17 May 2018

ECJ: discriminatory conduct by dominant companies not always abusive

The European Court of Justice has clarified that price discrimination by a dominant company may only be problematic if this conduct tends to distort the competitive position of some of the company’s trading partners in relation to others. There is no de minimis threshold for discriminatory conduct. And no evidence of an actual, quantifiable deterioration of one of the trading partners’ competitive positions needs to be provided for the conduct to be abusive. All the circumstances of the case, including the effects on the costs, profits or any other relevant interest of the trading partners, need to be analysed to determine whether the conduct produces, or is capable of producing, a competitive disadvantage. The ruling shows that dominant companies are not doomed to offering similar conditions for equivalent transactions to all their trading partners, as long as this conduct is not capable of distorting competition between trading partners.

The ECJ gave this clarification in its preliminary ruling in a case brought by pay-TV operator MEO against GDA, the Portuguese non-profit collecting society managing the rights of artists and performers. GDA allegedly abused its dominant position by charging higher prices to MEO than to MEO’s main competitor NOS. A Portuguese court asked the ECJ to clarify the term ‘competitive disadvantage’ in Article 102 TFEU, which reads as follows:

Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in (…) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage (…)“.

In its preliminary ruling, the ECJ explained that in order to determine whether price discrimination produces or is capable of producing a competitive disadvantage, it is necessary to examine all the relevant circumstances. To carry out this examination, the competition authority or competent national court need to assess factors such as: (i) the company’s dominant position, (ii) the negotiating power as regards the prices charged, (iii) the conditions and arrangements for charging those prices, (iv) their duration and amount, and (v) the possible existence of a strategy aiming to exclude one of the company’s trading partners, which is at least as efficient as its competitors, from the downstream market.