On 19 April 2018, the European Court of Justice clarified when the application of discriminatory prices with regard to trading partners by a dominant firm amounts to abuse of dominance.
In its judgment, the Court answered several questions that had been referred by a Portuguese court in proceedings concerning the prices charged by GDA, a Portuguese collective rights management organisation, to MEO, a television distributor. In essence, MEO argued that it was charged higher prices than its main competitor and consequently it was put at a competitive disadvantage leading to an infringement of Article 102 TFEU.
Going beyond the specifics of the case, the Court seized the opportunity to clarify two aspects of Article 102(2)(c) TFEU. First, the Court held that simply applying dissimilar conditions to trading partners is not always capable of distorting competition. This behaviour must have the effect that a trading partner is placed at a competitive disadvantage, i.e. there is a deterioration of its competitive position compared to its competitors on the downstream market. However, providing proof of actual and quantifiable deterioration of its competitive position is not required. Instead, all of the relevant circumstances of the case must be examined to determine the actual or potential competitive effect of the conduct. Second, the Court confirmed that while there is no minimum threshold for the purposes of determining whether the behaviour is abusive, not all behaviour has an anticompetitive effect.
Having set out the general framework, the Court gave the referring court several pointers to assess whether MEO was placed at a competitive disadvantage. (i) The downstream market was heavily concentrated and consisted of a duopoly of MEO and another provider, leading to significant negotiating power against GDA. (ii) The specific price charged to MEO was the result of a binding statutory arbitration between MEO and GDA. (iii) MEO actually gained a significant market share in the years the discriminatory prices were in place. The Court also observed that where the effect on the profitability of the trading partner is not significant, that fact may point towards the finding that the tariff differentiation is not capable of having any effect on the competitive position of that entity. (iv) In situations where the prices concern a downstream market on which the dominant firm is not active, the dominant firm has in principle no interest in excluding one of its trade partners from that downstream market. While the first three circumstances are quite case-specific, the Court's last observation seems to have a broader scope of application, for example if the dominant firm is vertically integrated.
In a recent private enforcement case, the Amsterdam District Court anticipated the Court's judgment by relying on Advocate General Wahl's opinion inMEOand applied a similar effects test [see ourMarch 2018 Newsletter]. Seemingly, the Court's judgment in MEO provides welcome guidance to competition authorities and courts on the examination of discriminatory pricing by a dominant firm.