The European Court of Justice ("ECJ") and the Court of Justice of the European Free Trade Association ("EFTA Court") handed down judgments in three cases on the abuse of a dominant position. The conclusion on the basis of these judgments is that it continues to be difficult to determine beforehand what behaviour will be considered as competition on the merits and what will be considered as abuse of a dominant position. All three judgments focus on the question of whether the behaviour has exclusionary effects, i.e. whether access to the market for competitors is foreclosed. However, at the same time the Courts repeat that actual foreclosure is not a prerequisite for a finding of abuse. Rebates and bonuses inducing buyers to buy almost exclusively from the dominant company continue to be "per se" prohibited it seems, irrespective of the market coverage of the commercial offer and irrespective of actual market foreclosure. We will discuss these cases in some more detail below.
Tomra: no need to establish actual foreclosure of the market when finding abuse
In its judgment of 19 April 2012 the ECJ dismissed the appeal brought by Tomra against the judgment of the General Court (C-549/10 P Tomra Systems and Others v Commission). This confirms existing European Union ("EU") case law on the abuse of a dominant position. However, the Commission has meanwhile pledged to focus on cases that are likely to give rise to actual negative effects on competition.
Central to these appeal proceedings was a Commission Decision of 2006 which found that Tomra had abused its dominant position. Tomra was considered to be dominant in the relevant market (with a market share of more than 70%).
The Commission found that Tomra had entered into numerous exclusive agreements with customers. They were either explicitly exclusive or the terms and conditions of the agreements (rebates and bonuses) were such as to render them de facto exclusive. According to the Commission Tomra's discount and bonus systems tied customers to it. In particular, rebate schemes based on individual sales targets for specific customers had the tendency to induce purchases exclusively from Tomra.
Tomra appealed against the 2006 Commission Decision but the General Court subsequently dismissed its appeal in its judgment of September 2010. The ECJ confirms its previous case law as well as the General Court's judgment following Tomra's further appeal.
In doing so the ECJ dismissed the argument that "market foreclosure" - the alleged result of Tomra's abuse - was in any case not absolute, since the exclusive agreements covered only around 40% of the relevant market. So 60% of the total demand remained open for competition, in spite of the alleged exclusive arrangements. In response to this argument the ECJ held that competitors of a dominant company should have "the opportunity to benefit from whatever degree of competition is possible on the market and competitors should be able to compete on the merits for the entire market and not just for a part of it." This would seem to confirm that the ECJ's position that companies with a dominant position abuse that position if they enter into any de facto exclusive agreement with customers. However, there are also signs in the Tomra case that the ECJ did take into consideration that Tomra did actually cover a significant share of the total market (around 40%) and that this was the reason why the behaviour was a form of abuse. In that ruling, the behaviour of a dominant company which only covers an insignificant share of the relevant market does not constitute an abuse because it is not capable of significantly foreclosing access to the market for competitors.
The ECJ's explicit statement in Tomra that the Commission was not required to undertake an analysis of the actual effects of Tomra’s behaviour indicates that the ECJ continues to uphold a broad notion of abuse (based on the form of the behaviour). In order to establish abuse, it continues to be sufficient for the Commission to show that the conduct at issue is capable of having a negative effect on competition in the market. In the Tomra case, the ECJ held that the Commission could have established abuse without there being a need for the Commission to examine whether Tomra was selling below its costs of production.
Meanwhile the Commission has adopted (in 2009) a policy in which the effects of the behaviour are more central. But that policy was not applicable to the review of the 2006 Decision. Still, in future cases the Commission will focus on cases that are likely to have negative effects on competition, as set out in its 2009 Enforcement Priorities Policy.
Posten Norge and Post Danmark
On 18 April 2012 the EFTA Court ruled on an application of Posten Norge to annul a decision of the EFTA Surveillance Authority finding that there was an abuse of a dominant position by the Norwegian incumbent for postal services (E-15/10 Posten Norge AS v EFTA Surveillance Authority). In a judgment of 27 March 2012 the ECJ answered questions of a Danish court on the abuse by Post Danmark established by the Danish Competition Authority (C-209/10 Post Danmark A/S v Konkurrencerådet).
The Posten Norge case resembles the Tomra case and deals with exclusive agreements between Posten Norge and retailers (supermarkets, petrol stations). Posten Norge used the supermarket outlets for delivering parcels sent by businesses to consumers (B2C delivery). Access to these retail outlets was considered to be the key to success in the Norwegian B2C parcel delivery market.
On the procedural front, the EFTA Court confirmed that its review of the decision of the competition authority's decision is not limited to examining whether a "manifest error" was made. Where a sanction is imposed, the EFTA Court fully reviews the decision notwithstanding the assessment of the complex legal and economic aspects inherent in a competition authority's decision.
Similarly as in Tomra, the competition authority had relied on the potential for the conduct to limit competition but then went on to illustrate the actual negative foreclosure effects. Comparable to what the ECJ did in Tomra, the EFTA Court emphasised that the actual foreclosure effects need not be established for a finding of abuse. In fact the EFTA Court considered it to be irrelevant whether an "as efficient competitor" of Posten Norge could have competed effectively regardless of the existing agreements. In addition, the degree of possible foreclosure was irrelevant (similar to Tomra) because even a limited degree of foreclosure was liable to restrict the limited competition which still existed in the market.
Nonetheless the focus on the potential of conduct of a dominant company to restrict competition (in Tomra and Posten Norge), the ECJ – in Post Danmark – laid emphasis on the fact that companies with a dominant position can still fiercely compete on the merits. The ECJ ruled that "not every exclusionary effect is necessarily detrimental to competition". Competition on the merits, it held, may "by definition lead to departure from the market or the marginalisation of competitors that are less efficient." The Court also ruled that discriminatory pricing by a dominant company is not in itself sufficient to find a form of "exclusionary abuse". It then went on to confirm that pricing below average total costs but above average incremental costs is not of itself a form of ("exclusionary") abuse. This ruling is in line with existing case law on pricing abuses of dominant companies.