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June 07 2018
Discriminatory pricing as an abuse is a little-deployed area of EU antitrust law and there has been no recent enforcement at the European Commission level. The few existing cases concern extreme facts, involving natural or statutory monopolies such as airports or copyright collecting societies.
In theory, the requirement in Article 102(2)(c) of the Treaty on the Functioning of the European Union (TFEU) that no dominant firm discriminate sets an impossible bar. For example, it is difficult to think of even the most powerful company being able to stand firm against any price concessions for:
Further, given the development of the Intel case law around loyalty rebates (which involve inherently discriminatory pricing based on subjective volume targets), it would be invidious to find a company's rebate scheme to be legal under the Intel foreclosure standard but unlawfully discriminatory under Article 102(2)(c).
The European Court of Justice's (ECJ's) judgment in MEO v Autoridade da Concorrência therefore offers welcome clarification of the case law. It starts with the premise that not all price differences are illegal – the key question is whether they cause material harm by competitively disadvantaging one company in contrast to its rivals.
Whether a competitive disadvantage exists requires a contextual analysis to determine:
MEO Serviços de Comunicações e Multimédia (MEO) needed to clear the use of copyright-related rights with Cooperativa de Gestão dos Direitos dos Artistas Intérpretes ou Executantes (GDA) to provide its paid TV signal transmission and content services.
MEO was unhappy with the tariffs GDA imposed on it for the use of copyright-related rights. MEO lodged a complaint with the Portuguese Competition Authority, accusing GDA of abusing its allegedly dominant position by applying different tariffs to MEO than to NOS Comunicações SA (NOS), one of MEO's largest competitors. Under Article 102(2)(c) of the TFEU, applying different conditions to equivalent transactions with trading parties, thereby putting a trading party at a competitive disadvantage, may qualify as abusive conduct.
The Portuguese Competition Authority did not pursue the investigation due to a lack of evidence that the tariff differentiation that GDA had had a restrictive effect on MEO's competitive position. This led to MEO filing an appeal with the Portuguese Competition, Regulation and Supervision Court, which asked the ECJ to issue an opinion on the interpretation of the concept of competitive disadvantage under Article 102(2)(c).
The ECJ clarified that merely finding that the behaviour of a dominant company is discriminatory is inadequate to constitute an infringement of Article 102(2)(c) of the TFEU. The ECJ stated that:
there must be a finding, not only that the behaviour of an undertaking in a dominant market position is discriminatory, but also that it tends to… hinder the competitive position of some of the business partners of that undertaking in relation to the others.
The ECJ recognised that charging MEO a higher price than NOS for an equivalent service indicated the existence of a disadvantage for MEO. However, the ECJ noted that this did not necessarily put MEO at a competitive disadvantage. All relevant circumstances had to be assessed to determine whether the price discrimination against MEO could put it at a competitive disadvantage. The following circumstances were particularly relevant in this case:
where the application of differentiated tariffs concerns only the downstream market, the undertaking in a dominant position, in principle, has no interest in excluding one of its trade partners from the downstream market.
The ECJ's ruling provides much-needed guidance as regards the extent to which a company with market power need not discriminate in its commercial dealings with trading partners. Some of the key takeaways are as follows:
For further information on this topic please contact Agapi Patsa or Bill Batchelor at Baker & McKenzie by telephone (+32 2 639 36 11) or email (firstname.lastname@example.org or email@example.com). The Baker & McKenzie website can be accessed at www.bakermckenzie.com.
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