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Remedies for unilateral conducts: An overview of recent national case law

Frederic Depoortere, Ingrid Vandenborre, e-Competitions, N°42182.

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1. Introduction

Regulation 1/2003 [1] obliges member states to apply Articles 101 and 102 to commercial practices which have an effect on interstate trade in order to foster convergence between national and EU competition law. With regard to Article 101(1) of the Treaty, the Regulation also provides that, in order to create a level playing field for agreements within the internal market, the application of national competition laws may not lead to the prohibition of agreements not also prohibited under EU competition law.

The Regulation foresees an explicit exception to this basic rule of convergence in allowing member states to adopt and apply stricter national laws which sanction unilateral conduct (Article 3.2). Recital 8 specifically refers to national laws which prohibit abusive behaviour affecting companies in a situation of economic dependence, regardless of whether the company who engages in such behaviour is dominant within the meaning of Article 102. Article 3.2 also allows member states to adopt national laws providing for different standards for assessing dominance and stricter national provisions governing the conduct of dominant undertakings [2]. In addition, Article 3.3 allows member states to adopt national laws which protect legitimate interests different from those protected by competition laws, further explained in Recital 9 as referring to unfair trade practices or more generally to "legislation which prohibits undertakings from imposing on their trading partners, obtaining or attempting to obtain from them terms and conditions that are unjustified, disproportionate or without consideration".

Since the entry into force of Regulation 1/2003, national authorities have applied Articles 101 and 102 in numerous cases. Focusing on Article 102, a review of the cases reported in this magazine over the last years shows that the increased involvement of the EU member states in the enforcement of Article 102 has given rise to a more varied approach to Article 102 enforcement across the European Union. This more varied enforcement practice has manifested itself in at least two different ways.

First, it is not always clear that the enforcement of Article 102 (and/or its national equivalents) by national authorities is exclusively grounded in the protection of competition, as distinguished from "different legitimate interests" which, while recognized as legitimate policy objectives for national legislation by Regulation 1/2003, are not the object of Article 102. What may occasionally add to the confusion is the fact that national competition authorities do not always clearly state whether their decision is based on the provisions of Article 102 or provisions of national law which provide for different standards for dominance and abuse.

Second, the national authorities often apply Article 102 to types of abuses which the Commission has mostly shunned in recent years, such as excessive pricing or discrimination. This is a development which may be similarly based on the broader vision which at least some member state authorities may have of the policy objectives of Article 102 enforcement.

The enforcement record at the member state level thus may lead one to call into question the exclusion of Article 102 from Regulation 1/2003’s convergence rule, given that in practice it has blurred the distinction between Article 102, the equivalent provisions in national law, and other national laws intended to achieve other objectives. The resulting differences in the application of competition law throughout the European Union complicate doing business across EU member states and may be viewed as undermining the basic goals of convergence of Regulation 1/2003.

2. Article 102 as a tool to address consumer protection and unfair trade practices

When reviewing the reports included in this publication on the decisions of the different member states over the course of the last years, there are several notable examples of a "broad" application of Article 102. In those cases where the authorities’ decisions appear to be based on the protection of consumer interests or the improvement of terms and conditions applicable to individual customers, the policy objectives applied go beyond the protection of effective competition as envisaged by the Treaty on the Functioning of the European Union. These decisions may cause one to call into question whether Article 102 and its national law equivalents are the most adequate instruments to achieve the broader policy goals envisaged, and underscore the potential impact of national enforcement practices on the cost of doing business in the EU.

In March 2011, in one of the first cases applying Article 102, the Bulgarian competition authority fined electricity distributor E.ON Bulgaria Sales ("E.ON Bulgaria") for refusing to supply electricity to a customer, on the basis that the previous owner of the business had not paid its outstanding debts. After the competent regulatory agency for energy had found that E.ON Bulgaria did not violate applicable regulations, the new owner/customer submitted a complaint to the Bulgarian competition authority. The authority considered E.ON Bulgaria to be dominant based on its exclusive license for the distribution of electricity in Bulgaria. Even though E.ON Bulgaria had been found to be in compliance with energy regulations, this did not preclude a finding by the competition authority that E.ON Bulgaria had infringed the Bulgarian national law equivalent to Article 102. This case presented the second instance of a refusal to supply electricity by E.ON Bulgaria. The authority had accepted commitments in the first case, but imposed fines against E.ON Bulgaria in this second case [3]. The decision differs from most EU cases involving refusals to supply in the energy sector, which generally involve an incumbent energy supplier making it more difficult for other energy suppliers to have access to a network or customer base. One may wonder whether the refusal to supply electricity to an individual customer, based on non-payment of prior debts, affects competition and should be analyzed as a competition law infringement. The case is currently subject to review by the Bulgarian Supreme Court.

Another example is a June 2010 decision of the Hungarian competition authority which accepted commitments from one of the leading Hungarian banks, based on the concern that the introduction of an early repayment fee and the increase of the handling fee for certain mortgages may have amounted to an abuse. Although the fee increases were carried out in compliance with applicable sector regulations, the competition authority found that the bank had infringed Hungary’s Article 102 equivalent when it introduced the changes on very short notice, through non-transparent changes to the applicable terms and conditions, and without individually notifying the affected customers. The decision is reported to fit within a series of similar commitment decisions involving various Hungarian banks offering housing and personal loans [4]. Two elements in the decision are of particular interest. First, the bank in question was not found to be dominant on the market for financial services in Hungary or housing loans. Rather, due to high switching costs, its customers were viewed as "captured customers", which was sufficient to trigger the application of Hungary’s national law provision equivalent to Article 102 [5]. Second, according to the report in this publication, the Hungarian authority explicitly found that the fees imposed were not clearly excessive compared to fees applied by other banks on the market. Again, it is questionable whether the measures imposed targeted the protection of effective competition.

A December 2009 decision by the Italian competition authority shows how subtle the distinction can be between enforcement action aimed at safeguarding effective competition and measures directed at serving consumers’ interests in general. Poste Italiane was alleged to hold a dominant position in the collection and payment services sector, as its postal payments slips are a wide-spread system of payment in Italy. Customers could only pay with postal payment slips at post offices or through an on-line Poste Italiane account. Alternative on-line payment methods (without a Poste Italiane account) were much more expensive. Poste Italiane committed to make postal payment slips more "interoperable" with alternative payment methods (for example, bank wire transfers), thereby enabling consumers to avoid payment fees or pay lower fees than those charged by Poste. It also committed to make it easier for the recipients of the payments to process payments which did not go through Poste. One way to view these commitments is that they aim at mitigating Poste’s dominance in the collection and payment service sector, to the benefit of competing payment service providers (such as banks). However, the basis for imposing the remedies, and the crux of the authority’s reasoning, was not the possible foreclosure of competing alternatives, but rather the ability for individual consumers to use alternative payment methods (such as bank wire transfers). It is not clear, for example, what percentage of payments were in fact being conducted through postal payment slips, and to what extent the competitiveness of other financial service providers was jeopardized by Poste’s practices [6].

A last example is a decision also from the Italian competition authority from December 2010, which accepted commitments from Google to address allegations that the company abused its dominant position in the intermediation services market related to online advertising. The authority alleged that Google had failed to allow publishers to control the content published on the Google News feature and had linked participation in Google News to inclusion of the publisher’s materials on Google’s search results pages. The authority also found that there was a lack of transparency in the determination of the percentage of advertising revenues payable to publishers affiliated with Google’s AdSense network. Google committed (i) to use a separate crawler for Google News, allowing publishers to participate in Google’s search tool even if they refused to be listed on Google News; and (ii) to disclose the revenue-sharing percentages that would be applied to publishers affiliated with Google’s AdSense network [7]. Also in this case, the concerns identified appeared to be based on the nature of Google’s terms and conditions with its individual customers rather than the extent to which those terms foreclosed competitors’ access to online advertising or the distribution of content from the publishers involved in Italy.

3. A new future for enforcement against exploitative abuses?: excessive and discriminatory pricing abuses in the EU member states

A number of member state decisions show a willingness to apply Article 102 to allegations of excessive or discriminatory pricing. The European Commission has been more reluctant to take enforcement action in relation to exploitative abuses in general, and has analyzed discriminatory and excessive pricing issues mainly in the context of strategic efforts to foreclose competitors, even if there have been some exceptions recently [8]. The Commission’s focus on exclusionary rather than exploitative abuses was set out in its Guidance paper [9]. Enforcement action against exploitative abuses such as excessive or discriminatory pricing may be closely linked to the broad application of Article 102 described above, and may be the basis for renewed enforcement in this area.

For example, in December 2010, the Romanian competition authority reportedly fined the Romanian Post because it had granted discriminatory tariff rebates to certain customers on the market for standard postal commercial correspondence and standard postal service of direct mail [10].

Also in December 2010, the Luxembourg Competition Council found that Coditel had abused its dominant position on the cable distribution market based inter alia on the imposition of subscription fees for supplementary sockets without justification. Cogitel committed to drop the subscription fees for supplementary sockets [11].

Similarly, in June 2010, the French competition authority issued interim measures against Google, finding that its AdWords product, which provides online advertising space and is based on an auction process for the purchase of keywords, discriminated against speed camera warning systems in favour of other radar database suppliers. The allegation concerned the termination by Google of its advertisement agreement with Navx, a company offering GPS databases including speed camera warning systems. Google committed to clarify the scope and impact of its policy applicable to devices aimed at evading traffic speed cameras. Google also committed to clarify the processes which could result in the suspension of an advertiser’s account on Google and to restore Navx’ account [12].

As a last example, in May 2009, the Italian Administrative Court partially annulled a decision of the Italian competition authority accepting commitments from several roadside assistance providers in the context of an investigation based both on Article 101 TFEU and the national law equivalent of Article 102 TFEU [13]. The competition authority had found that the roadside assistance providers charged excessive prices for the provision of calling centre services, involving a special fee for each motorist call leading to the intervention of the roadside assistance companies. The providers had agreed to eliminate the fee and offer a scheme in which the selection of a roadside assistance provider was based on competitive bids by motorway segment [14]. The Italian Administrative Court considered the commitments excessive and disproportionate as they would have fundamentally changed the market structure for the provision of roadside assistance services, and exceeded the authority’s enforcement powers.

Conclusion

While the European Commission has emphasized an effects-based approach to the enforcement of Article 102 with a view to address exclusionary abuses, the Commission’s policies and priorities in the enforcement of Article 102 have not necessarily been embraced in the same way by all member state authorities. The exception to convergence which Regulation 1/2003 allows in the context of Article 102 gives national authorities the freedom to diverge from the Commission’s policies in relation to Article 102 enforcement. Even if the Commission’s policies may be subject to evolution, this does not affect the observation that the enforcement practices emerging at the member state level suggest it may be worth reconsidering the convergence exception for Article 102. Where Article 102 is applied to the commercial practices and policies of multinational undertakings, a level playing field may well be equally appropriate under Article 102 as it is under Article 101.

Footnotes

[1Council Regulation (EC) n° 1/2003, of 16 December 2002, on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJEU L 1, 4 January 2003, p. 1-25).

[5Although Regulation 1/2003 permits the application of national Article 102 equivalents to conduct affecting companies in a situation of economic dependence, the Regulation does not extend this exception to conduct in relation to individual consumers.

[7Decision of 22 December 2010 in case A420 - FIEG - Federazione Italiana Editori Giornali/Google, provvedimento No. 21959. See also Cedric Manara, The Italian Competition Authority examines commitments regarding the functioning of Google News (FIEG v. Google), e-Competitions, n° 32135.

[8For example, the Commission issued a Statement of Objections against Standard & Poor’s in 2009 for unfair pricing practices which it considered amounted to an abuse of dominance, and made commitments imposed legally binding in 2011.

[9See Communication from the Commission, Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings; (OJ C 45, 24.2.2009, p. 7–20) which at paragraph 7 provides that for the purpose of providing guidance on its enforcement priorities the Commission at this stage limits itself to exclusionary conduct and in particular, certain specific types of exclusionary conduct which, based on its experience, appear to be the most common.

[14Decision of 23 October 2008 in case A391 - Servizi di Soccorso Autostradale, provvedimento No. 19021.

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