It is not always easy for the business community to determine whether the conduct of a company enjoying a dominant position on the market is abusive in terms of competition law.
The criteria set out by Advocate General (AG) Athanasios Rantos in an opinion given within the context of a preliminary reference filed before the Court of Justice of the European Union (CJEU) offers some guidance in this respect.
EU and national antitrust law clearly prohibit any form of abusive behaviour by companies holding a dominant position in any relevant market.
Broadly speaking, abusive conduct can be either exclusionary or exploitative in nature. This means conduct by a dominant company that either seeks to strategically exclude competitors from the market in which it operates, or that seeks to make use of the company’s market power to the detriment of consumers, is illegal. It is of the utmost importance for a dominant company to distinguish legitimate from unlawful behaviour to ensure that it is not in breach of antitrust law.
The facts of this particular case, which was filed within the context of the liberalisation of the market for the retail supply of electricity in Italy, were as follows:
The Italian competition authority investigated the strategy implemented by three companies of the Enel group allegedly aiming to make it more difficult for competitors to enter the liberalised energy market.
The said authority concluded that these companies had abused of their dominant position in breach of EU competition law. This was so as the companies had implemented a strategy to foreclose access to the market through the discriminatory use of data relating to the customers which, prior to the liberalisation, were available to the parent company, enabling commercial offers to be communicated to these customers, with the aim of retaining them within the group.
The group of companies filed an appeal from the fine imposed by the national competition authorities. The national appellate court filed a preliminary reference before the CJEU, requesting guidance on the interpretation and application of EU competition law in relation to exclusionary practices.
The message of the AG is loud and clear. It is not illegal for entities which enjoyed a statutory monopoly to adopt practices aimed at retaining their customers
The AG primarily observed that the legality of the relevant conduct in terms of other laws, such as data protection laws or civil law, does not preclude the conduct in question from being classified as abusive in terms of competition law.
He proceeded to observe that conduct which seeks to restrict competition on the relevant market must be considered as abusive. Establishing such a restrictive effect is important as not every exclusionary effect is necessarily detrimental to competition.
The AG opined that there is no clear demarcation line that can be drawn between those practices that are part of ‘normal’ competition and those which are not. Hence, whether conduct comes within the scope of competition law or otherwise cannot be determined in advance, but any practice, even though not specifically listed in the law, may constitute an abusive practice.
Any exclusionary practice must, therefore, be examined within its factual, legal and economic context to ascertain its lawfulness or otherwise. Nonetheless, some factors that assist in this analysis can be gleaned from the jurisprudence of the CJEU.
Primarily, the principle that an undertaking in a dominant position has a ‘special responsibility’ not to allow its conduct to impair effective competition must always be taken into consideration when conducting any such examination. ‘Special responsibility’ applies to all dominant undertakings, including incumbent operators that previously held a monopoly.
The fact that the conduct in question clearly departs from normal market practice may be regarded as a relevant factor in ascertaining whether conduct is abusive, particularly when such conduct is not based on obvious economic or objective reasons. Establishing whether consumers will benefit through lower prices, better quality and a wider choice of new or improved goods and services serves as an indicator in this regard.
The AG maintained that incumbent operators such as Enel must be able to maximise their profits like any other operator on the market. Thus, they are allowed, and even expected, to put in place practices aimed at retaining customers. However, on account of their ‘special responsibility’, they must not exploit the advantages conferred by the statutory monopoly, to exclude new competitors which are equally efficient from the relevant market.
Considering the facts at hand, it was therefore important to ascertain whether such competitors could have had access, in an economically viable way, to the same type of useful data which Enel held in relation to its customers due to its statutory monopoly. This may help to affirm whether Enel’s conduct is potentially capable of foreclosing the relevant market and, therefore, whether it is illegal or otherwise.
The AG affirmed that both the potential direct and indirect damage to consumers is to be taken into consideration in establishing the illegality of an exclusionary practice.
The fact that a practice is capable of restricting competition is sufficient and there is no need to wait for anti-competitive effects to occur on the market to establish the existence of abuse.
The AG maintained that abuse of a dominant position is an objective concept. Therefore, there is also no requirement to establish the existence of an anti-competitive intent on the part of the dominant undertaking and specifically, the subjective intention to exclude competitors.
The message of the AG is loud and clear. It is not illegal for entities which enjoyed a statutory monopoly to adopt practices aimed at retaining their customers, when faced with the liberalisation of the market in which they operate.
However, they must not exploit the advantages stemming from such a monopoly to engage in practices that can exclude equally efficient competitors from the market.