relevant circumstances’
reasoning is to investigate whether the rebate scheme in question has a similar working as rebates
that are conditional upon exclusivity.194 The aim of it is not to provide the anticompetitive effect of
the conduct but rather the vacancy of a justification based on pro-competitive reasons.195 The
184
Michelin I (n75) paragraph 81.
Ibid. paragraph 82.
186
Ibid. paragraph 83.
187
Ibid. paragraph 86.
188
Rousseva (n73) 178.
189
e.g. the discrepancy between the smaller competitors and Michelin NV; the fact that smaller competitors could
not match the rebate offered by Michelin NV.
190
This further proves the ordoliberal influence in the case law of the Court.
191
The term ‘loyalty-inducing’ was not explicitly used in the Michelin I case, but rather implied. It was first used
in the Michelin II case with regards to quantity rebates, see paragraph 103 and following.
192
Rousseva (n73) 179.
193
Michelin I (n75) paragraph 73; BPB Industries, T-65/89 ,ECLI:EU:T:1993:31.
194
Colomo (n133) 29.
195
Ibid.
185
37
Michelin I case learns us that target rebate as the ones applied by Michelin NV will be contrary to
Article 102 TFEU, without assessing any economic justification.
4.2
PRESUMED LEGALITY OF QUANTITY REBATES
4.2.1 Definition
“Quantity rebate systems linked solely to the volume of purchases made from an
undertaking occupying a dominant position are generally considered not to have the
foreclosure effect prohibited by Article 82 EC (see Michelin v Commission, cited at
paragraph 54 above, paragraph 71, and Case C-163/99 Portugal v Commission [2001]
ECR I-2613, paragraph 50). If increasing the quantity supplied results in lower costs for
the supplier, the latter is entitled to pass on that reduction to the customer in the form of
a more favorable tariff (Opinion of Advocate General Mischo in Portugal v Commission,
cited above, at ECR I-2618, point 106). Quantity rebates are therefore deemed to reflect
gains in efficiency and economies of scale made by the undertaking in a dominant
position.”196
98. Zenger qualified quantity rebates as follows:
“The only form of rebate the Court has not categorically marked as unlawful is therefore
the very limited class of discounts that are at once incremental, standardized, and
volume-based.”197
99. Since the Hoffmann La Roche case the Court has systematically held that quantity rebates applied
by dominant undertakings are not per se illegal under Article 102 TFEU. This case-law was turned
on its head in the Michelin II198 case where the General Court stated199 that quantity rebates can be
abusive under Article 102 TFEU if they are ‘loyalty-inducing’. To come to this conclusion the Court
would “consider all the circumstances” of the rebate scheme at hand.
196
Michelin II (n75) paragraph 58.
H. ZENGER,, “Loyalty Rebates and The Competitive Process”, Journal of Competition Law & Economics
2012, 6.
198
Michelin II (n75).
199
Michelin II (n75) paragraph 58 – 60.
197
4.2.2 Michelin II and the abandonment of the presumption
100. In its Decision200 2002 the Commission held that the quantity rebate scheme applied by Michelin
NV was abusive under Article 102 TFEU. This was later confirmed by the General Court in its
judgement of 30 September 2003. This is an interesting case with respects to the legality of quantity
rebates as this was the first time the Commission had found a quantity rebate to be abusive under
Article 102 TFEU.
201
Another reason why this case is of relevance is because the rebate scheme
applied by Michelin NV shows a lot of similarities with the one at hand in the Post Danmark II
judgment.202 Namely, both cases involved retroactive standardized rebate schemes.
101. Michelin NV was found to be a dominant undertaking in the French market for replacement tires
for trucks and buses as well as retreated tires. Michelin had set up a marketing scheme which
involved bonuses, rebates and a ‘service bonus system’203; it was also possible for customers to join
the ‘Michelin Friends Club’. Of particular importance for this thesis is the rebate scheme applied by
Michelin NV.
102. Michelin NV operated a retroactive standardized quantity rebate based on a uniform scale, which
it applied to all of its customers.204 The rebate scheme had several particular characteristics whereby
the Commission was of the opinion that the scheme was abusive in the sense of Article 102 TFEU.
The Court of First Instance later followed the Commission’s decision. Even though it was a quantity
rebate, the fact that it had a reference period of a year (a long period in the eyes of the Court of First
Instance) and that the rebate was applicable to the total turnover.205 The rebate scheme had several
different ‘levels’, with each level (individual sales target for the customer) correlating with another
rebate. The rebate was subsequently based on the annual turnover of the customers.
103. In paragraph 58 and 59 the Court sheds some light on the legality of quantity rebates, as opposed to
loyalty rebates, under Article 102 TFEU:
200
Commission decision 2002/405 relating to a proceeding pursuant to Article 82 of the EC Treaty,
COMP/E-2/36.041/PO Michelin, OJ L143/1, 31.05.2002.
201
Jones & Suffrin (n87) 463.
202
P. COLOMO, “Post Danmark II, or the Quest for Administrability and Coherence in Article 102
TFEU”, LSE Working Papers 2015/15.
203
D. WAELBROECK, “Michelin II: A per se Rule Against Rebates by Dominant Companies?”, Journal of
Competition Law and Economics 2005, 150.
204
Van Bael & Bellis (n124) 925.
205
Ibid.
39
“Quantity rebate systems linked solely to the volume of purchases made from an
undertaking occupying a dominant position are generally considered not to have the
foreclosure effect prohibited by Article 82 EC (see Michelin v Commission, cited at
paragraph 54 above, paragraph 71, and Case C-163/99 Portugal v Commission [2001]
ECR I-2613, paragraph 50). If increasing the quantity supplied results in lower costs for
the supplier, the latter is entitled to pass on that reduction to the customer in the form of
a more favorable tariff (Opinion of Advocate General Mischo in Portugal v Commission,
cited above, at ECR I-2618, point 106). Quantity rebates are therefore deemed to reflect
gains in efficiency and economies of scale made by the undertaking in a dominant
position.”
“It follows that a rebate system in which the rate of the discount increases according to
the volume purchased will not infringe Article 82 EC unless the criteria and rules for
granting the rebate reveal that the system is not based on an economically justified
countervailing advantage but tends, following the example of a loyalty and target rebate,
to prevent customers from obtaining their supplies II - 4102 MICHELIN v COMMISSION
from competitors (see Hoffmann-La Roche v Commission, cited at paragraph 54 above,
paragraph 90; Michelin v Commission, cited at paragraph 54 above, paragraph 85; Irish
Sugar v Commission, cited at paragraph 54 above, paragraph 114; and Portugal v
Commission, cited at paragraph 58 above, paragraph 52).”
104. Based on the foregoing paragraphs, Jones and Suffrin rightfully noted that the legality of quantity
rebates is based on economic efficiencies and gains being passed onto consumers (i.e. an economic
justification).206 In paragraph 62 the Court states that “the mere fact of characterizing a discount
system as quantity rebates does not mean that the grant of such discounts is compatible with Article
102 TFEU”. In that same paragraph, it then goes on the reiterate earlier case-law that all the
circumstances have to considered.207 The Court therefore departed from the Hoffmann La Roche
presumption with regards to quantity rebates. 208
105. Instead of declaring the rebate as presumably legal, the Court went on to analyze all the
circumstances, like it did in earlier cases involving loyalty rebates209.
206
Jones & Suffrin (n87) 468.
Michelin II (n109) paragraph 62.
208
Pagaina 3 post danmkar II or the quest for administrability and cherence in article 102 TFEU.
209
Michelin II (n109) paragraph 60.
207
“In determining whether a quantity rebate system is abusive, it will therefore be
necessary to consider all the circumstances, particularly the criteria and rules governing
the grant of the rebate, and to investigate whether, in providing an advantage not based
on any economic service justifying it, the rebates tend to remove or restrict the buyer's
freedom to choose his sources of supply, to bar competitors from access to the market, to
apply dissimilar conditions to equivalent transactions with other trading parties or to
strengthen the dominant position by distorting competition (see Hoffmann-La Roche v
Commission, cited at paragraph 54 above, paragraph 90; Michelin v Commission, cited
at paragraph 54 above, paragraph 73; and Irish Sugar v Commission, cited at paragraph
54 above, paragraph 114).”210
106. Based on the circumstances the Court concluded that the quantity rebate operated by Michelin had
“the characteristics of a loyalty-inducing discount system”. 211 The quantity rebate therefore lost its
presumed legal status it held under the Hoffmann la Roche case law. Seeing as the rebate scheme
was retroactive instead of incremental it would appear that the Hoffmann La Roche didn’t apply as
it could not be considered as a pure quantity rebate based on the volume of sales. The General Court
took the approach of Michelin I and applied it to the rebate scheme at hand. In paragraphs 50 – 52
it concluded that the rebate scheme was unfair212, loyalty-inducing213 and had a market-partitioning
effect214.215
107. Based on the objective justification reasoning, it was possible for Michelin to escape prosecution if
it was able to prove an objective economic justification for the rebate.216 Michelin NV failed, in the
eyes of the Court to provide this proof.217 Jones and Suffrin therefore conclude that “quantity rebates
which are not linked to a demonstrable economic justification may be loyalty-inducing”.218
210
Ibid.
Michelin II (n109) paragraph 95.
212
Ibid., paragraph 50.
213
Ibid., paragraph 51.
214
Ibid., paragraph 52.
215
Colomo (n212) 6.
216
Michelin II (n109) paragraph 108.
217
Ibid.
218
Jones & Suffrin (n87) 469.
211
41
4.2.3 British Airways
108. Having considered the Michelin I case, it is justified to have a closer look at the British Airways
judgement of the Court. It is apparent that in this case, the Court again chose to follow its previous
case-law which has been widely criticized219 for lacking an effects-based approach.220 The Court in
paragraph 65 directly refers to the Michelin I and Hoffmann-La Roche judgements:
“In that respect, Michelin is particularly relevant to the present case, since it concerns a
discount system depending on the attainment of individual sales objectives which
constituted neither discounts for quantity, linked exclusively to the volume of purchases,
nor fidelity discounts within the meaning of the judgment in Hoffman La Roche, since
the system established by Michelin did not contain any obligation on the part of resellers
to obtain all or a given proportion of its supplies from the dominant undertaking” 221
109. The facts of the British Airways case are as follows. During the nineties British Airways offered
sizeable extra commissions to its travel agents for the sales of BA tickets to customers, on top of the
basic commissions already provided. For the travel agents there was therefore an extra incentive to
sell BA tickets instead of tickets of its competitors. Essential in the agreements concluded with the
travel agents, is that there was a certain ‘roll-back’ mechanism included222, i.e. once the travel agent
hit a certain target sales, an extra commission would be paid out based on the total amount of sales
during the reference period.223
110. The Commission clarified the marketing agreements as follows in paragraph 29 of its decision224:
“The commission schemes for travel agents described above all have one notable feature
in common. In each case meeting the targets for sales growth leads to an increase in the
commission paid on all tickets sold by the agent, not just on the tickets sold after the
target is reached. In the [marketing agreement] schemes the cash bonus per ticket paid
219
See to that extent the works of Gormsen, Rousseva, Colomo and Pétit mentioned in the biography.
European Court of Justice Upholds Judgment of the Court of First Instance in the British Airways/Vir
221
British Airways (n96) paragraph 65.
222
Jones & Suffrin (n87) 475.
223
K. BACON, “European Court of Justice upholds judgement of the Court of First Instance in the British Airways
Judgement”, Competition Policy International 2007, 228.
224
British Airways, C-95/04, ECLI:EU:C:2007:166. OJ 2000 L 30, p. 1, paragraph 29.
220
to the travel agent increases for all tickets sold. In the [performance reward scheme] the
percentage commission paid increases for all ticket sales by the travel agent. This means
that when a travel agent is close to one of the thresholds for an increase in commission
rate selling relatively few extra BA tickets can have a large effect on his commission
income. Conversely a competitor of BA who wishes to give a travel agent an incentive to
divert some sales from BA to the competing airline will have to pay a much higher rate
of commission than BA on all of the tickets sold by it to overcome this effect.”
111. Virgin Atlantic Airways (hereafter ‘VA’), a big competitor of British Airways, filed a complaint
with the European Commission stating that British Airways abused its dominant position in the
market for air travel agency services. The Commission stated in its decision225 that the complaint of
VA was well founded and therefore concluded that British Airways had abused its dominant position
under Article 102 TFEU seeing as the marketing agreements were comparable to the loyalty rebates
(inter alia discussed in Michelin I and Hoffmann La Roche.226 The Court of First Instance confirmed
the decision in the first appeal made by BA. BA appealed the judgement of the Court of First
Instance with the Court of Justice, which in its turn upheld the judgement.227
112. In the British Airways judgement it is once again clear that loyalty rebates are presumed to have an
anticompetitive purpose and therefore are by nature or ‘by object’ contrary to Article 102 TFEU.
113. In paragraphs 67 to 69 the Court clarifies its approach to rebates under Article 102 TFEU. In
paragraph 67 it first goes to reiterate the, already discussed, Michelin I228 paragraph 73. It is however
interesting that the Court added a new examination of this paragraph in paragraph 68.229 Paragraph
68 and 69 read as follows:
“It follows that in determining whether, on the part of an undertaking in a dominant
position, a system of discounts or bonuses which constitute neither quantity discount or
bonuses nor fidelity discounts or bonuses within the meaning of the Judgement in
Hoffmann- La Roche constitutes an abuse, it first has to be determined whether those
discounts or bonuses can produce an exclusionary effect, that is to say whether they are
capable, first , of making market entry difficult or impossible for competitors of the
225
British Airways, C-95/04, ECLI:EU:C:2007:166. OJ 2000 L 30, p. 1
British Airways, C-95/04, ECLI:EU:C:2007:166. OJ 2000 L 30, p. 1, paragraph 96.
227
British Airways (n96).
228
Michelin I (n75) paragraph 73.
229
Rousseva, (n73) 180.
226
43
undertaking in a dominant position and, secondly, of making it more difficult or
impossible for its co-contractors to choose between various sources of supply or
commercial partners.
It then needs to be examined whether there is an objective economic justification of the
discount and bonuses granted. In accordance with the analysis carried out by the General
Court in paragraphs 279 to 291 of the judgement under appeal, an undertaking is at
liberty to demonstrate that its bonus system producing an exclusionary effect is
economically justified.”230
114. As is clear from the aforementioned paragraphs, the Court will apply a two stage test with regards
to rebate schemes similar to the ones found in Michelin I and Hoffmann-La Roche.
115. First, the Court will analyze whether the rebate scheme ‘can produce an exclusionary effect by
making market entry very difficult or impossible for competitors of the undertaking or making it
more difficult or impossible for its co-contractors to choose between various sources of supply or
commercial partners’. Concrete effects will therefore not be analyzed, only the capability of
exclusionary effect is relevant for Article 102 TFEU.
116. Second, once the capability of exclusionary effect has been established it is possible for the
dominant undertaking to provide an objective justification for its abuse. With regards to the analysis
of an objective justification for the abuse of BA, the Court said the following:
“Assessment of the economic justification for a system of discounts or bonuses
established by an undertaking in a dominant position is to be made on the basis of the
whole of the circumstances of the case (see, to that effect, Michelin, paragraph 73). It
has to be determined whether the exclusionary effect arising from such a system, which
is disadvantageous for competition, may be counterbalanced, or outweighed, by
advantages in terms of efficiency which also benefit the consumer. If the exclusionary
effect of that system bears no relation to advantages for the market and consumers, or if
it goes beyond what is necessary in order to attain those advantages, that system must be
regarded as an abuse. In this case, correctly basing its examination upon the criteria thus
inferred from the case-law, the Court of First Instance examined whether there was an
economic justification for the bonus schemes at issue. In paragraphs 284 and 285 of the
230
British Airways (n96) paragraph 68 – 69.
judgment under appeal, it adopted a position in relation to the arguments submitted by
BA, which concerned, in particular, the high level of fixed costs in air transport and the
importance of aircraft occupancy rates.
On the basis of its assessment of the circumstances of the case, the Court of First Instance
came to the conclusion that those systems were not based on any objective economic
justification. 88 In this context, it should be noted that BA's arguments concerning the
high level of fixed costs in air transport and the importance of aircraft occupancy rates
are inadmissible for the reasons set out in paragraph 78 of this judgment, since, by those
arguments, BA is in reality challenging the assessment of facts and evidence made by the
Court of First Instance. It is not for the Court of Justice, on an appeal, to substitute its
own assessment of market data and the competitive position for that of the Court of First
Instance”
117. One of the reasons why the British Airways judgement is of importance, lies in the aforementioned
paragraphs. Contrary to previous cases, namely Michelin I , Hoffmann-La Roche and BPB
Industries, the Court did not accept the possibility for the dominant undertaking to escape
prosecution under Article 102 TFEU by objectively justifying231 its abusive conduct.232 In the British
Airways judgement, the Court once again refused to budge away from its form-based approach to
abuse under Article 102 TFEU. British Airway’s main argument was that its marketing schemes did
not in fact have a negative effect on its competitors. The market share of its competitors actually
increased during the time it operated its commissions scheme.
4.3 OBJECTIVE JUSTIFICATION
4.3.1 Overview
118. This concept of objective justification is still unclear as it lacks an analytical framework.233 It is
unfortunate that Article 102 does not contain a provision similar to Article 101 (3) as this would
In earlier case-law the Court used ‘objective justification’ whereas in this case it used ‘economic justifcation’.
Rousseva (n73) 181.
233
A. ALLBORS-LLORENS, “The Role of Objective Justification and Efficiencies in the Application of Article
82 EC”, Common Market Law Review 2007, 1727-1761.
231
232
45
undo a lot of legal uncertainty. 234 Furthermore, it is not uncommon for rule of EU law to provide a
prohibitory rule followed by an exonerating provision.235 The mandatory requirements reasoning in
the context of freedom of goods is a good example to this.236
119. Van der Vijver237 recognizes three different types of objective justification in Article 102 TFEU
case-law, being:

legitimate business behavior;

legitimate public interest objectives;

and efficiency considerations.
120. The burden of proof for this objective justification will rest on the dominant undertaking, see for
example paragraph 41 of the Post Danmark238 judgement:
In particular, such an undertaking may demonstrate, for that purpose, either that its
conduct is objectively necessary (see, to that effect, Case 311/84 CBEM[1985]
ECR 3261, paragraph 27), or that the exclusionary effect produced may be
counterbalanced, outweighed even, by advantages in terms of efficiency that also benefit
consumers
(Case
C-95/04 P British
Airways v Commission [2007]
ECR I-2331,
paragraph 86, and TeliaSonera Sverige, paragraph 76).
“It is incumbent upon the dominant undertaking to provide all the evidence necessary to
demonstrate that the conduct concerned is objectively justified. It then falls to the
Commission to make the ultimate assessment of whether the conduct concerned is not
objectively necessary and, based on a weighing-up of any apparent anti-competitive
effects against any advanced and substantiated efficiencies, is likely to result in consumer
harm.”
T. VAN DER VIJVER, “Objective Justification and Article 102 TFEU”, World Competition 2012, 55-76.
A. ALLBORS-LLORENS, “The Role of Objective Justification and Efficiencies in the Application of Article
82 EC”, Common Market Law Review 2007, 1727-1761.
236
E. ROUSSEVA, “The Concept of Objective Justification of An Abuse of a Dominant Position: Can it Help to
Modernise the Analysis under Article 82 EC?, The Competiton Law Review 2006, 68.
237
A. ALLBORS-LLORENS, “The Role of Objective Justification and Efficiencies in the Application of Article
82 EC”, Common Market Law Review 2007, 1727-1761.
238
Post Danmark I (n86) paragraph 41.
234
235
121. What the standard of proof is, is to a certain extent unclear. Luc Ghyselen noted in his paper239 that
there are three aspects a dominant undertaking will have to prove240:

the abusive conduct generates efficiencies;

the efficiencies have to be quantifiable;

the conduct is proportionate to achieve the efficiencies.
4.3.2 Legitimate business interest
122. Legitimate business behavior can been seen as ‘normal business behavior’ referred to in the
Hoffmann-La Roche judgement241. 242 In paragraph 189 of the United Brands243 judgement the Court
stated:
“Although it is true as the applicants points out, that the facts that an undertaking is in a dominant
position cannot disentitle it from protecting its own commercial interests if they are attacked, and
that such an undertaking must be concerned the right to take such reasonable steps as it deems
appropriate to protect its said interests, such behavior cannot be countenanced if its actual purpose
is to strengthen this dominant position and abuse it.”
What constitutes as normal business behavior or competition on the merits will be heavily depended
on the facts of the case.
4.3.3 Legitimate public interest.
123. Legitimate public interests objectives were considered in the Hilti244 case. Hilti, the dominant
undertaking whose conduct was under assessment, tried to justify its exclusionary practices by
L. GYSELEN, “Rebates, Competition on The Merits or Exclusionary Practice?”, European Competition Law
Anual 2003, 288.
240
L. GYSELEN “Rebates, Competition on The Merits or Exclusionary Practice?”, European Competition Law
Anual 2003, 298.
241
Hoffmann La Roche (n83) paragraph 91.
242
A. ALLBORS-LLORENS “The Role of Objective Justification and Efficiencies in the Application of Article
82 EC”, Common Market Law Review 2007,1745.
243
United Brands, C-27/76, ECLI:EU:C:1978:22.
244
Hilti, T-30/89, ECLI:EU:T:1991:70.
239
47
stating that the abuses were necessary in order to protect the safety and the wellbeing of its
customers.245 These arguments were not accepted by the General Court as it was not Hilti’s
responsibility to protect the public safety, seeing as this was already the task of several governmental
bodies.
246
However, with regards to public interest, the Commission has accepted environmental
concerns as a justification of abuse under Article 102 TFEU.247
124. The last objective justification recognized by Van der Vijver is an efficiency consideration. This
objective justification mirrors in a certain way paragraph 3 of Article 101 TFEU. An objective
justification based on efficiency entails that although there is a foreclosure effect on the market,
there are positive effects being passed onto the consumers that outweigh the negative effects.248
4.3.4 Econocmic jusifcation.
125. So far the Court has not yet accepted an efficiency justification for a rebate scheme abusive under
Article 102 TFEU.
As was clear from the Michelin II249 case and the British Airways250
judgement, the Court did consider the possibility. For example in Michelin II, the then Court of First
Instance stated251:
“In those circumstances, it is necessary to consider whether, in spite of appearances, the
quantity rebate system applied by the applicant is based on a countervailing advantage
which may be economically justified (see, in that regard, Michelin v Commission, cited
at paragraph 54 above, paragraph 73; Irish Sugar v Commission, cited at paragraph 54
above, paragraph 114; and Portugal v Commission, cited at paragraph 58 above,
paragraph 52) or, in other words, if it rewards an economy of scale made by the applicant
because of orders for large quantities. If increasing the quantity supplied results in lower
costs for the supplier, the latter is entitled to pass on that reduction to the customer in the
Ibid. 105 – 107.
T. VAN DER VIJVER, “Objective Justification and Article 102 TFEU”, World Competition 2012, 66.
247
Port of Genoa Decision 97/745 [1997] OJ L 301/27, paragraph 21.
248
Guidance on the Commission’s Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive
Exclusionary Conduct by Dominant Undertakings, 2009, OJ C45/2, paragraph 30.
249
Michelin II (n109)
250
Case T- 219/99 British Airways plc v Commission [2003] ECR II-5917.
251
Michelin II (n109) paragraph 98.
245
246
form of a more favourable tariff (Opinion of Advocate General Mischo in Portugal v
Commission, cited at paragraph 58 above, point 106).”
126. In paragraph 107 the Court stated252:
“It is then necessary to examine whether the applicant has established that the quantity
rebate system, which presents the characteristics of a loyalty-inducing rebate system, was
based on objective economic reasons (see, in that regard, Irish Sugar v Commission, cited
at paragraph 54 above, paragraph 188, and Portugal v Commission, cited at paragraph
58 above, paragraph 56).”
127. When the Court applied this to the facts however into detail, the Court found that Michelin could
not justify its rebate scheme due to cost savings.
“It must be stated that the applicant provides no specific information in that regard. It merely states
'that orders for large amounts involve economies and that the customer is entitled to have those
economies passed on to him in the price that he pays' (point 57 of the application). It also refers to
its reply to the statement of objections and to the transcript of the hearing (reply, point 91). Far
from establishing that the quantity rebates were based on actual cost savings (Opinion of Advocate
General Mischo in Portugal v Commission, cited at paragraph 58 above, point 118), the applicant
merely states generally that the quantity rebates were justified by 'economies of scale in the areas
of production costs and distribution' (transcript of the hearing, p. 62).”253
128. Based on the foregoing paragraphs of the Michelin II judgement, it would appear that the Court
would only accept economic justifications if they reflect cost savings due to an increase in the
volume of purchases. 254
4.4 SUMMARY CONCLUSION
129. Roughly three categories of rebates can be distilled from the case-law as described above. First,
quantity rebates, which based on Hoffmann La Roche will be presumed to be legal. However, after
the Michelin II judgment this presumption of legality was disputed by the General Court. It
concerned a standardized retroactive rebate and as such could not be considered as a quantity rebate
in the sense of Hoffmann La Roche. The General Court therefore assessed the rebate scheme through
252
Michelin II (n109) paragraph 107.
Michelin II (n109) paragraph 108.
254
E. ROUSSEVA, “The Concept of Objective Justification of An Abuse of a Dominant Position: Can it Help to
Modernise the Analysis under Article 82 EC?, The Competiton Law Review 2006, 103.
253
49
the lenses of the Michelin I case. After it had considered all the circumstances, the General Court
came to the conclusion that the rebate scheme was unfair, loyalty-inducing and market-partitioning.
This leads to the conclusion that the presumption of legality will only be applied to a very strict
category of quantity rebates. One of the questions the Post Danmark II possibly could answer is
whether the presumption also applies to standardized incremental quantity rebates. This will be
discussed in the closing chapters.
130. The second category recognized in the case-law are the exclusionary rebates or loyalty rebates.
These are considered abusive ‘by object’. These are presumed to be contrary to Article 102 TFEU,
like exclusive dealing contracts, as they are very likely to have a negative impact on consumers. 255
As noted in the discussed case-law, with regards to exclusivity rebates the Courts will conclude that
the scheme is abusive based on the form that rather the effects. 256
131. The last category is the residual category as held in the Michelin I judgement. Rebate schemes that
do not meet the requirements of either of the aforementioned rebate schemes will be assessed under
the Michelin I - test. This test was further developed in the British Airways case. With regards to
this residual category the Court will accordingly apply a two-stage test. First, it will assess whether
the rebate scheme is capable of producing an exclusionary effect. Second, the Court will assess
whether there is an objective justification for the scrutinized conduct.
132. Based on the objective justification doctrine an dominant undertaking can escape application of
Article 102 TFEU by proving that it was justified. The proof of burden will ultimately be on the
dominant undertaking. So far, roughly three different justifications have been accepted in the caselaw and literature; namely: legitimate business interest, legitimate public interest and economic
efficiencies. Whether the dominant undertaking will be able to justify its conduct based on previous
cases will be ambiguous. This will depend heavily on the factual context of the rebate scheme. As
of yet it is unclear which objective justifications the EU Courts will accept in the future. Considering
the amounts of parameters that can impact the application of the objective justification I am of the
opinion that it is not an ideal framework to assess of abuse of dominance under. It is clear that this
concept is developed on an ad-hoc basis and therefore does not provide the much needed guidance
for dominant undertakings wanting to avoid the application of Article 102 TFEU on their rebate
schemes.
255
256
Peeperkorn (n92) 53.
Jones & Suffrin (n87) 382.
133. In the 2000’s, following the Michelin II and British Airways judgements of the General Court, the
Commission started to rethink its decisional approach to conduct contrary to Article 102 TFEU.
There was a lot of criticism following both these judgements as in both cases, the dominant
undertaking’s competitor’s market shares increased despite the conduct of the dominant
undertakings.257 In July 2005 it published the Report on an Economic Approach to Article 82
(‘Consultation Paper’) 258. The Commission had by then realized that the form-based approach to
rebates under Article 102 TFEU garnered a lot of criticism among legal practitioners and dominant
undertakings alike. The main criticism being that the approach of the EU Court did not involve a
consistent assessment of the effects of the conduct.259 The executive summary of the Consultation
Paper is as follows260:
“This report argues in favor of an economics-based approach to Article 82, in a way
similar to the reform of Article 81 and merger control. In particular, we support an
effects-based rather than a form-based approach to competition policy. Such an
approach focuses on the presence of anti-competitive effects that harm consumers, and
is based on the examination of each specific case, based on sound economics and
grounded on facts.”
In the Consultation Paper the authors therefore clearly plead for an effects based approach to Article
102 TFEU.
134. Shortly following the publication of the Consultation Paper, the Commission published the
Discussion Paper on the Application of Article 82 of the Treaty to Exclusionary Abuses261 (‘the
Discussion paper’). The Commission published this paper in order to incite a debate on what
257
Colomo (n133) 19.
Report by the Economic Advisory Group (EAGCP) for Competition Policty ‘An Economic Approach to Article
82 EC’, July 2005, availible at: ec.europa.eu/competition/atintrust/art82.
259
O’Donoghue & Padilla (n81).
260
Report by the Economic Advisory Group (EAGCP) for Competition Policty ‘An Economic Approach to Article
82 EC’, July 2005, 2, availible at: ec.europa.eu/competition/atintrust/art82.
261
DG COMPETITION Discussion Paper on the Application of Article 82 of the Treaty to Exclusionary Abuses,
Brussels, December 2005, available at: ec.europa.eu/competition/atintrust/art82.
258
51
analytical framework the Commission should adopt in its future decisions and guidelines regarding
exclusionary abuses under Article 102 TFEU. It was the first attempt at drafting guidelines for the
application of Article 102 TFEU.262 The Discussion Paper has been criticized by some
commentators however because it “it lacks the vigour found in the EAGCP Report.”263. Akman
further criticized the Discussion Paper for not giving a clear overview how the effects-based
approach should be implemented.264 There are however notions of an effects based approach to be
found in the Discussion Paper265, although not sufficient. Others266 state that the Discussion Paper’s
preferred approach, of making consumer harm the main objective of the Commission’s Policy,
would be contrary to at that time established case-law. Namely, in the case-law multiple objectives
have been cited for Article 102 TFEU, consumer-harm being only one of them.267 As discussed
earlier268
135. The official ‘guidelines’ for the application of Article 102 TFEU were published in December 2008,
carefully titled Guidance on the Commission’s Enforcement Priorities in Applying Article 82 EC
Treaty to Abusive Exclusionary Conduct by Dominant Undertakings (‘Guidance Paper’)269. By
publishing the Guidance Paper, the wanted to create some clarity on its decisional practice and more
importantly its priorities (the Guidance Paper is most of all a prioritization device)270 with regards
to exclusionary conduct under Article 102 TFEU. It is however highly debatable if it succeeded in
that objective.
136. Some commentators, like Ezrachi, have stated that instead of creating more certainty for
undertakings by publishing the Guidance Paper, the Commission has accomplished the opposite.271
262
L. GORMSEN, A Principled Approach to Abuse of Dominance in European Competition Law, Cambridge,
Cambridge University Pres, 2010, 157.
263
Discussion Paper (n274).
264
P. AKMAN “The EC Discussion Paper on the Application of Article 82”, not published. Available at:
http://competitionpolicy.ac.uk/documents/8158338/8264816/004.pdf/6364b50a-b785-4529-97e0-ad64a17c7f35.
265
Discussion Paper (n274).
266
L. GORMSEN, A Principled Approach to Abuse of Dominance in European Competition Law, Cambridge,
Cambridge University Pres, 2010, 157.
267
Ibid., 158.
268
Paragraphs 47 and following.
269
DG COMPETITION Discussion Paper on the Application of Article 82 of the Treaty to Exclusionary Abuses,
Brussels, December 2005, available at: ec.europa.eu/competition/atintrust/art82.
270
N. PETIT “Rebates and Article 102 TFEU: The European Commission's Duty to Apply the Guidance Paper”,
not published, availible at: http://orbi.ulg.ac.be/handle/2268/192441.
271
Guidance on the Commission’s Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive
Exclusionary Conduct by Dominant Undertakings, 2009, OJ C45/2, 64.
This uncertainty is created on two fronts according to Ezrachi, namely‘inherent uncertainty’ and
‘external uncertainty’.272 ‘Inherent uncertainty’ in the sense that the concepts brought up by the
Commission are too vague and “open-ended”.273 A diverging approach274 between the EU Courts
and the EU Commission could in turn lead to what Ezrachi calls ‘external uncertainty’.275 While it
was applauded by some for opening the door to a more economic approach of Article 102 TFEU, it
is nonetheless without its flaws.276
137. Certain paragraphs in the Guidance Paper are unfortunate however. Paragraph 22 is a good example
of this::
“There may be circumstances where it is not necessary for the Commission to carry out
a detailed assessment before concluding that the conduct in question is likely to result in
consumer harm. If it appears that the conduct can only raise obstacles to competition and
that it creates no efficiencies, its anti-competitive effect may be inferred.”277
138. These kind of paragraphs further add to the ambiguity and uncertainty touched upon in previous
paragraphs. Regrettable is that the Commission seems to contradict itself in this paragraph as this
indicates that the form-based approach is still at play in the minds of the Commission. Ultimately,
this kind of flexibility does not serve predictability ex ante for dominant undertakings which was
partly the reason why the Commission started this debate in the first place.278
272
A, EZRACHI Article 82 EC: Reflections on its Recent Evolution, Oxford, Hart Pubishing, 2009, 53.
Ibid.
274
Where the EU courts would adhere to a form-based approach and the EU commission to a more economic
approach.
275
Ezrachi (n285) 55.
276
D. GERADIN “The Decision of the Commission of 13 May 2009 in the Intel case: Where is the Foreclosure
and Consumer Harm?”, Journal of European Competition Law & Practice 2010, 112-122.
277
Guidance Paper (n284) paragraph 22.
278
P. AKMAN, “The Reform of the Application of Article 102 TFEU: Mission Accomplished”, Anti-Trust Law
Journal, forthcoming, 14, available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2654679.
273
53
5.1 THE AS-EFFICIENT-COMPETITOR TEST
139. With regards to price-based exclusionary conduct, which would appear as to include loyalty
rebates279, the Commission has set out in its Guidance Paper that it will only intervene “where the
conduct concerned has already been or is capable of hampering competition from competitors
which are considered to be as efficient as the dominant undertaking”.280 In paragraph 25 of the
Guideline the Commission clarifies how this as-efficient-competitor (hereafter ‘AEC- test’) test
would be applied:
“In order to determine whether even a hypothetical competitor as efficient as the
dominant undertaking would be likely to be foreclosed by the conduct in question, the
Commission will examine economic data relating to cost and sales prices, and in
particular whether the dominant undertaking is engaging in below-cost pricing. This will
require that sufficiently reliable data be available. Where available, the Commission will
use information on the costs of the dominant undertaking itself. If reliable information on
those costs is not available, the Commission may decide to use the cost data of
competitors or other comparable reliable data.”
140. The last line of the aforementioned paragraph is highly questionable. Namely, the Commission
states here that, in certain circumstances, when applying the AEC-test, it will assess whether the
dominant undertaking operates below the costs of a competitor. With regards to legal certainty this
cannot be justified. It is unreasonable to require from a dominant undertaking to assess ex ante its
pricing schemes in the light of the costs of another undertaking.281
141. The status of the AEC-test was first discussed in the Intel282 judgement. The Intel case involved
conditional rebates offered by Intel, the dominant undertaking, to its customers. Important to note
is that the Intel case was brought before the General Court before the adaption of the Guidance Paper
N. PETIT “Rebates and Article 102 TFEU: The European Commission's Duty to Apply the Guidance Paper”,
not published, 2, available at: http://orbi.ulg.ac.be/handle/2268/192441.
280
Guidance on the Commission’s Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive
Exclusionary Conduct by Dominant Undertakings, 2009, OJ C45/2, paragraph 3.
281
Akman (n291) 15.
282
Intel, T-286/09, ECLI:EU:T:2014:547.
279
by the Commission283. As is clear from the judgment in Intel284, the General Court decided to stick
to the principles and two stage approach established in earlier case law. The Commission also
concluded that Intel had abused its dominant position by applying the traditional two stage test.
However, it also applied its AEC-test. In this regard, paragraph 992 of the Commission’s decision285
in Intel is noteworthy:
“Intel argues that beyond the requirement of an exclusivity or quasi-exclusivity condition
of the discounts required by the case law quoted in recital (920), the Court also
considered "whether the scheme in question did in fact affect the situation of competitors
(i.e. whether they did actually or likely foreclose competitors)".
However, a reading of the case law referred to in recital (920) reveals that this is not the
case. Contrary to what Intel argues, the Courts do not look into the actual impact of the
alleged anticompetitive conduct on the market in the analysis undertaken in cases like
Microsoft or British Airways either. Indeed, even with regard to conduct that does not
constitute fidelity discounts within the meaning of the Hoffmann La Roche case la the
Community Courts have established that "for the purposes of establishing an
infringement of Article 82 EC, it is not necessary to demonstrate that the abuse in question
had a concrete effect on the markets concerned. It is sufficient in that respect to
demonstrate that the abusive conduct of the undertaking in a dominant position tends to
restrict competition or, in other words, that the conduct in question is capable of having
or likely to have such an effect."
142. In paragraph 923286 the Commission then goes on:
“Contrary to what Intel argues, however, this does not require evidence of actual
foreclosure. In addition, a violation of Article 82 may also result from the anticompetitive
object of the practices pursued by a dominant undertaking.”
283
The case came under investigation in the early 2000s,whereas the Guidance Paper was published in December
2008. See Nicholas Petit, pagina 3, rebates and the duty to apply the AEC test.
284
Intel (n295) paragraph 80 – 81.
285
Intel, T-286/09, ECLI:EU:T:2014:547, OJ 2009 C 227, p. 13
286
Intel, T-286/09, ECLI:EU:T:2014:547, OJ 2009 C 227, p. 13, paragraph 923.
55
With this paragraph the Commission seems to contradict its own Guidance Paper as it states that
proof of actual foreclosure effects.
143. Intel’s main argument was that no actual foreclosure effects had been proven. In response to this,
the Commission referred to the established case-law up to that point. It therefore saw no reason why
it had to establish anti-competitive effects. In its decision it did however apply the AEC – test to the
case.287
144. The Commission described the AEC it would apply as follows:
“The as efficient competitor analysis is a hypothetical exercise in the sense that it
attempts to analyze whether a competitor which is as efficient as Intel (in terms of
producing x86 CPUs and in terms of delivering x86 CPUs that provide the same value to
customers as Intel), but which would not have as broad a sales base as Intel, would be
foreclosed from entering.”
“Given all the relevant parameters (namely de facto conditions for the rebates applied
by the dominant undertaking, contestable share, reference period and cost measure), the
as efficient competitor analysis as applied in this case examines what price an as efficient
competitor would have to offer an Intel trading partner in order to compensate it for the
loss of any Intel rebate. If Intel’s rebate scheme means that in order to compensate an
Intel trading partner for the loss of the Intel rebate, an as efficient competitor has to offer
its products below a viable measure of Intel's cost, then it means that the rebate was
capable of reducing access to Intel trading partners which could offer products from the
as efficient competitor, or in other words capable of foreclosing a hypothetical as efficient
competitor. This would thereby deprive final consumers of the choice between different
products which the Intel trading partner would otherwise have chosen to offer were it to
make its decision solely on the basis of the relative merit of the products and unit prices
offered by Intel and its competitors.”288
287
288
Intel, T-286/09, ECLI:EU:T:2014:547, OJ 2009 C 227, p. 13, paragraph 1002-1576.
Intel, T-286/09, ECLI:EU:T:2014:547, OJ 2009 C 227, p. 13, paragraph 1154.
145. To summarize, the AEC test tries to give a solution for the orthodox form-based approach of Article
102 “by defining foreclosure as instances where a dominant firm forces rivals to effectively compete
with below-cost prices” as noted by Zenger.289 With the AEC-test there is a parting of the automatic
assumption that there are anti-competitive effects on the competitive structure once the requirements
for an infringement of Article 102 TFEU, based on the case-law, have been identified.290 As it is
stated in paragraph 23 of the Guidance paper:
“…the Commission will normally only intervene where the conduct concerned has
already been or is capable of hampering competition from competitors which are
considered to be as efficient as the dominant undertaking.”
146. The Intel decision was a first insight on how the Commission would apply the AEC-test. It in turn
was however criticized by commentators for several reasons.291 One of the reasons being that,
despite having announced that it would adopt a more economic approach with regards to Article
102 TFEU292, when push comes to shove, the Commission still falls back on its form-based
approach.293
147. Some points of criticism are to be made with regards to the legal framework put forward in the
Guidance Paper. When the Commission would apply the AEC-test, it would take certain parameters
H. ZENGER, “Devising Loyalty Rebates that Comply with the As-Efficient-Competitor Test”, Concurrences
Review 2013, 16-19.
290
Gormsen, are anti competitive effects necessary for an analysis under article 102 TFEU?
291
D. GERADIN “The Decision of the Commission of 13 May 2009 in the Intel case: Where is the Foreclosure
and Consumer Harm?”, Journal of European Competition Law & Practice 2010, 112-122.
292
The then Commissioner for EU competition is said to have announced this as early as 23 september 2005. See
Neelie Kroes, “Preliminary Thoughts on Policy Review of Article 82”, Speech at the Fordham Corporate Law
Institute New York, 23 September 2005.
293
Geradin (n305) 23.
289
57
into account such as ‘the contestable share294’ and the ‘relevant range295’. There are several reasons
why these parameters would be difficult to estimate.296 For dominant undertakings it would therefore
be very difficult to calculate when its abusive conduct is likely to fall under the prohibitions of
Article 102 TFEU. Lang concludes with his main criticism being that the Guidance Paper makes no
clear distinction between ‘legitimate foreclosure’ and ‘anti-competitive foreclosure’. 297
148. Ultimately, the AEC test is not a desirable solution for the formalistic approach of Article 102
TFEU. As mentioned in the above paragraph, the parameters are too difficult for an undertaking to
estimate which in turn could cause legal uncertainty298. Another issue is that it is still too orthodox
in the sense that, as Gormsen notes, the standard of proof is still based on the ‘capability’ of
competition restricting effects.299
5.2 THE LEGAL NATURE OF THE AS-EFFICIENT-COMPETITOR TEST
149. In the following paragraphs I will assess the legal nature of the Paper, and more specifically the
AEC-test contained within the Guidance Paper, as this was also to a certain extent unclear for the
referring Court in the Post Danmark II prejudicial question.300
“As with exclusive purchasing obligations, the likelihood of anti-competitive foreclosure is higher where
competitors are not able to compete on equal terms for the entire demand of each individual customer. A
conditional rebate granted by a dominant undertaking may enable it to use the ‘non contestable’ portion of the
demand of each customer (that is to say, the amount that would be purchased by the customer from the dominant
undertaking in any event) as leverage to decrease the price to be paid for the ‘contestable’ portion of demand (that
is to say, the amount for which the customer may prefer and be able to find substitutes)”. See Guidance on the
Commission’s Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive Exclusionary Conduct
by Dominant Undertakings, 2009, OJ C45/2.
295
Commission will estimate what price a competitor would have to offer in order to compensate the customer for
the loss of the conditional rebate if the latter would switch part of its demand (‘the relevant range’) away from the
dominant undertaking. See Guidance paper.
296
J. TEMPLE LANG and R. O’ DONOGHUE,“Defining Legitimate Competition: How to Clarify Pricing Abuses
Under Article 82 EC, Fordham Int Lt. 2002, 139
297
Ibid.
298
See to this extent also paragraph 108.
299
L. GORMSEN, “Are Anti-Competitive Effects Necessay for an Analysis under Article 102 TFEU?”, World
Competition 2013, 223-246.
300
See paragraph 124.
294
150. In paragraph 3 of the Guideline it states that the paper does not “constitute a statement of the law”.301
Guidelines in EU law are generally considered to be soft law.
302
With regards to Guidelines the
Court clarified its legal status in the Dansk Rørindustri A/S judgement, in paragraph 207 it stated:
“The Court has already held, in a judgment concerning internal measures adopted by the
administration, that although those measures may not be regarded as rules of law which
the administration is always bound to observe, they nevertheless form rules of practice
from which the administration may not depart in an individual case without giving
reasons that are compatible with the principle of equal treatment. Such measures
therefore constitute a general act and the officials and other staff concerned may invoke
their illegality in support of an action against the individual measures taken on the basis
of the measures (see Case C-171/00 P Liberos v Commission [2002] ECR I-451,
paragraph 35).”
151. Based on the aforementioned paragraph, the Commission would have to apply the Guidance Paper
in subsequent cases involving Article 102 TFEU. The Commission already noted in its Discussion
Paper however that it would have to respect the interpretation of the EU Courts given to Article 102
TFEU.303 Therefore the Commission would still have to respect the boundaries as determined by
the EU Courts.304 This could cause issues for Commission who allegedly wants to further its more
economic approach agenda. The reason for this is that the Commission can shape its policy in a
proactive way whereas the Courts can only develop a new approach in a reactive way, i.e. when a
new relevant case is brought before the Courts.305
152. The Court of Justice had an opportunity to reshape its policy with regards to Article 102 TFEU. In
the Tomra306 it involved again an exclusive dealing and rebate scheme set up by dominant
Guidance on the Commission’s Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive
Exclusionary Conduct by Dominant Undertakings, 2009, OJ C45/2, paragraph 3.
302
Z. GEORGIEVA, Soft Law in EU Competition Law and its Judicial Reception in Member States -- A
Theoretical Perspective (October 2014). TILEC Discussion Paper No. 2014-035. Available at
SSRN:http://ssrn.com/abstract=2506617 or http://dx.doi.org/10.2139/ssrn.2506617.
303
DG COMPETITION Discussion Paper on the Application of Article 82 of the Treaty to Exclusionary Abuses,
Brussels, December 2005, paragraph 6 available at: ec.europa.eu/competition/atintrust/art82.
304
A. EZRACHI; “Article 82 EC: Reflections on its Recent Evolution”, Oxford, Hart Pubishing, 2009, 51.
305
Ibid.
306
Tomra, C-549/10, ECLI:EU:C:2012:221.
301
59
undertaking Tomra. It was clear from the judgement however that the Court had no intention to
apply the Commission’s Guidance Paper. In paragraph 81 it stated:
“The appellants’ arguments that the Commission’s Guidance (see paragraph 52 of this judgment),
provides for a comparative analysis of prices and costs cannot invalidate that conclusion. As the
Advocate General observes in point 37 of his Opinion, the Guidance, published in 2009, has no
relevance to the legal assessment of a decision, such as the contested decision, which as published
in 2006.”
Jones & Sufrin rightfully note that the above begs the question that if the Guidance had been
published after the Commission’s decision would the Paper have been relevant in the Courts
assessment?307
153. Pétit states that the AEC test can be seen as a “rule of practice” as mentioned above.308 He also notes
that the Commission should apply the AEC test when assessing a price abuse, however a marginal
discretion has to be taken into account.309
5.3 THE AS-EFFICIENT COMPETITOR TEST FOLLOWING THE POST
DANMARK II JUDGMENT
154. In Post Danmark II the referring Court asked the Court Justice, inter alia, the following in its
prejudicial question:
In its answer the Court is further requested to clarify what relevance, if any, the dominant
undertaking’s prices and costs have to the evaluation pursuant to Article 82 EC of such a rebate
scheme (relevance of an “as-efficient-competitor” test).
155. The Advocate General is of the opinion that the AEC is not binding on the national competition
authorities.310 The reasons for this are twofold. First, the Commission states in its Enforcement
307
Jones & Suffrin (n87) 482.
N. PETIT “Rebates and Article 102 TFEU: The European Commission's Duty to Apply the Guidance Paper”,
not published, availible at: http://orbi.ulg.ac.be/handle/2268/192441.
309
N. PETIT “Rebates and Article 102 TFEU: The European Commission's Duty to Apply the Guidance Paper”,
not published, 10, availible at: http://orbi.ulg.ac.be/handle/2268/192441.
310
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott, paragraph 60.
308
Priorities Communication that it is not ‘a statement of the law’311. Second, it is settled case-law that
statements of the Commission are not legally binding.312 However, the national competition
authorities are not precluded form utilizing a price/cost analysis in their assessment.313
156. To further corroborate her opinion, the Advocate General also refers to the fact there is no case law
that states that a price/cost analysis is an absolute requirement when assessing a rebate scheme. 314
Therefore she is also of the opinion that the Court should confirm their position on this issue.315
157. To make such an analysis conditional would be unreasonable in the eyes of Advocate General
Kokott. She lists a number of reasons for this. First, she remarks that it would take up a lot of the
limited resources of the national competition authorities.316 Second, in order for the AEC test to be
reliable, the input data has to be reliable.317 And in order for the data to be reliable the dominant
undertaking that is subject of the investigation has to be cooperative at all times. She states that this
is an unreasonable presumption as corporate data is open to a lot of different interpretations.318 Third,
the AEC test compares the dominant undertaking with an as efficient competitor. But the relevant
market is structured in such a way (high barriers of entry, economies of scale) that it is near
impossible for another undertaking to be as efficient as Post Danmark. 319 The Advocate General
concludes that to compare the dominant undertaking with an as efficient hypothetical undertaking,
which is not able to exit, would lead to undesirable result.
158. The Advocate General thus pleads for a more general assessment where all the relevant
circumstances of the rebate scheme have been taken into account. She states:
“In particular, however, a finding of abuse in the context of Article 82 (now art. 102
TFEU), as in other contexts, always requires an evaluation which takes into account all
the relevant circumstances of the individual case in question and must not be confined to
Guidance on the Commission’s Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive
Exclusionary Conduct by Dominant Undertakings, 2009, OJ C45/2, paragraph 23.
312
Expedia, C-226/11, EU:C:2012:795, paragraph 29 – 31.
313
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott, paragraph 60.
314
Ibid. 63.
315
Ibid. 64.
316
Ibid. 66.
317
Ibid. paragraph 66.
318
Ibid. paragraph 67.
319
Ibid. paragraph 71.
311
61
an examination of price and cost components alone. On the contrary, there are many
other factors, such as the specific modus operandi of a rebate scheme and certain
characteristics of the market on which the dominant undertaking operates, that may also
be relevant to finding of abuse. In fact, they may be much more informative than a
price/cost analysis.”320
159. So in conclusion, the Advocate General pleads for an approach that involves all the relevant
circumstances without the AEC test being mandatory for the national competition authorities, based
on the foregoing reasons. An AEC test can however be applied in the assessment of the rebate
scheme under art. 102 TFEU. 321
“2. Article 82 EC does not require the abusive nature of the rebate scheme operated by
a dominant undertaking to be demonstrated by means of a price/cost analysis such as the
as-efficient-competitor test, where its abusive nature is immediately shown by an overall
assessment of the other circumstances of the individual case.
However, the authorities and courts dealing with competition cases are at liberty to avail
themselves of a price/cost analysis in their overall assessment of all the circumstances of
the individual case, unless, on account of the structure of the market, it would be
impossible for another undertaking to be as efficient as the dominant undertaking.”
160. In paragraphs 51 and following, the Court discussed the relevance of the as-efficient-competitor test
in assessing a rebate scheme under art. 102 TFEU.322
161. In its judgement, the Court agrees with the Advocate General on the fact that there is no legal
obligation resting on national competition authorities to apply the as-efficient-competitor test when
assessing a rebate scheme under art. 102 TFEU.
323
According to the Court there is simply no
possible reading of art. 102 TFEU that would allow this.324
320
Ibid. paragraph 68.
Ibid. paragraph 75.
322
Ibid. paragraph 52.
323
Ibid. paragraph 57.
324
Ibid.
321
162. It can, however, be reasonable to apply an as-efficient-competitior test when assessing a rebate
scheme, but it cannot be made obligatory.325 In the present case, the Court is of the opinion, just like
the Advocate General, that, to apply an as-efficient-competitor test on the rebate scheme applied by
Post Danmark, would not make much sense. To back this up, the Court notes similar arguments as
the Advocate General.326 To conclude, the Court sees the AEC test as a tool available to the national
competition authorities when assessing a rebate scheme under art. 102 TFEU and is therefore not a
necessary condition. 327
163. It can therefore be concluded that following the Post Danmark II judgement the AEC – test is a
valid option for the assessment of rebates. Pétit notes: “this means that the Commission can set for
itself stricter standards than those found in Article 102 TFEU case-law.”328 Seeing as the AEC test
can be seen as a ‘rule of practice’, the Commission would be under an obligation based on the case
law to apply the AEC-test.
5.4 SUMMARY CONCLUSION
164. A divide between the assessment of rebate schemes by the Commission and the EU Courts can be
noticed following the publication of the Guidance Paper in 2009. Preceding the Guidance Paper, the
Commission published the Consultation and Discussion Paper. The Commission wanted to spark
the debate on how to modernize the legal framework of Article 102 TFEU. The conclusion from
these documents is that the Commission wanted to push the assessment of conduct, thus including
rebate schemes, under Article 102 TFEU into the direction of an effects-based approach. This intent
was predominantly present in the Consultation paper which clearly urged for a more economic
approach. The spirit of the Consultation paper was however to a lesser extent present in the
documents that followed up on it. It is unfortunate that the Discussion and Guidance paper did not
contain the same enthusiasm as the Consultation paper.
165. The culmination of the modernization debate by the Commission was the Guidance Paper. In this
Guidance Paper the Commission offered an insight into its enforcement priorities for the future.
This would allow dominant undertakings, who are the subject of Article 102 TFEU, to better assess
325
Ibid. paragraph 58.
See paragraph 32.
327
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 62.
328
PETIT, N. “Rebates and Article 102 TFEU: The European Commission's Duty to Apply the Guidance Paper”,
not published, pagina 11, availible at: http://orbi.ulg.ac.be/handle/2268/192441.
326
63
their conduct ex ante as to avoid prosecution by way of Article 102 TFEU. Whether the Commission
succeeded in achieving its goals is debatable. The reason for this is that the Commission contradicts
itself in the Guidance Paper which in turn leads to uncertainty. Moreover, the Guidance Paper allows
for a lot of flexibility for the Commission329. Geradin has given a nice example of the ambiguity
plaguing the Guidance Paper. Namely, he counted eighteen times the use of the term ‘generally’ and
five times the term ‘in principle’ in the Guidance Paper.330
166. In the Guidance Paper the Commission included the as-efficient-competitor test. This test involves
assessing whether a hypothetical competitor as efficient as the dominant undertaking would be likely
to be foreclosed by the conduct in question. Therefore when the AEC-test suggests that the pricing
level has the potential to foreclose on equally efficient competitors, the Commission will take this
into account when deciding whether the conduct is exclusionary. The Guidance Paper states that the
AEC-test is relevant in the overall assessment but is not decisive in the final decision. The
Commisison can therefore also take other factors into account.
331
The Commission gave some
insight on the concrete application of this AEC-test in the context of rebate schemes with its decision
in the Intel case. Several commentators have noted that the parameters used in the AEC-test are
difficult to estimate for dominant undertakings and therefore not reliable.
167. Whether the Guidance Paper and the AEC-test was legally binding for the Commission and the
national competition authorities was still contested, to a certain extent, up until the Post Danmark
II judgment. The Court of Justice has stated in previous case-law that, although not being rules of
law, guidelines are rules of practice. Therefore the Commission could not depart from these
guidelines without giving a specific reason. The Commission also had to take the case-law of the
EU courts into account when assessing conduct from dominant undertakings. Clarity on this issue
came with the Post Danmark II judgement. The Court held that the application of the AEC-test is
purely optional competent authority conducting the investigation. However when the relevant
authority does apply the AEC-test it will have to take the case-law of the EU courts into account.
168. Although it is a step in the right direction, the AEC-test is not the ideal way of modernizing Article
102 TFEU. If the Commission is serious about modernizing Article 102 TFEU it should put its
money where its mouth is. The AEC-test is currently only optional and only forms an aspect of its
D. GERADIN, “Is the Guidance Paper on the Commission’s Enforcement Priorities in Applying Article 102
TFEU to Abusive Exclusionary Conduct Useful?” in ETRO, F. and KOKKORIS, I., Challenges in the
Enforcement of Article 102, Oxford, Oxford University Press, 2010.
330
Ibid.
331
Ibid.
329
hypothetical decision. The Commission needs to admit that the previous case-law involving rebates
was wrong. Not only because its bad case-law but also because it lacks an administrable framework
which could in turn chill competition and ultimately affect consumers who could benefit from
certain rebates.
169.
In previous chapters I have established that when a rebate scheme cannot be considered as either a
quantity or loyalty rebate, the Courts will apply the legal test applied in Michelin I and further
developed in British Airways. In this assessment it will consider ‘all the circumstances’ of the rebate
scheme and will allow the dominant undertaking to proof an objective justification. In short, the test
will try to assess whether the rebate scheme is ‘loyalty-inducing’. I will argue that this ‘by object’
approach of rebate schemes, and more specifically quantity rebates, under Article 102 TFEU is not
desirable. A possible solution would be to extent the case-law concerning selective-price cuts and
margin squeezes to rebate schemes. This would shift the legal framework from a ‘by object’ rule to
a ‘by effect’ standard.
170. The Court needs to develop a legal standard with regards to rebates so that dominant undertakings
can legitimately foresee ex ante whether or not their conduct would be contrary to Article 102 TFEU.
The case-law discussed in previous chapters indicates that the legal framework, as it stands now,
lacks an analytical and economic dimension.332 A good example of this is the application of the
Michelin I test in the context of quantity rebates.
171. The Michelin I case concerned target rebates whereas, for example, in the Michelin II case it
concerned a standardized quantity rebate. The reasoning in the case law with regards to target
rebates was created in a very specific context. Colomo notes that “applying the principles sketched
in Michelin I to quantity rebates would indeed amount to stretching that in of case law beyond the
limits of its logic”.333 Furthermore, in the Hoffmann La Roche judgement the Court dictated that
quantity rebates are presumed to be legal. This would, from a normative point of view, imply a
different approach with regards to quantity rebates. If the competent authority would take Hoffmann
La Roche presumption into account, it would have to prove that the purpose of the rebate scheme is
332
333
Colomo (n212) 15.
Colomo (n212) 15.
65
to foreclose competition and not to save costs based on higher volumes. It would also have to prove
the absence of any objective justification.
172. The case-law is still not clear on how the ‘all the relevant circumstances’ should be estimated by
dominant undertakings.334 This is important seeing as it forms one of the main steps of the Michelin
I case law. Aspects that have been taken into account are e.g. a long reference period. But under
what circumstances would a reference period be long? It is clear that these ‘loyalty-inducing’ factors
are bad proxies for indicating anti-competitive effects on the relevant market, as has been shown in
British Airways case where the market share of the competitor was not badly affected (on the
contrary rather).
173. The Michelin I line of case law was developed in a specific factual context.335 In essence, it involved
a target rebate (in the Michelin I case, individualized and not transparent) which require a different
approach than quantity rebates (see Hoffmann La Roche). The Court analyzed whether the target
rebate had a similar purpose as a loyalty rebate. It is not hard to imagine that individual target rebates
are offered to customers in order to foreclose competitors. However with regards to standardized
quantity rebates based on the volume of sales, it is harder to make the same argument.336
174. Colomo argues that applying the Michelin I to volume-based rebate schemes reverses the burden of
proof on dominant undertakings.337 Namely, based on Hoffmann La Roche quantity rebate schemes
were presumed to be economically justified. However as is clear from Michelin II, the Court decided
to skip that presumption and in turn, put the burden of proof again with the dominant undertaking:
“It is then necessary to examine whether the applicant has established that the quantity rebate
system, which presents the characteristics of a loyalty-inducing rebate system, was based on
objective economic reasons (see, in that regard, Irish Sugar v Commission, cited at paragraph 54
above, paragraph 188, and Portugal v Commission, cited at paragraph 58 above, paragraph 56).
“338
334
Ibid.
See paraghraph 92 and following.
336
Colomo (n212) 11.
337
Ibid. 12.
338
Michelin II (n109) paragraph 107.
335
175. The main concern or presumption with loyalty rebates is that they are fueled by the same incentives
as exclusive purchasing obligations, i.e. anti-competitive intent. However in the Michelin II for
example it has been proven that this was not the case.339
176. Based on the foregoing paragraphs, applying the Michelin I test to quantity rebates would not be
desirable.340 From Michelin I it follows that it is possible for the competition authorities to brand a
rebate scheme as ‘loyalty-inducing’, without an assessment of the concrete anti-competitive effect,
for it to be contrary to Article 102 TFEU. Colomo argues that this is clearly not an administrable
test.341 With regards to quantity rebates, the Court of Justice should therefore move away from the
‘by object’ prohibition under Article 102 TFEU.
177. A new approach to quantity rebates under Article 102 TFEU should therefore involve the HoffmannLa Roche assumption, i.e. the assumption that quantity rebates are legal. A quantity rebate should
only be seen as contrary to Article 102 TFEU when, applied by a dominant undertaking, it is possible
for it to exclude equally efficient competitors. 342
178. With the Post Danmark II judgement, the Court received a chance to change its heavily criticized
case-law concerning rebate schemes in the light of Article 102 TFEU. It could have already had
this opportunity, had the judgement of the General Court in Michelin II been appealed.
Unfortunately, this was not the case. In the following chapter the Post Danmark II case and its
impact on the state of standardized quantity rebates will be analyzed.
6.1 A NEW LEGAL FRAMEWORK FOR REBATE SCHEMES
179. As indicated in the introduction to this chapter, a possible solution would be to adopt the line of case
law held in selective price cuts and margin squeeze cases. These are two types of conduct that can
potentially cause foreclosure on the relevant market.
M. MOTTA “‘Michelin II: The Treatment of Rebates” in LYONS, B. Cases in European Competition Policy:
The Economic Analysis, Cambridge, Cambridge University Press, 2009, 86.
340
Colomo (n212) 10.
341
Colomo (n212) 14.
342
Colomo (n212) 18.
339
67
180. Selective price cutting is essentially a form of predatory pricing. Predatory pricing is generally seen
as pricing policy whereby the goals is to force competitors of the market. Selective price cutting is
defined as follows by Latham & Watkins as follows:
“Predation can take the form of selective price-cutting when the predator imposes belowcost prices to a competitor’s customers or to customers that would otherwise desert to a
competitor while leaving other prices to other existing customers at a higher level.”343
181. Jones & Suffrin define margin squeezs as follows:
“A margin squeeze occurs where a vertically integrated undertaking which is dominant
the upstream market for an input sets its prices at such a level that its competitors on the
downstream market cannot compete with it for the supply of products or services to
customers.”344
182. With regards to margin squeezes and selective price cuts, the EU institutions apply a legal standard
instead of a rule when it assesses conduct under Article 102 TFEU.345 With respect to these types of
abuses the Court will investigate whether there are in fact anti-competitive effects detectable on the
relevant market. See to that extent paragraph 61paragraph 61 of the TeliaSonera Sverige346 case:
“ It must be observed in that regard that, bearing in mind the concept of abuse of a
dominant position explained in paragraph 27 of this judgment, the Court has ruled out
the possibility that the very existence of a pricing practice of a dominant undertaking
which leads to the margin squeeze of its equally efficient competitors can constitute an
abuse within the meaning of Article 102 TFEU without it being necessary to demonstrate
ROSENBLATT, H., ARMENGOD, H., A. “Post Danmark: predatory pricing in the European Union”, The
European Anti-Trust Review 2013, 21-24.
344
Jones & Suffrin (n87) 426.
345
COLOMO, P., “Intel and Article 102 TFEU Case Law: Making Sense of a Perpetual Controversy”, LSE
Working Papers, 4.
346
TeliaSonera, C-52/09, ECLI:EU:C:2011:83.
343
an anti-competitive effect (see, to that effect, Deutsche Telekom v Commission,
paragraphs 250 and 251).”347
183. A good example on how selective price cuts are assessed, is the Post Danmark I case. In this case it
involved Post Danmark348 applying selective price cuts towards specific customers, to the alleged
detriment of certain competitors.349 In its assessment, the Court could rely on the case-law on
predatory pricing, of which the AKZO350 case is the most important one. In paragraphs 71 and 72
the Court of the AKZO judgment it established a reasoning that has been confirmed in following
cases concerning predatory pricing. 351
It said the following:
“Prices below average variable costs (that is to say, those which vary depending on the
quantities produced) by means of which a dominant undertaking seeks to eliminate a
competitor must be regarded as abusive. A dominant undertaking has no interest in
applying such prices except that of eliminating competitors so as to enable it subsequently
to raise its prices by taking advantage of its monopolistic position, since each sale
generates a loss, namely the total amount of the fixed costs (that is to say, those which
remain constant regardless of the quantities produced) and, at least, part of the variable
costs relating to the unit produced.”
“Moreover, prices below average total costs, that tis to say, fixed costs plus variable
costs, but above average variable costs, must be regarded as abusive if they are
determined as part of a plan for eliminating a competitor. Such prices can drive from the
market undertakings which are perhaps as efficient as the dominant undertaking but
which, because of their smaller financial resources are incapable of withstanding the
competition waged against them”.352
184. In paragraph 40 of the Post Danmark I judgment the Court added:
347
TeliaSonera, C-52/09, ECLI:EU:C:2011:83, paragraph 61.
the same dominant undertaking as in Post Danmark II.
349
Post Danmark I, C-209/10, ECLI:EU:C:2012:172.
350
AKZO, C-62/86, ECLI:EU:C:1991:286.
351
See Post Danmark I, C-209/10, ECLI:EU:C:2012:172.
352
AKZO (n365) paragraph 70 – 71.
348
69
“If the court making the reference, after carrying out that assessment, should
nevertheless make a finding of anti-competitive effects due to Post Danmark’s actions, it
should be recalled that it is open to a dominant undertaking to provide justification for
behaviour that is liable to be caught by the prohibition under Article 82 EC (see, to this
effect, Case 27/76 United Brands and United Brands Continentaal v Commission [1978]
ECR 207, paragraph 184; Joined Cases C-241/91 P and C-242/91 P RTE and
ITP v Commission [1995] ECR I-743, paragraphs 54 and 55; and TeliaSonera Sverige,
paragraphs 31 and 75).”353
185. Based on the aforementioned paragraphs, the test for selective-price cuts is therefore either the
finding of anti-competitive effects354 or prices below the average variable costs.355 It is, just like
margin squeezes, subject to a legal standard instead of a legal rule.356
186. Within the two lines of law there is an analysis of ‘all the relevant circumstances’ 357. There are
however differences between the two approaches. The analysis in selective price cut cases is
objective where the analysis in rebate cases is subjective.358
Objective in the sense that the
exclusionary effect is inferred “because of their impact on the behavior of individual customers”.359
187. The case law concerning margin squeezes and selective price cuts can be relevant to rebates seeing
as they both take the form of price-based conduct.360 With regards to quantity rebates, there are no
requirements expected from the customer. Quantity rebates in the true sense of the word, do not
require the customer to buy a certain amount.361 Colomo is for this reason of the opinion that quantity
rebates should be assessed in the same manner as margin squeezes and selective price cuts. 362 Put
into concrete terms, this would mean that a new more viable test for quantity rebates under Article
102 TFEU would be that a quantity rebate scheme could only be illegal under EU competition law
if the pricing is under a certain cost measure.363
353
Post Danmark I, C-209/10, ECLI:EU:C:2012:172, paragraph 40.
Ibid., paragraph 34-39.
355
Colomo (n212) 8.
356
Colomo (n133) 29.
357
See for example paragraph Michelin I paragraph 54 for rebates and paragraph 26 Post Danmark I.
358
Colomo (n133) 29.
359
Ibid.
360
Colomo (n212) 4.
361
Colomo (n212) 9.
362
Colomo (n133) 9.
363
Colomo (n133) 9.
354
188. Selective price cut cases like, Post Danmark I, often have a lot in common with cases concerning
‘loyalty-inducing rebates’.364 In Post Danmark I several parties (including the Commission) argued
that selective price cuts should be treated in a same manner as loyalty rebate:
“In contrast, FK, the Danish and Italian Governments, the EFTA Surveillance Authority
and to a certain extent the Commission, take the opposite view, particularly after the
clarification of its position made by the latter at the hearing. In broad outline, those
interested parties submit that, irrespective of costs, selective pricing by a dominant
undertaking in relation to customers of its only genuine competitor leads, or may very
likely lead, to the exclusion of the latter if such pricing is not justified on economic
grounds, particularly economies of scale. That is said to be the situation in the main
proceedings.”365
189. Applying the selective price-cuts principles to quantity rebates would imply that a quantity rebate
would be per se abusive when it does not pass the AKZO test provided in paragraph 71. With regards
to quantity rebates, dominant undertakings should be able to compete on the merits. With regards
to selective-price cut this was affirmed in Post Danmark I:
“Thus, not every exclusionary effect is necessarily detrimental to competition (see, by
analogy, TeliaSonera Sverige, paragraph 43). Competition on the merits may, by
definition, lead to the departure from the market or the marginalization of competitors
that are less efficient and so less attractive to consumers from the point of view of, among
other things, price, choice, quality or innovation.”366
190. This would mean that only when equally efficient undertakings are likely or actually being affected
by the conduct that the rebate would be contrary to Article 102 TFEU. When a dominant supplier
offers above-cost rebates its equally efficient competitors would in theory be able to compete on the
merits with the dominant undertaking.
364
Colomo (n212) 9.
Post Danmark I, C-209/10, ECLI:EU:C:2012:172, Opinion of Advocate General Mengozzi, paragraph 52.
366
Post Danmark I (n86) paragraph 22.
365
71
191. A ‘by effect’ approach of rebates under Article 102 TFEU would improve the consistency between
Article 102 and 101 TFEU. This is important because they do not only serve the same goal367 but
also because it is possible to assess one type of conduct under both articles.368 The Van den Bergh369
case being a good example of this.
192. Adopting a ‘by effect’ standard would imply that the national competition authorities and courts
would have to assess the effects of the conduct. A direct consequence would therefore be that this
would take up time and resources, two scarce commodities. This is one of the arguments in
maintaining the status quo.370 Colomo argues however that the current rule potentially chills
competition and over enforcement, which in turn could involve extra costs for society.
193. Moreover, it is not a full blown economic analysis that is required under the ‘by effect’ standard.
Insights from economics could provide guidance in the assessment. This is also not required in the
Guidance Paper:
“The Commission will normally intervene under Article 82 where, on the basis of cogent and
convincing evidence, the allegedly abusive conduct is likely to lead to anti-competitive
foreclosure…”371
6.2 SUMMARY CONCLUSION
194. There are several issues concerning the application of the Michelin I – test to quantity rebates. First,
the Michelin I case did not involve quantity rebates nor an exclusivity rebate. Therefore the case
concerned a different factual context. Second, the presumption of legality as held in Hoffmann La
Roche is not respected with this approach. Third, it is not clear for dominant undertakings how to
assess ‘all the relevant circumstances’ beforehand. This concept is, as the case-law stands now, too
vague. The fact that this is developed on a case-by-case basis does not help. Fourth, not respecting
the presumption of legality of quantity rebates implies that the burden of proof is reversed. Dominant
undertakings would have to proof that their quantity rebate scheme is economically justified while
in the past this was assumed.
367
Continental Can, Case 6-72, ECLI:EU:C:1973:22, paragraph 25.
L. PEEPERKORN, “Conditional pricing: Why the General Court is wrong in Intel and what the Court of Justice
can do to rebalance the assessment of rebates”, Concurrences Review 2015,43-63; COLOMO, P., “Intel and Article
102 TFEU Case Law: Making Sense of a Perpetual Controversy”, LSE Working Papers, 45.
369
Van Den Bergh, T-65/98, ECLI:EU:T:2003:281.
370
Colomo (n133) 28.
371
Paragraph 20, Guidance Paper.
368
195. The case law on selective price cuts and margin squeezes could be used as an example for the
assessment of rebates under Article 102 TFEU. In these cases the Court applies a ‘by effect’
approach rather than a ‘by object’. This implies that potential anti-competitive effects will have to
be proven if rebate schemes are to be found abusive. The Court should therefore revise its case law
and do away with its form based approach. A new approach should be in line with Hoffmann La
Roche, therefore quantity rebates should be presumed to be legal. When applying the reasoning from
AKZO, a quantity rebate scheme could be contrary to Article 102 if the rebate leads to a pricing level
below average costs.372
7.1 FACTS
196. In the Post Danmark II case373 the Court of Justice of the European Union (hereafter ‘the Court’)
was asked by the Danish Sø-og Handelsretten (Maritime and Commercial Court) for a preliminary
ruling on the interpretation of Article 102 TFEU. The facts leading up to the preliminary ruling will
be discussed below.
197. Post Danmark A/S (hereafter ‘Post Danmark’) is a Danish company responsible for the postal
service in Denmark. In the period between 2007 and 2008 the company was controlled by the Danish
State and was inter alia responsible for the one-day universal postal service including bulk mail,
weighing less than 2 kg. The Danish government imposed a tariff scheme on Post Danmark A/S,
whereby the prices of services covered by the universal service obligation could not differ according
to the places of destination.374
198. In return for this imposed tariff scheme and universal service obligation, Post Danmark A/S received
a statutory monopoly on a broad range of services. These included the distribution of letters, but
also the delivery of bulk mail, direct advertising mail375 e.g., weighing up to 50 grams.376
372
Colomo, post danmark ii, pagina 18.
Post Danmark II, C-23/14, ECLI:EU:C:2015:651
374
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 3.
375
Direct mail is a synonym for advertising mail, that is the delivery of advertisements through postal mail.
376
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 4.
373
73
199. In 2003, at a time where Post Danmark was the only company active in the market of bulk mail in
Denmark, Post Danmark implemented a standardized377 rebate scheme in respect of direct
advertising.378 It was standardized in the sense that the conditions for the rebates were public and
were offered to all the customers of Post Danmark.
200. The rebate scheme contained several “steps” starting from a 6% rebate for customers ordering more
than 30,000 letters over a reference period of a year leading up to a maximum rebate of 16% for
orders exceeding 2,000,000 letters per year. In between the minimum and maximum rebates, were
eight other rebate levels, depending on the aggregate number of orders placed within a reference
year. Advocate General Kokott clarifies in her opinion379: “In the case of the first seven rebate levels,
the discount increased by one percentage point per level, and in the case of the last two rebate
levels, by two percentage points per level reaching the maximum rate of 16%”.380
201. At the beginning of each year, Post Danmark and its customers made agreements on the expected
quantities of mailings that year.381 When agreements were made, the rebates were invoiced based
on those estimations. However, if at the end of the reference year, the customer did not order the
estimated quantities, it had to reimburse Post Danmark.382
202. In her opinion Advocate General Kokott notes that “the rebate scheme made no distinction in regard
to whether the mailings were covered by Post Danmark’s monopoly or whether there was a
competitor operating in the area in question”.383 In accordance with its obligations vis-à-vis the
Danish government, it applied the rebate scheme to all advertising mail bearing the address of the
addressee, regardless of whether the mail was covered by the Post Denmark’s monopoly.
203. On 1 Janauary 2007 Bring Citymail Danmark A/S (hereafter ‘Bring Citymail’) began delivering
direct advertising mail in Denmark. Bring Citymail is a subsidiary of Post Norge A/S, a Norwegian
377
Standardized target rebates are schemes where all customers are set the same target and get the same rebates,
see Jones & Suffrin (n87) 455.
378
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 6.
379
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott.
380
Ibid., paragraph 11.
381
Ibid., paragraph 8.
382
Ibid., paragraph 12.
383
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott, paragraph 10.
postal service. 384 The only competitor active in the Danish market for the delivery of advertising
mail in bulk was Post Danmark.385
204. In the period of 2010 Bring Citymail suffered heavy losses and as a result had to withdraw its
activities from the Danish market. It filed a complaint with the Konkurrencerådet (Danish
Competition Council), stating that Post Danmark had abused its dominant position on the market
for the delivery of bulk mail. 386
205. The Konkurrencerådet found, by a decision of 24 June 2009, that Post Danmark had indeed abused
its dominant position on the aforementioned market by applying the rebate scheme, in 2007 and
2008, in respect of direct advertising mail. According to the Konkurrencerådet, the rebate scheme
had a foreclosing effect on the market and tied customers to Post Danmark. It was of the opinion
that Post Danmark had no way of proving any economic justification for the rebate scheme, i.e. it
failed to prove that there were efficiency gains that benefited consumers and that those gains
neutralized the restrictive effect of the rebate on competition. 387
206. In its judgement, the Konkurrencerådet also referred to the characteristics of the bulk mail market.
The relevant market was characterized by economies of scale and high barriers of entry. In this
market, Post Danmark held a share of almost 95%. As a result the Konkurrencerådet found that Post
Danmark was an unavoidable trading partner. 388
207. Most problematic for the Konkurrencerådet was the fact that the rebate scheme had a retroactive
nature with a one-year period for the acquisition of rights and the amplitude of the rebate rates
applied.389 The Konkurrencerådet thus concluded that the rebate scheme had an anti-competitive
exclusionary effect on the market.
208. Konkurrencerådet did not apply an ‘as-efficient-competitor’ test in its reasoning. Seeing as the
relevant market had certain characteristics (high barrier of entry, economies of scale e.g.), it could
384
Ibid., paragraph 10.
Ibid., paragraph 11.
386
Ibid., paragraph 13.
387
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 13.
388
Ibid., paragraph 14.
389
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 16.
385
75
not be required, for the purposes of the test, that a new competitor be as efficient in the short term
as Post Danmark.390
209. Post Danmark appealed the decision of the Konkurrencerådet to the Konkurrenceankenævnet
(Competition Appeals Tribunal). By decision of 10 May 2010, it upheld the first instance decision.
210. The case was then brought before the Sø-og Handelsretten (Maritime and Commercial Court). The
Sø-og Handelsretten had doubts concerning the criteria it had to take into account to determine
whether the rebate scheme, had an exclusionary effect on the relevant market contrary to art. 82 EC
(now art. 102 TFEU). 391
211. The Sø-og Handelsretten therefore referred the following questions to the Court of Justice392:
“What guidelines should be used to decide whether the application by a dominant
undertaking of a rebate scheme with a standardized volume threshold having the
characteristics referred to in the order for reference constitutes an abuse of a dominant
position contrary to Article 82 EC?
In its answer the Court is requested to clarify what relevance it has to the assessment
whether the rebate scheme’s thresholds are set in such a way that the rebate scheme
applies to the majority of customers on the market.
In its answer the Court is further requested to clarify what relevance, if any, the dominant
undertaking’s prices and costs have to the evaluation pursuant to Article 82 EC of such
a rebate scheme (relevance of an “as-efficient-competitor” test).
At the same time the Court is requested to clarify what relevance the characteristics of
the market have in this connection, including whether the characteristics of the market
can justify the foreclosure effect being demonstrated by examinations and analyses other
than an as-efficient-competitor test (see, in that regard, paragraph 24 of the
[communication from the Commission entitled “Guidance on the Commission’s
enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary
conduct by dominant undertakings” (OJ 2009 C 45, p. 7)].
390
Ibid., paragraph 17.
Ibid., paragraph 19.
392
Ibid., paragraph 20.
391
(2) How probable and serious must the anti-competitive effect of a rebate scheme having
the characteristics referred to in the order for reference be for Article 82 EC to apply?
(3) Having regard to the answers given to Questions 1 and 2, what specific circumstances
must the national court take into account in assessing whether a rebate scheme, in
circumstances such as those described in the order for reference (characteristics of the
market and the rebate scheme), has or is capable of having such a foreclosure effect in
the specific case that it constitutes an abuse covered by Article 82 EC?
In this connection, is it a requirement that the foreclosure effect should be appreciable?”
7.2 OPINION AG KOKOTT
212. In her Opinion393 delivered on 21 may 2015, Advocate General Kokott sets off with examining the
first part of the first question of the preliminary ruling, being the applicable rules to the assessment
of rebates schemes operated by dominant undertakings.394 She recognizes that dominant
undertakings are in a special position as they are not free to apply every marketing technique as they
desire, there are certain restrictions when compared to non-dominant undertakings.395 A rebate
scheme which can be seen as an exclusionary abuse , applied by a non-dominant undertaking, will
be legal whereas this is not necessarily true for dominant undertakings. Whether the rebate scheme
applied by a dominant undertaking implies an extensive investigation.396
213. Advocate General Kokott then refers to the settled case law involving the legality of rebates within
the meaning of art. 102 TFEU.397 In the Intel case, the General Court gave a taxonomy of the
categories of rebates.398 She states, however, that it is “ultimately immaterial whether the scheme
can be assigned to a traditional category of rebate”.399 The Advocate General is of the opinion that
the only deciding factor is whether “the rebates seek to remove or restrict the buyer’s freedom to
choose his sources of supply, to bar competitors from access to the market, or to strengthen the
dominant position by distorting competition”. 400
393
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott.
Ibid., paragraph 22.
395
Ibid., paragraph 25.
396
Ibid., paragraph 27.
397
Ibid., paragraph 28.
398
Intel (n295) paragraph 75.
399
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott.
400
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott, paragraph 29.
394
77
214. The main deciding factor is thus whether the rebate granted by the dominant undertaking is capable
of producing on the relevant market an exclusionary effect which is not economically justified. 401
According to the Advocate General this would only be the case when the undertaking can save
certain costs, caused by economies of scale, which are then passed on the customers.402 The
Advocate-general is therefore clearly in favor of maintaining the form-based approach.
215. To determine whether or not the rebate scheme is capable of producing an exclusionary effect, all
the relevant circumstances of the individual case have to be examined.403 In the first part of the third
prejudicial question, the Sø-og Handelsretten asked the Court to shine a light on the circumstances
it has to take in account when examining the legality of rebate schemes.404
216. Advocate General Kokott distills several deciding factors originating from case law for assessing a
rebate scheme under art. 102 TFEU.405 First, she discusses the criteria and rules governing the grant
of the rebate. Second, she comments on the conditions of competition prevailing on the relevant
market and the position of the dominant undertaking on that market.406
217. It would be impossible for the Court to list an extensive list of criteria and rules governing the grant
of a rebate. However, Advocate General Kokott states that when the effect of the rebate scheme is
not purely incremental407 and is retroactive, there is an indication that the rebate scheme is
abusive.408
218. The reason for this is that such a rebate scheme has, in her opinion, a ‘suction effect’.409 The
customer have a monetary incentive to stay loyal to the dominant undertaking, i.e. it has a ‘loyaltybuilding effect’. In this case, the Advocate General, argues that there was an indication of a strong
suction effect due to the rebates were being granted retroactively over a reference period of one
401
Ibid., paragraph 29.
Ibid., paragraph 29.
403
Ibid., paragraph 31.
404
Ibid., paragraph 32.
405
Ibid., paragraph 35.
406
Ibid., paragraph 35.
407
“Incremental in the sense that the achievement of each new rebate threshold not only triggers a reduction in
the price of all further orders” see Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott,
paragraph 36.
408
Ibid., paragraph 36.
409
Ibid., paragraph 21.
402
year.410 The fact that the rebate applied “without distinction both to the contestable part of demand
and to the non-contestable part of demand, that is to say, in particular letters up to 50g, which are
covered by Post Danmark’s statutory monopoly” was further proof for the Advocate General for
the loyalty-building effect of the rebate.411
219. Next, special attention has to be given to the position of the undertaking on the relevant market and
the prevailing conditions of competition.412 The Advocate General notes that Post Danmark has held
a share of 95% of the Danish bulk market versus the 5% of Bring Citymail.413 The conditions
prevailing on the Danish bulk market are so that, according to the Advocate General, the rebate
scheme applied by Post Danmark could produce exclusionary effects.
414
The reasons for this are:
the high barrier to entry of the relevant market, the high economies of scale and the fact that Post
Danmark could be seen as unavoidable trading partner.415
220. There rebate scheme took away monetary incentives of the customer to change to the competition
of Post Danmark. Two thirds of the mailings were open to competition, but a change in postal
supplier would entail a loss of the rebate for the customers concerned. This further adds to the illicit
nature of the rebate scheme from the point of view of art. 102 TFEU. 416417
221. In the second part of the first prejudicial question, the Sø-og Handelsretten asked for clarity on the
question whether widespreadness of the rebate scheme operated by Post Danmark added to the
abusive nature of the rebate scheme. The referring court points out to the fact that the rebate is
standardized and thus applies to a large quantity of customers on the market (i.e. Post Danmark did
not target individual customers).418
410
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott, paragraph 38.
Ibid., paragraph 38.
412
Ibid., paragraph 42.
413
Ibid., paragraph 42.
414
Ibid., paragraph 50.
415
Ibid., paragraph 46.
416
Ibid., paragraph 49.
417
Ibid., paragraph 49.
418
Ibid., paragraph 51.
411
79
222. In several other cases concerning the legality of rebate schemes in the light of art. 102 TFEU, the
Court has already rebutted this.419 In conclusion the widespreadness of the rebate is irrelevant when
assessing the abusive nature of a rebate scheme under art. 102 TFEU. 420
223. Based on the foregoing, the Advocate General concludes the following:
“A rebate scheme operated by a dominant undertaking constitutes abuse within the
meaning of Article 82 EC (now art. 102 TFEU) where an overall assessment of all the
circumstances of the individual case shows that the rebates are capable of producing an
economically unjustified exclusionary effect, it being important to take into account in
that regard, in particular, the criteria and rules governing the grant of the rebate, the
conditions of competition prevailing on the relevant market and the position of the
dominant undertaking on that market.”421
224. In the last part of her opinion, the Advocate General discusses the second question of the prejudicial
question. It involves the question whether there has to be a certain ‘appreciability’ of the anticompetitive effect in order to conclude there is an abuse under art. 102 TFEU.
422
She dissects the
prejudicial question into two parts. First, she considers the likelihood of the presence of an anticompetitive effect caused by a rebate scheme. Second, the seriousness of the likely anti-competitive
effect.423
225. With regards to the likelihood of the anti-competitive effect, the Advocate General refers to previous
case law where the Court has already decided in the Michelin I case that “for the purposes of
establishing an infringement of Article 82 EC (now art. 102 TFEU), it is sufficient to show that the
abusive conduct of the undertaking in a dominant position tends to restrict competition or, in other
words, that the conduct is capable of having that effect.”424 In her opinion the Advocate General
therefore concludes that there is no reason why the competition authorities should take the likelihood
419
Suiker Unie, C-40/73, ECLI:EU:C:1975:174, paragraph 511.
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott, paragraph 54.
421
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott, paragraph 55.
422
Ibid., paragraph 76.
423
Ibid., paragraph 78.
424
Michelin I (n75) paragraph 39.
420
of anti-competitive effects into account. It can however play a role when the competent competition
authority has to decide on a punishment. 425
226. Lastly, the Advocate General answers the question whether art. 102 TFEU includes a de minimis
test, in the sense that the restriction on competition has to reach a certain threshold in order to
conclude to a violation of art. 102 TFEU.426 She is of the opinion that a de minimis threshold is
unnecessary for two reasons. First, she reaffirms her stance that the exclusionary effect have to be
determined, based on all the relevant circumstances.427 Secondly, she reminds the reader that art.
102 TFEU is only geared towards conduct that is capable of affecting trade between Member
States.428
227. Based on the foregoing, her opinion concludes with the following:
“1. A rebate scheme operated by a dominant undertaking constitutes abuse within the
meaning of Article 82 EC where an overall assessment of all the circumstances of the
individual case shows that the rebates are capable of producing an economically
unjustified exclusionary effect, it being important to take into account in that regard, in
particular, the criteria and rules governing the grant of the rebate, the conditions of
competition prevailing on the relevant market and the position of the dominant
undertaking on that market.
3. Aside from the requirement that a rebate scheme operated by a dominant undertaking
must have an actual or potential adverse effect on trade between Member States, the
exclusionary effect that may be produced by such a scheme does not have to exceed any
form of appreciability (de minimis) threshold in order to be classified as abuse within the
meaning of Article 82 EC. It is sufficient for the presence of such an exclusionary effect
to be more likely that its absence.”429
425
Ibid., paragraph 85.
Ibid., paragraph 87.
427
Ibid.,, paragraph 93.
428
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott, paragraph 93.
429
Ibid., paragraph 96.
426
81
7.3 THE JUDGEMENT OF THE COURT
228. In its judgement of 6 october 2015, the Court answered the prejudicial questions430 asked by the Søog Handelsretten.431 For the facts of the proceedings I refer to the overview discussed before.432 The
Court first discusses the first and second paragraphs of prejudicial question 1 and the first
subparagraph of Question 3.433 Secondly, the Court considers the third and fourth subparagraphs of
Question 1.434435 Lastly, it investigates Question 2 and the second subparagraph of Question 3.436
229. In the first part of its judgement, the Court answers the question what the criteria are that have to be
taken into account when deciding on the exclusionary effect of a rebate scheme under art. 102
TFEU.437 In the first subparagraph of Question 3, the referring court also asks what the relevance is
of the fact that the rebate scheme is applicable to the majority of customers on the market.438
230. The Courts starts off by assessing the features of the rebate scheme operated by Post Danmark.439It
notes that it has three main features being that the rebate scheme is: standardised 440, conditional441
and retroactive442. The rebate scheme under investigation therefore shares a lot of similarities with
the rebate scheme found to be abusive in the Michelin II judgment.443
231. In the Intel case the General Court made a distinction between several kinds of rebates. See to that
extent paragraph 74:
“ As regards in particular whether the grant of a rebate by an undertaking in a dominant
position can be characterized as abusive, a distinction should be drawn between three
categories of rebates (see, to that effect, Case 322/81 Nederlandsche Banden-Industrie-
430
See paragraph 16.
Post Danmark II, C-23/14, ECLI:EU:C:2015:651.
432
See paragraph 1 and following.
433
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 21.
434
Ibid., paragraph 51.
435
Discussed in paragraphs 48 and following.
436
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 63.
437
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 21.
438
Ibid., paragraph 21.
439
Ibid.,, paragraph 22.
440
Ibid., paragraph 23.
441
Ibid., paragraph 24.
442
Ibid., paragraph 25.
443
Michelin II (n109).
431
Michelin v Commission [1983] ECR 3461 (‘Michelin I’), paragraphs 71 to 73, and Case
C-95/04 P British Airways v Commission [2007] ECR I-2331 (‘Case C-95/04 P British
Airways’), paragraphs 62, 63, 65, 67 and 68). “444
232. In her opinion Advocate General Kokkott did not agree with this approach, as can be seen from
paragraph 29 of her Opinion:
“For the purposes of assessing the rebate scheme operated by a dominant undertaking
from the point of view of Article 82 EC, however, it is ultimately immaterial whether the
scheme can be assigned to a traditional category of rebate (in particular, quantity rebates
or loyalty rebates). The decisive criterion is, rather, whether, in providing an advantage
not based on any economic supply justifying it, the rebates seek to remove or restrict the
buyer’s freedom to choose his sources of supply, to bar competitors from access to the
market, or to strengthen the dominant position by distorting competition. “445
233. In paragraph 27, the Court reiterates the Hoffmann La Roche446 distinction between quantity rebates
and loyalty rebates.447 According to this line of case law, loyalty rebates are per se illegal.448 Whereas
loyalty rebates are presumed to be illegal, quantity rebates that are linked to the volumes of
purchases are not. The Court therefore disagrees with Advocate General Kokott as it still adhere to
a system of distinguishing several types of rebates in its judgment.
234. Seeing as the rebates are granted on the basis of the aggregate orders over a given period, the Court
is of the opinion that the rebate in question cannot be considered as a plain quantity rebate coupled
to the volume of purchases.449 There was however no contractual obligation for the customers of
Post Danmark to obtain all or a specific amount of their purchases from Post Danmark. Therefore,
the Court concludes that the rebate scheme can neither be seen as a loyalty rebate in the sense of the
Hoffman La Roche case.450
444
Intel (n295) paragraph 74.
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott, paragraph 29.
446
Hoffmann La Roche (n83) paragraph 90.
447
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 27.
448
Jones & Suffrin (n87) 458.
449
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 28.
450
Ibid., paragraph 28.
445
83
235. The Court therefore resorts back to the Michelin I case-law451, where it also concerned a rebate
scheme that could neither be categorized as a loyalty rebate nor as a quantity rebate linked to the
volume of purchases. To solve this the Court has adopted the following reasoning in previous case
law452:
“In those circumstances, in order to determine whether the dominant undertaking in a
dominant position has abused that position by applying a rebate scheme such as that at
issue in the main proceedings, the Court has repeatedly held that it is necessary to
consider all the circumstances, particularly the criteria and rules governing the grant of
the rebate, and to investigate whether, in providing an advantage not based on any
economic service justifying it, the rebate tens to remove or restrict the buyer’s freedom
to choose his sources of supply, to bar competitors from access to the market, to apply
dissimilar conditions to equivalent transactions with other trading parties or to
strengthen the dominant position by distorting competition.”.453
“Having regard to the particularities of the present case, it is also necessary to take into
account, in examining all the relevant circumstances, the extent of Post Danmark’s
dominant position and the particular conditions of competition prevailing on the relevant
market.”454
236. Based on the foregoing, the Court applies a double test which can be traced back to earlier case law.
First, it determines whether the rebates can produce an exclusionary effect and secondly it has to
examine whether there is an objective economic justification for the rebates granted.455
237. However, a new added element is to be found in paragraphs 29-30. In Michelin II the General Court
assessed whether the non-conditional rebate had a ‘loyalty-inducing’ effect. The General Court
would have stopped at paragraph 29 in Michelin II but in here in Post Danmark II the Court adds a
new step. When assessing all the relevant circumstances it will take the dominant position of the
undertaking into account and “the particular conditions of competition prevailing on the relevant
451
British Airways (n96) paragraph 65.
452
British Airways, C-95/04, ECLI:EU:C:2007:166.
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 29.
454
Ibid., paragraph 30.
455
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 31;
ECLI:EU:C:2007:166. Paragraph 68 – 69.
453
British
Airways,
C-95/04,
market”. This added line can be traced back to the opinion of the Advocate General.456 This is not
a revolutionary step as it is in essence just another added ‘circumstance’ the Court can take into
account when assessing the rebate scheme under the Michelin I case law.
238. In paragraph 31, however, a much awaited element is introduced to the case law of the Court:
“In that regard, it first has to be determined whether those rebates can produce an
exclusionary effect, that is to say whether they are capable, first, of making market entry
very difficult or impossible for competitors of the undertaking in a dominant position and,
secondly, of making it more difficult or impossible for the co-contractors of that
undertaking to choose between various sources of supply or commercial partners. It then
has to be examined whether there is an objective economic justification for the discounts
granted (judgment in British Airways v Commission, C-95/04 P, EU:C:2007:166,
paragraphs 68 and 69)”457
239. This marks a tacit departure from the form based approach adhered in Michelin II (by the General
Court) and British Airways (by the ECJ). It would appear that, based on the aforementioned
paragraph, standardized retroactive quantity rebates do not form a prima facie violation of Article
102 TFEU. This would also confirm that there is a distinction between ‘by object’ and ‘by effect’
abuses in Article 102 TFEU. In paragraph 31 the Court states that in order to conclude that the rebate
scheme was abusive it needed to assess whether the rebate was capable of having anti-competitive
effects. This is important as the Court does not assume that the rebate scheme has anti-competitive
effect.
240. The Post Danmark II judgement shows that the Court does not agree with the analysis of the General
Court of standardized rebate schemes in Michelin II.
241. The distinction between the Michelin II judgement of the General Court and the Post Danmark II
judgement is clear in the following paragraphs:
“It follows from all of the foregoing that a quantity rebate system in which there is a
significant variation in the discount rates between the lower and higher steps, which has
456
457
See paragraph 231 above.
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 31.
85
a reference period of one year and in which the discount is fixed on the basis of total
turnover achieved during the reference period, has the characteristics of a loyaltyinducing discount system.”458
“It follows that, for the purposes of applying Article 82 EC, establishing the anticompetitive object and the anti-competitive effect are one and the same thing (see, in that
regard, Irish Sugar v. Commission, cited at paragraph 54 above, paragraph 170). If it is
shown that the object pursued by the conduct of an undertaking in a dominant position
is to limit competition, that conduct will also be liable to have such an effect.”459
242. In the aforementioned paragraphs the General Court assumed that the standardized rebate scheme
(much like the one under scrutiny in Post Danmark II) is an abuse ‘by object’ and it is therefore
assumed that it will have anti-competitive effects. Therefore, whether the rebate scheme had actual
anti-competitive effects on the relevant market or was capable of having such effects was not
relevant for the General Court. This was thus not a viable defense for the dominant undertaking, the
only option left was to show that it had an objective justification of the rebate scheme. I therefore
conclude that in Michelin II the Court first analyzed whether the rebate scheme was ‘loyaltyinducing’, if this was the case then dominant undertaking could escape the prohibition by proving
an objective justification.
243. In Post Danmark II, the Court applies a two-stage test. For the Court it is not enough to only analyze
the ‘loyalty-inducing’ aspects of the rebate scheme.
“In that regard, it first has to be determined whether those rebates can produce an
exclusionary effect, that is to say whether they are capable, first, of making market entry
very difficult or impossible for competitors of the undertaking in a dominant position and,
secondly, of making it more difficult or impossible for the co-contractors of that
undertaking to choose between various sources of supply or commercial partners. It then
has to be examined whether there is an objective economic justification for the discounts
458
459
Michelin II (n109) paragraph 95.
Michelin II (n109) paragraph 241.
granted (judgment in British Airways v Commission, C-95/04 P, EU:C:2007:166,
paragraphs 68 and 69).”460
244. In its judgement, the Court concludes that the rebate scheme applied by Post Danmark has a likely
exclusionary effect on the relevant market.461462 To come to this conclusion the Court applies the
reasoning mentioned above463 to the facts of the case. The circumstances it took into account were
the following:

the retroactive nature of the rebate scheme464;

the fact that the rebate scheme was based on a reference period of a year465;

for a large amount of Post Danmark’s customers it was economically not interesting to
switch over to a competitor of Post Danmark for fear of loss of the rebates466, i.e. there was
a big incentive to purchase a big portion of their supplies from Post Danmark;

on the bulk mail market, Post Danmark held a dominant position with a market share of
95%467;

Post Danmark enjoyed structural advantages due to its statutory monopoly468;

Post Danmark constituted an unavoidable business partner by reason of its high market
share469;
245. In paragraph 50 the Court further clarified:
“The fact that the rebate scheme covers the majority of customers on the market may
constitute a useful indication as to the extent of that practice and its impact on the market,
which may bear out the likelihood of an anti-competitive exclusionary effect.”470
460
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 31.
Ibid., paragraph 29.
462
Ibid., paragraph 42.
463
See paragraph 44.
464
Ibid., paragraph 32.
465
Ibid., paragraph 33.
466
Ibid., paragraph 36.
467
Ibid., paragraph 39.
468
Ibid., paragraph 39.
469
Ibid., paragraph 40.
470
Ibid., 50.
461
87
246. If, however, Post Danmark could prove that the exclusionary effect was justified, due to economic
benefits being passed onto its customers, it could avoid persecution under art. 102 TFEU.471 In
earlier case law472 the Court has stated:
“In that last regard, it is for the dominant undertaking to show that the efficiency gains
likely to result from the conduct under consideration counteract any likely negative effects
on competition and consumer welfare in the affected markets, that those gains have been
, or are likely to be, brought about as a result of that conduct, that such conduct is
necessary for the achievement of those gains in efficiency and that it does not eliminate
effective competition, by removing all or most existing sources of actual potential
competition .”473
247. Here, the Court reaffirmed that it was possible for Post Danmark to escape violation of Article 102
TFEU if it managed to present an objective justification:
“In particular, a dominant undertaking may demonstrate that the exclusionary effect
arising from its conduct may be counterbalanced, or outweighed, by advantages in terms
of
efficiency
which
also
benefit
the
consumer
(see
judgments
in British
Airways v Commission, C-95/04 P, EU:C:2007:166, paragraph 86, and TeliaSonera
Sverige, C-52/09, EU:C:2011:83, paragraph 76).”474
248. Concerning whether the likelihood of anti-competitive effects is relevant for the application of art.
102 TFEU, the Court confirms the opinion of the Advocate General.475 Based on earlier case law,
for example the TeliaSonera Sverige476 case, the Court holds that, in order for a certain practices to
fall under the scope of art. 102 TFEU, the conduct has to potentially effect the competition on the
relevant market. Therefore there have to be anti-competitive effects, but they do not have to be
471
Ibid.,, paragraph .
Post Danmark I paragraph 42.
473
Post Danmark I, C-209/10, ECLI:EU:C:2012:172., paragraph 42.
474
Ibid., paragraph 48.
475
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 67.
476
TeliaSonera, C-52/09, ECLI:EU:C:2011:83., paragpah 64.
472
concrete.
477
To come to the conclusion that the conduct is capable of having anti-competitive
effects, the competent authority still has to take into account all the relevant circumstances. 478
249. The presence of a dominant undertaking weakens the structure of the market according to the
Court.479 Since the seminal Hoffmann La Roche480 case, this has been confirmed numerous times.481
Based on this fact, the dominant undertaking has to compose itself in a more strict way than other
non-dominant undertakings. In short, it has a “special responsibility not to allow its behavior to
impair genuine, undistorted competition on the internal market”482.483 The structure of the market
already suffers from the presence of the market, therefore any further abuse committed by the
dominant undertaking would further weaken the market. The Court and the Advocate General are
therefore of the opinion that a de minimis test of the anti-competitive effects is not in order.484 As
discussed in previous paragraphs, here the ‘special responsibility’ concept does not have a definitive
legal consequence for Post Danmark.
250. The Court has stated that anti-competitive effects have to be probable. The question is however,
what the threshold is and when it will be crossed. The Court tries to clarify this in the following
paragraphs:
“In that regard, and as the Advocate General stated in point 80 of her Opinion, the anticompetitive effect of a particular practice must not be of purely hypothetical.
The Court has also held that, in order to establish whether such a practice is abusive,
that practice must have an anti-competitive effect on the market, but the effect does not
necessarily have to be concrete, and it is sufficient to demonstrate that there is an anticompetitive effect which may potentially exclude competitors who are at least as efficient
as the dominant undertaking (judgment in TeliaSonera Sverige, C-52/09, EU:C:2011:83,
paragraph 64).
477
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 66.
Ibid., paragraph 68.
479
Ibid., paragraph 71.
480
Hoffman/La Roche, C-85/76, ECLI:EU:C:1979:36, paragraph 123.
481
France Télécom, C-202/07, ECLI:EU:C:2009:214, paragraph 107.
482
Post Danmark I, C-209/10, ECLI:EU:C:2012:172., paragraph 123.
483
For a further discussion in this concept see paragraph 74.
484
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 73.
478
89
It follows that only dominant undertakings whose conduct is likely to have an anticompetitive effect on the market fall within the scope of Article 82 EC.
In that regard, the assessment of whether a rebate scheme is capable of restricting
competition must be carried out in the light of all relevant circumstances, including the
rules and criteria governing the grant of the rebates, the number of customers concerned
and the characteristics of the market on which the dominant undertaking operates.”485
251. In conclusion the Court answered the prejudicial questions in the following way:
“ 1. In order to determine whether a rebate scheme, such as that at issue in the main
proceedings, implemented by a dominant undertaking is capable of having an
exclusionary effect on the market contrary to Article 82 EC, it is necessary to examine
all the circumstances of the case, in particular, the criteria and rules governing the grant
of the rebates, the extent of the dominant position of the undertaking concerned and the
particular conditions of competition prevailing undertaking concerned and the
particular conditions of competition prevailing on the relevant market. The fact that the
rebate scheme covers the majority of customers on the market may constitute a useful
indications to the extent of that practice and its impact on the market, which may bear
out the likelihood of an anti-competitive exclusionary effect.
2. The application of the ‘as-efficient-competitor’ test does not constitute a necessary
condition for a finding to the effect that a rebate scheme is abusive under Article 82 EC.
In a situation such as that in the main proceedings, applying the as-efficient-competitor
test is of no relevance.
3. Article 82 EC must be interpreted as meaning that, in order to fall within the scope of
that article, the anti-competitive effect of a rebate scheme operated by a dominant
undertaking, such as that at issue in the main proceedings must be probable, there being
no need to show that it is of a serious or appreciable nature.”486
252. With the Post Danmark II judgment the Court confirms that, just like in Article 101 TFEU, there is
a ‘by object’ and ‘by effect’ divide between abuses in Article 102 TFEU. Certain forms of abuse
will be considered as an abuse by ‘object’, like exclusivity dealings, loyalty rebates, tying and
bundling, predatory pricing schemes that are below average variable costs. This means that for these
forms of abuse the Court will not assess whether the conduct has potential or actual effect on the
485
486
Ibid. paragraph. 65-68.
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, paragraph 75.
competitive process. The Court considers that these types of conduct have anti-competitive goals as
their object and will therefore be liable to have anti-competitive effects.
253. On the other hand, with other types of conduct like margin squeezes, selective price cuts and, after
the Post Danmark II judgement, standardized retroactive rebates the Court will assess whether the
conduct is capable of having anti-competitive effects. A similar approach as in Article 101 to Article
102 can therefore be inferred.
254. After the Post Danmark II it appears that the Court of Justice took note of the mounting criticism of
its case-law. The judgement appears to be in line with the Guidance Paper published by the
Commission.
7.4 SUMMARY CONCLUSION
255. The Post Danmark II case concerned a standardized retroactive rebate scheme. The Advocate
General reaffirmed previous case law concerning this type of conduct in her opinion. First, in
continuation with Michelin I, ‘all the relevant circumstances’ have to be assessed. In this assessment
the Court should take “the criteria and rules governing the grant of the rebate” into account, namely
“the conditions of competition prevailing on the relevant market and the position of the dominant
undertaking on that market.”487 Second, a violation of Article 102 TFEU could be avoided by Post
Danmark II had it proven the existence of economic efficiencies. Based on previous case-law, she
stated, explicitly, that an assessment of the possible anti-competitive effects is not necessary.
Apparent from Advocate General Kokott’s opinion is that she is not keen on modernizing the legal
framework applied to rebate schemes under Article 102 TFEU. Instead she pleads for a continuation
of the orthodox approach. This is unfortunate as this modernization process needs as much allies in
the EU courts as possible. This was on one hand however to be expected as Advocate General
Kokott can be regarded as an adherent of ordoliberalism.488
256. The European Court of Justice, however, was more ambitious in her judgment than the Advocate
General. In the assessment of the ‘all the relevant circumstances’ it added another ‘circumstance’ to
be taken into consideration, namely the extent of Post Danmark’s dominant position and the
particular conditions of competition prevailing on the relevant market. This was also proposed by
the Advocate General in her opinion.489
487
Post Danmark II, C-23/14, ECLI:EU:C:2015:651, opinion of AG Kokott, paragraph 55.
Ibid., paragraph 56-57.
489
Ibid., paragraph 231.
488
91
257. In paragraph 31 the Court required proof that the standardized retroactive rebate scheme can
potentially cause anti-competitive effects. This marks an evolution in comparison to the approach
previously applied by the EU Courts to rebate schemes. In the Michelin II case it concerned a similar
rebate scheme as in Post Danmark II. The General Court did not find it necessary however to assess
the potential negative effects on the market as it resorted to the tried and tested method of Michelin
I.
258. After the Post Danmark II judgement, retroactive standardized quantity rebates will be assessed
under a ‘by effect’ approach as opposed to the previoues ‘by object’ assessment. As clarified in the
judgement, concrete effects do not need to be proven. Moreover, these effects are not subjected to
a de minimis test. Therefore it is not required to show that the anti-competitive effects are of a serious
or appreciable nature.
259. This thesis discussed the development of case law concerning rebate schemes applied by dominant
undertakings under Article 102 TFEU. Starting with the seminal Hoffmann La Roche judgment, the
Court made a distinction between quantity rebates on one hand and loyalty rebates on the other.
According to the Court loyalty rebates had the same impact on the market, and therefore consumer
welfare, as exclusive purchasing obligations. These exclusive purchasing obligations have an
exclusionary effect, according to the Court, when they are applied by a dominant undertaking as
they generally require the customer to purchase all of their requirements from the dominant
undertaking. With regards to loyalty rebates the Court assumed that those kind of rebate schemes
have a similar negative impact on the market as exclusive purchasing obligations. The anticompetitive effects experienced by the consumer is however not mentioned once. This judgement
started the form-based approach to rebates under Article 102 TFEU. Contrary to exclusivity rebates,
quantity rebates linked solely to the volume of purchases are presumed to be legal.
260. The Hoffmann La Roche judgement was a decisive case for the further development of Article 102
TFEU as its philosophy was repeated in subsequent cases. In following cases the Hoffmann La
Roche reasoning was applied, even though the factual context of those cases was different. The
form-based approach led to questionable results however. The main criticism is that the assumption
regarding the anti-competitive effect of loyalty rebates is contrary to recent economic insights. In
certain circumstances, loyalty rebates can invoke pro-competitive effects. Ignoring this reality
ultimately leads to over-enforcement. EU competition policy is still managed through the rule of
law so understandably certain abstractions have to be me made. Alternative approaches to rebate
schemes are however open to the EU institutions handling these cases. This would involve moving
away from the ‘by object’ violation of Article 102 TFEU to a ‘by effect’ approach of rebate schemes.
261. From a historical point of view there is a basis to adopt a new approach. Recent research, primarily
done by Pinar Akman, has indicated that the drafters of the EU competition rules were not inspired
by ordoliberalism. Consequently, Article 102 TFEU is not an ordoliberal provision of EU
competition law. Ordoliberalism is primarily concerned with the economic freedom of its actors and
consumer welfare is to a lesser effect a priority. To accept ordoliberalism as the guiding philosophy
of Article 102 TFEU would slow the modernization process of Article 102 TFEU. These renewed
insights on the origins of Article 102 TFEU form a teleogical basis for the institutions to reform its
legal framework with regards to rebate schemes. Ordoliberalism, however, still has its adherents in
the EU Courts, Advocate General Kokott being a notable one.
93
262. With the Post Danmark I judgment the Court of Justice, in a Grand Chamber session, confirmed
that consumer welfare is the objective of Article 102 TFEU. This would allow for an approach that
takes efficiencies into account.
263. Following the Michelin I judgement the General Court was keen on applying the ‘all the relevant
circumstances’ legal test to quantity rebates. This two stage test was developed in the Michelin I
judgement for the residual category of rebate schemes, i.e. rebate schemes that could not be
categorized as either a quantity rebate or exclusivity rebate within the meaning of Hoffmann La
Roche. This two stage test first assesses whether the rebate scheme has ‘loyalty-inducing’ elements
and second whether there is an objective justification once a violation of Article 102 TFEU has been
found. The General Court again applied a line of case law without regard to its factual context. The
Michelin I case concerned the so called ‘target rebates’ whereas in the Michelin II case it concerned
standardized retroactive quantity rebates. Following the judgement of the General Court in Michelin
II and the ruling in British Airways of the Court of Justice there was mounting criticisms from
commentators and legal practitioners for a modernization of the assessment of rebates under Article
102 TFEU.
264. In 2005 then EU Commissioner Kroes announced in a speech that ‘a more economic’ approach of
Article 82 EC was imminent. Following this speech, several ‘soft law’ papers (like the Consultation
Paper and the Discussion Paper) were published to discuss this process. This resulted in the
publication of the Guidance Paper. In this Guidance Paper the Commission tried to create clarity on
how it would prioritize its enforcement policy with regards to abuse of dominance under Article 102
TFEU. The criticism of the then form-based approach was not only that it lacked a sound economic
basis but also the characteristics of an administrable test. Seeing as case law was developed on a
case-by-case basis it was not clear on how the Court would apply ‘all the relevant circumstances ‘
in the future. Therefore, ex ante it was particularly hard for legal counsel to advise dominant
undertakings on the litigious nature of their rebate schemes.
265. Unfortunately the amount of flexibility that the Commission gives itself undermines this goal. At
the center of the Guidance Paper was the as-efficient-competitor test. Based on this test, the
Commission will only intervene where the conduct concerned has already been or is capable of
hampering competition from competitors which are considered to be as efficient as the dominant
undertaking. Several commentators have argued that the parameters, that the Commission will take
into account when applying the AEC-test, are not ideal. Parameters like ‘contestable share’ and
‘relevant range’ are difficult to estimate as a dominant undertaking and therefore do not provide the
necessary legal certainty. Furthermore, the Guidance Paper allows the Commission, when deciding
the allowed cost-price level, to apply the price costs of competitors. It cannot be required of
dominant undertakings to take the price-cost levels of their competitors into account.
266. In its decision in the Intel case, the Commission regrettably contradicted itself. It had the opportunity
to apply the AEC-test, which it did, but then again it stated that it is not required to indicate possible
anti-competitive effects to find a violation of Article 102 TFEU. It was also not clear whether the
AEC-test was mandatory for competition authorities dealing with rebate cases or just optional. This
was a question that was answered by the Post Danmark II judgement. The Court ruled that the AEC
is wholly optional and thus not mandatory. In the words of the Court the AEC-test is thus a “tool
amongst others” But seeing as this could be regarded as a ‘rule of practice’ it will have to take the
relevant case law of the EU courts into account when applying the AEC-test. Even though the
Guidance Paper showed that the Commission had the intention to reform its assessment of Article
102 TFEU, its ambition progressively declined after the publication of the Consultation Paper and
resulted in the -at most- average Guidance Paper.
267. Article 102 TFEU is a puzzling article as it lacks applicable definitions. It is therefore left up to the
EU courts to give a workable framework to this article. The Post Danmark II case was an ideal
opportunity to clarify what the assessment should be of quantity rebates under Article 102 TFEU.
The characteristics of the rebate scheme were comparable to the rebate scheme under investigation
in Michelin II. Michelin chose however not to appeal the decision.
268. The Court started off by assessing all the relevant circumstances’ of the quantity rebate scheme. In
this assessment it, remarkably, took the competitive structure of the market into consideration. This
was a new element not previously seen in other judgements concerning rebates. The biggest
improvement caused by the judgement was when the Court took the possible anti-competitive
effects of the rebate scheme into account. The Court analyzed whether the rebate scheme was
capable of causing anti-competitive effects on the market. This marked somewhat of an evolution
seeing as this introduces a ‘by effect’ standard to the assessment of rebates under Article 102 TFEU.
This also confirms that there is, as it is imbedded in the text of Article 101 TEFU, a distinction
between ‘by object’ and ‘by effect’ violations of Article 102 TFEU. Selective price cuts and margins
squeezes are types of conduct where the Court will investigate where there are anti-competitive
effects on the relevant market. Accordingly, following the Post Danmark II, judgment quantity
rebates will only violate Article 102 TFEU if, in the absence of an objective justification and having
considered all the relevant circumstances, the Court comes to the conclusion that the rebate scheme
has the capability of producing anti-competitive effects. The degree of these anti-competitive effects
will not be subjected to a de minimis-test. The anti-competitive effect have to be ‘probable’ and
must not be purely hypothetical. What should be understood under probable anti-competitive effects
is still an unanswered question.
269. The Post Danmark II is more of an evolution than a revolution. The Court has realligned its case
law with this judgment in the direction of the Guidance Paper. The Court should in the future
95
abandon the ‘by object’ with regards to loyalty rebates and exclusivity dealing. The impact of these
practices can have a negative impact on consumer welfare but I remain of the opinion that these
effects should be proven and not merely assumed. The Hoffmann La Roche assumption with regards
to quantity rebates was not respected to a full extent. Under the presumption of legality the dominant
undertaking should not be required to provide proof that its rebate scheme is economically justified,
as was the case in the Post Danmark II judgment. As of yet it appears that a completely new way of
doing things is not a concern for the EU Courts. The question is of course what stance the EU courts
will take in following rebate cases. Many questions remain unresolved after the Post Danmark II
judgement. The fate of exclusivity rebates and exclusive purchasing obligations being one of them.
Hopefully, the Court will assess these unanwered questions in the coming Intel judgment.
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1. LEGISLATION
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97
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3.2. Articles
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101
GERADIN, D.” Loyalty Rebates after Intel: Time for the European Court of Justice to Overrule
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GORMSEN, L. “Article 82 EC: Where Are We Coming From and Where Are We Going To?”, The
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GYSELEN, L. “Rebates, Competition on The Merits or Exclusionary Practice?”, European Competition
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KJÆRSGAARD, N., GRAVENGAARD, M., “The EU Commission Guidance on Exclusionary abuse
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KALLAUGHER, J. and SHER, B. “Rebates Revisited: Anti-Competitive Effects and Exclusionary
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in European Competition Law?”, Journal of European Competition Law and Practice 2014, 1-10.
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of Justice can do to rebalance the assessment of rebates”, Concurrences Review 2015,
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Paper”, not published, availible at: http://orbi.ulg.ac.be/handle/2268/192441.
PETIT, N., “Intel, leveraging rebates and the goals of Article 102 TFEU”, European Competition
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PORTUESE, A, GOUGH, O., TANEGA, J., “The Principle of Legal Certainty as a Principle of
Economic Efficiency”, Research Paper No. 13-13, University of Westminster School of Law, 1-36.
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Dispenses with the Need to Apply Article 82 Ec to Vertical Restraints”, Common Market Law Review
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ROUSSEVA, E., “The Concept of Objective Justification of An Abuse of a Dominant Position: Can it
Help to Modernise the Analysis under Article 82 EC?, The Competiton Law Review 2006, 68.
ROUSSEVA, E. and MARQUIS, M. “Hell Freezes Over: A Climate Change for Assessing Exclusionary
Conduct under Article 102 TFEU”, Journal of European Competition La wand Practice 2012, 1-19.
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Reason”, Competition Policty International 2005, 89-114.
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103
WHISH, R. “Intel v. Commission: Keep Calm and Carry on!”, Journal of European Competition Law
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Concurrences Review 2013, 16-19.
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Further Reading
WILS, W.,“The judgment of the EU General Court in Intel and the so-called 'more economic approach'
to abuse of dominance”, World Competition 2014, 405 – 434.
In the aforementioned article, Prof. dr. Wils defends the idea that form-based approach is sound caselaw.