Background of the Case
In March 2006, the Commission imposed a fine of EUR 24 million on Tomra group for abusing its dominant position. The Commission found that Tomra had infringed Article 102 TFEU by implementing an exclusionary strategy in the national reverse vending machine markets of Germany, the Netherlands, Austria, Sweden and Norway from 1998 to 2002. This strategy included agreements on (i) the exclusivity of Tomra Group as supplier (ii) individualized quantity targets, or (iii) retroactive rebate schemes.
Tomra group brought an action to annul the Commission Decision. On 9 September 20101, the General Court upheld the Commission decision. In particular, the General Court concluded that the foreclosure by a dominant undertaking of a substantial part of the market cannot be justified by showing that the contestable part of the market is still sufficient to accommodate a limited number of competitors. Also, the General Court followed the approach of settled case law on rebates that loyalty rebates are per se illegal instead of referring to a more economic approach promulgated by the Commission’s guidance paper on exclusionary abuses2.
Tomra Group lodged an appeal against this decision but the Court of Justice upheld the General Court Judgment on 19 April 20123.
Judgment of the Court:
Intent to engage in abusive behavior is not required
Tomra group submits that the General Court was wrong to endorse the Commission’s finding of an anti-competitive intent to foreclose competition. The Court also erred in law by refusing to consider evidence showing that Tomra group was intend on competing on the merits.
The Court of Justice recalls that the concept of abuse of a dominant position prohibited by Article 102 TFEU is an objective concept. Nonetheless, “it is legitimate for the Commission to refer to subjective factors, namely the motives underlying the business strategy in question”. The existence of an anti-competitive intent is only one of a number of facts which may be taken into account to assess whether there is an abuse of a dominant position. However, the Commission is not obliged to establish the existence of such intent on the part of the dominant undertaking in order to render Article 102 TFEU applicable.
The Court of Justice upheld the Generals Court’s finding that the existence of an intention to compete on the merits, even if it were established, could not prove the absence of abuse.
Thresholds of foreclosure
Tomra submits that the General Court erred in law and failed to provide sufficient reasoning when finding that the alleged exclusivity agreements covered a sufficient portion of total demand so as to be capable of restricting competition.
The Court of Justice refers to the judgment in Teliasonera4 and states that “the dominant position referred to in Article 82 EC (now Article 102 TFEU) relates to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors and its customers”. Article 102 TFEU does not envisage any variation in form or degree in the concept of a dominant position.
The Court of Justice upholds the General Court’s conclusion that the foreclosure by a dominant undertaking of a substantial part of the market cannot be justified by showing that the contestable part of the market is still sufficient to accommodate a limited number of competitors. The customers on the foreclosed part of the market 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. So, when a company grants loyalty rebates only to a part of a market this is abusive. The Court of Justice rejects the possibility to apply “a minimum viable scale” test since the determination of a precise threshold of market foreclosure beyond which the practices at issue had to be regarded as abusive is not required for the purposes of applying Article 102 TFEU.
Examination of retroactive debates
Tomra asserts that the General Court erred in law by not requiring the Commission to establish that the retroactive rebates used by Tomra led to below cost selling in order to qualify those rebates as exclusionary.
The Court of Justice considers that a rebate system must be regarded as infringing Article 102 TFEU if it tends to prevent customers of the dominant undertaking from obtaining their supplies from competing producers. The invoicing of ‘negative prices’, in other words prices below cost, to customers is not a prerequisite of a finding that a retroactive rebate scheme operated by a dominant undertaking is abusive.
The Court of Justice sides with the General Court in ruling that the loyalty mechanism was inherent in the supplier’s ability to drive out its competitors by means of the suction to itself of the contestable part of demand. When such a trading instrument exists, it is therefore unnecessary to undertake an analysis of the actual effects of the rebates on competition given that, for the purposes of establishing an infringement of Article 102 TFEU, it is sufficient to demonstrate that the conduct at issue is capable of having an effect on competition.
The Court of Justice rules that the Commission establishes the existence of an abuse of a dominant position by relying on the evidential value of other considerations that prove the existence of strong incentives to obtain supplies exclusively or almost exclusively from Tomra group. Consequently, there was no obligation to examine the question whether the prices charged by the Tomra group were or were not lower than their long-run average incremental costs.
One might be puzzled as to the methodology used to analyse the alleged abuse in the future. Either a rebate system granted by a dominant undertaking is assessed under a more economic approach as promulgated by the Commission Guidance or is assessed under a formalistic approach as reaffirmed in the present case.
The present decision concerns an appeal against a Commission decision which predated the Guidance Paper. The Court of Justice in Tomra only reviewed the reasoning of the Commission in that particular case and does not rule on how rebates should be reviewed in the future. It is to be expected that the Commission will follow its own Guidance Paper. Therefore, it can also be expected that, when reviewing such a decision, the Court will also follow the more economic approach. Nevertheless, this case is a reminder that the “economic approach” will not save behaviour that for other reasons clearly is abusive.