How to defend yourself against a claim of abuse of dominance by discrimination
Complaints from suppliers, customers or competitors of discriminatory practices against undertakings in a dominant position are typical. The founding texts of competition law would appear to particularly encourage their use.
Article 102(2)(c) TFEU in effect expressly includes in the abuses that may constitute an abuse of dominant position, the “applying [of] dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage”, while Article L. 420-2 of the French Commercial Code provides that the abuses of dominant position it prohibits may , inter alia, consist of “discriminatory conditions of sale“. The trading partners of a dominant firm may be tempted to rely on this claim, since they often incorrectly believe that the purpose of competition law is to protect them and that they have an immediate commercial interest in invoking discrimination.
As Advocate General Nils Wahl recently pointed out in his Opinion delivered on 20 December 2017 in MEO (Case C-525/16, LawLex18622), contrary to what a superficial analysis might suggest, the provisions do not compel dominant undertakings to apply uniform tariffs or identical terms to their trading partners.
It is established that “a practice of price differentiation, even by an operator in a dominant position, does not necessarily constitute an abuse” (French Competition Authority, 20 Dec. 2012, Decision No 12-D-28, FFR, pt. 55, LawLex122486). This is not an abusive practice per se, but rather a behavior that may very well also have the effect of enhancing economic efficiency.
A discriminatory practice by an undertaking in a dominant position will only be sanctioned under strict conditions: if it creates a difference in treatment between similar situations and if that difference causes a competitive disadvantage that the dominant company is unable to justify. This legal framework makes it possible to establish a list of defenses available to dominant undertakings facing claims of discriminatory practices.
- First, raise all the classic defense pleas that can be invoked against any abuse of dominance claim.
The company will, of course, challenge the existence of a dominant position, calling into question the definition of the markets invoked and the dominance alleged.
- Challenge the existence of discriminatory behavior.
First undertakings must refute the fact that the dominant undertaking applied dissimilar terms for equivalent services (CJEU, Case C-525/16 MEO, Judgment of 19 April 2018, pt. 23, LawLex18622) or inversely treated different situations identically (ECJ, Case 13/63 Italy v Commission, Judgment of 17 July 1963). This means that the dominant firm can argue that it is entitled to treat partners in different situations differently (ECJ, Case 13/63 of 17 July 1963, French Competition Authority, 8 June 2014, Decision No 14-D-06, LawLex142200) or that a tariff increase applied indistinctly to all market operators cannot be considered a discriminatory practice (CA Paris, 19 Sept. 2000, LawLex0203259).
- Assert that the burden of proof of difference in treatment rests with the Competition Authority or the complainant.
Given the importance of the burden of proof, it will be necessary to argue that the burden of proof of the comparability of situations of trading partners of the dominant operator between which there is a difference in treatment is borne by the Competition Authority or the complainant undertaking (Competition Authority, 28 Feb. 2013, No 13-D-07, pt. 63, LawLex13290).
- Assert lack of competitive disadvantage.
The mere fact that conduct is discriminatory is not enough to constitute an abuse by a dominant company, it must also hinder “the competitive position of some of the business partners of that undertaking in relation to the others” (ECJ, Case 40/73 Suiker Unie, Judgment of 16 Dec. 1975, LawLex042777; Case C-95/04 P British Airways, Judgment of 15 March 2007, pt. 144, LawLex071501; Case C-525/16 MEO, Judgment of 19 April 2018, pt. 25, LawLex18622). The existence of such a disadvantage cannot be presumed but requires an examination of the effects of the practices in light of all the circumstances of the case at hand. The Court of Justice has held that “the mere presence of an immediate disadvantage affecting operators […] does not, however, mean that competition is distorted or is capable of being distorted” (Case C-525/16 MEO, pts. 96, 97, 99, 104, 105, LawLex18619). The disadvantage must “have a specific effect on the competitive position of the undertaking suffering the alleged discrimination”, be “sufficiently significant” that “the level of competition on the downstream market is affected” bearing in mind that possible differences in treatment which “have no impact, or only a very minor impact on competition cannot constitute an abuse of a dominant position”.
- Provide objective justification for differentiation.
If both conditions of discrimination and competitive disadvantage are met, the dominant undertaking can still demonstrate that such discrimination is objectively justified (Case C-52/07 Kanal 5 Ltd, Judgment of 11 Dec. 2008, LawLex09159; CA Paris, 5-7, 23 Sept. 2010, LawLex101038; French Competition Authority, 9 Dec. 2009, No 09-D-36, pt. 397, LawLex093580). For example, in the case of a copyright management organization, such justification may arise, in particular, from the task and method of financing of public service undertakings.
- Argue the lack of any causal link between the alleged practice and the alleged dominant position.
Case-law requires the demonstration of a causal link between dominance and abuse failing which the claim will be dismissed (French Competition Authority, Decision No 04-D-54 of 9 Nov. 2004, pt. 96 et seq., LawLex042757 and Decision No 14-D-08 of 24 July 2014, LawLex142287).