Department of Law
Spring Term 2021
Master’s Thesis in EU competition law
30 ECTS
Privacy policy clauses: Exploitation by
unfair trading conditions under Article
102(a) TFEU?
Author: Renja Vänskä
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Table of content
LIST OF ABBREVIATIONS ... 4
1 INTRODUCTION ... 5
1.1 BACKGROUND ... 5
1.2 PURPOSE AND RESEARCH QUESTIONS... 6
1.3 DELIMITATIONS ... 7
1.4 METHODOLOGY AND MATERIALS ... 8
1.5 STRUCTURE ... 8
2 BACKGROUND ABOUT ONLINE PLATFORMS ... 9
3 THE LEGAL FRAMEWORK OF DATA PROTECTION LAW ... 10
3.1 BACKGROUND ... 10
3.2 THE GDPR... 12
3.3 THE LEGAL BASIS OF CONSENT ... 14
4 THE LEGAL FRAMEWORK OF ARTICLE 102 TFEU ... 16
4.1 OBJECTIVES ... 16
4.2 ARTICLE 102TFEU IN GENERAL ... 19
4.3 DOMINANT POSITION ... 21
4.4 ABUSE ... 23
5 EXPLOITATION BY UNFAIR TRADING CONDITIONS ... 25
5.1 ABOUT THIS CHAPTER ... 25
5.2 CAUSALITY REQUIREMENT BETWEEN MARKET POWER AND ABUSE ... 25
5.3 THE EFFECTS OF THE ABUSE ... 30
5.4 THE STANDARD OF THE EFFECTS ... 36
5.5 THE NOTION OF FAIRNESS IN TRADING CONDITIONS ... 38
6 PRIVACY POLICY CLAUSES AS UNFAIR TRADING CONDITIONS ... 47
6.1 THE BUNDESKARTELLAMT’ S DECISION AGAINST FACEBOOK:SPARKING DEBATE ON INTERPLAY . 47 6.2 DATA PRIVACY-RELATED CONCERNS AS A MATTER OF COMPETITION LAW? ... 51
6.2.1 Arguments against interplay ... 51
6.2.2 Arguments for interplay ... 53
6.3 PRIVACY POLICY CLAUSE- AN UNFAIR TRADING CONDITION UNDER ARTICLE 102(A)TFEU? ... 55
6.3.1 About this chapter ... 55
6.3.2 Does privacy policy constitute a trading term? ... 56
6.3.3 The notion of fairness in privacy policy ... 56
6.3.4 The effects of an unfair privacy policy ... 60
6.3.5 The requirement of causality in privacy policy ... 62
6.3.6 Problems with remedies ... 65
7 CONCLUSIONS ... 67
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List of abbreviations
Convention Convention for the Protection of Individuals with regard to Automatic processing of Personal Data
DPA Data protection authority
EC European Community
ECHR European Convention on Human Rights
ECJ Court of Justice of the European Union
ECtHR The European Court of Human Rights
EDPB European Data Protection Board
EDPS European Data Protection Supervisor
EU The European Union
EU Charter Charter of Fundamental Rights of the European Union
GDP Gross Domestic Product
GDPR Regulation (EU) 2016/679 General Data Protection
Regulation
GWB Gesetz gegen Wettbewerbsbeschränkungen
i.e. id est (lat.)
NCA National competition authority
OECD Organization for economic Co-operation and Development
TEU Treaty on European Union
TFEU Treaty on the Functioning of the European Union
The Commission The Commission of the European Communities
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1 Introduction
1.1
Background
Digital marketplace is rapidly proliferating. The business model of an increasing number of companies is based on the processing of large amounts of different types of data, from various types of sources, commonly known as Big Data.1 The processing of Big Data offers new possibilities for companies to innovate and drives the competitiveness and economic growth of the European Union (EU). In fact, the value of the data economy in the EU was 301 billion € (2.4% of the EU’s GDP) in 2018, whereas in 2025 it is estimated to be 829 billion € (5.8% of the EU’s GDP).2 Big data often involves data which is related to an identified or identifiable person, namely personal data.3 By processing personal data, companies can earn money and at the same time avoid charging consumers a monetary payment. The processing of personal data has great benefits for companies because the users’ data can be sold to third parties and, as a consequence, advertisers can target their advertisements for each individual user. Consumers benefit from this too; they can get the products and services that they need and want.
At the same time, the right to privacy and the protection of personal data are core values of the EU protected by the Regulation (EU) 2016/679 General Data Protection Regulation (GDPR) and the Charter of Fundamental Rights of the European Union (EU Charter). All undertakings that process personal data must comply with the GDPR. The undertakings website’s privacy policy should, in accordance to the GDPR, make it clear to the users if and how their personal data is being collected and for what purposes. However, in practice, this is seldom the case. The privacy policies are often quite long and written in a difficult language. Moreover, they might even be breaching the GDPR, most often lacking the valid legal base for processing. As a result, consumers lose control over their personal data.
The EU competition law seeks to ensure proper functioning of the internal market and the well-being of consumers, businesses and the society as a whole. To this end, the Treaty on the Functioning of the European Union (TFEU) contains rules that aim to
1 Autorité de la concurrence and Bundeskartellamt, Competition Law and Data, p. 4. 2 European Commission, The European Data Strategy.
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prevent restrictions and distortions of competition in the internal market. Article 102 TFEU prohibits abusive behaviour by an undertaking holding a dominant position within the internal market. According to Article 102(a) TFEU, such an abuse may in particular consist ofdirectly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions. These types of abuses are defined as exploitative abuses, directly harming consumers.
Authorities in many countries have started to take a closer look at how undertakings collect and use data and what level of control users have in that regard. The questions of whether competition law should sanction excessive data collection as an abuse of dominance, and whether there should be an interplay between competition and data protection law have been raised. Can, and should, EU competition law intervene when a dominant undertaking is exploiting its consumers through its privacy policy or is it solely a matter of data protection law? The decision of the German competition authority Bundeskartellamt against Facebook in 2019 sparked debate on this matter. The Bundeskartellamt found that Facebook abused its dominant position on the German market for social networks by imposing unfair data privacy conditions upon its users. Could this same approach be applied in the EU? Can an a privacy policy clause, established by a dominant undertaking, constitute an exploitative abuse, namely an unfair trading condition under Article 102(a) TFEU?
1.2
Purpose and research questions
The purpose of this thesis is to study whether a privacy policy clause can constitute an exploitative abuse of dominance under Article 102(a) TFEU. More specifically, it will be analysed whether such a violation can be deemed to be an unfair trading condition under Article 102(a) TFEU and therefore constitute an abuse. In order to answer this question, several other important questions need to be analysed alongside:
- How is abuse defined in Article 102 TFEU?
- What are exploitative abuses? How do they differ from exclusionary abuses? - Is there a causality requirement between market power and abuse?
- What are the effects that are needed to be proved for conduct to be abusive under Article 102 TFEU?
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- Are privacy policies considered as trading terms?
- Under which circumstances can privacy policy clauses be considered unfair? - Can a mere breach of the GDPR constitute an unfair privacy policy clause? - Are the requirements of causality and effects fulfilled when it comes to privacy
policy clauses?
- What problems, if any, would occur if a privacy policy clause were infringing both the GDPR and competition law at the same time?
1.3
Delimitations
This thesis analyses the EU competition rule Article 102(a) TFEU. Therefore, the focus is primarily on EU law instead of national laws. The quick pace of digitalisation has posed challenges for competition law and policy, not only for Article 102 TFEU but also in the context of Article 101 TFEU and EU merger control. Even though this thesis analyses Article 102 TFEU, case law from merger control is of relevance when assessing the relevance of data for competition law enforcement. This thesis focuses on two fields of law: competition and data protection law. Aspects from contract law, which can be of interest when analysing trading conditions, are excluded. This thesis focuses on exploitative abuse in the form of unfair trading conditions. Exploitative pricing practices are therefore excluded. In order to understand the nature of exploitative abuses, the analysis is done by a comparison to exclusionary abuses.
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1.4
Methodology and materials
The chosen methods for this thesis are the legal dogmatic method and the EU legal method. This thesis investigates the relationship between two different legal frameworks: those of competition and data protection law. The thesis will analyse the question with de lege lata and de lege ferenda perspectives.
The material used is varied. The primary EU law will be used, meaning the Treaty on European Union (TEU) and the TFEU. General principles of EU law are essential when discussing EU- related questions and will therefore also be used. Article 288 TFEU outlines that the EU institutions may adopt regulations, directives, decisions, recommendations and opinions.This second piece of EU legislation will also be studied. For the purpose of this thesis, the GDPR is of especially high importance. Also of special importance are guidelines, soft law and notices from the EU Commission (the Commission). Also the Commission’s guidance on the application of competition law, guidance from the Article 29 Working Party (WP29), the European Data Protection Supervisor (EDPS) and the European Data Protection Board (EDPB) are important materials for this thesis. The case- law of the European Court of Justice (ECJ) is also an important source of law.
National case- law and national laws are not in focus but need to be addressed to some extent for background information and inspiration for the future. Reports from national competition authorities (NCA) will also be of importance. To enhance the analysis and to bring some perspectives from the currently ongoing discussion around this topic, secondary sources such as legal academic books and legal articles are used in this thesis.
1.5
Structure
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establish an abuse under Article 102 (a) TFEU. By drawing insights from the decisions of the Commission and EU Courts, it will be analysed how the notion of fairness is defined as regards unfair trading conditions. Chapter six analyses whether privacy policy clauses can fulfil the needed, already analysed, conditions of exploitation by unfair trading conditions under Article 102(a) TFEU. Possible problems with remedies will be stressed in the end. Chapter seven will conclude the findings and draw insights on how unfair privacy policy clauses should be enforced in the future.
2 Background about online platforms
Personal data is a key business asset for many data-driven companies. These data-driven companies often operate on online platforms, which can be defined as a technological basis for delivering or aggregating services/content in digital format. Online platforms often operate as a two-or multi-sided platform.4 Putting it simply, this means that online platforms enable interaction between distinct groups of customers located on different sides of the given transaction. These platforms provide a common meeting place and facilitate interactions between members of the two distinct customer groups. In addition, the online platform sells two distinct products or services to these two different groups of consumers.5 The market is two- or multisided when two or more user groups are brought together in the same market.6 Facebook and Google are great examples of multi-sided platforms.
A defining property of the online platforms operating on two- or multi-sided markets are network effects.7 Network effects are the cross-platform externalities that result when the actions of participants on any side of the platform, affect participants on other sides of the platform.8 These externalities can be either direct, meaning that an increase in the content providers makes the platform more valuable to content consumers, or indirect, meaning that the number of users on one side of the market attracts more users on the other side.9 As an example of direct externalities, the value of Facebook, an online
4 Dush-Brown p. 4. 5 Ibid.
6 Ibid., p. 3 – 4.
7 Filistrucchi, Geradin & Damme p. 2 – 4.
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platform operating on a multi-sided market, rises as the number of its users goes up. An example of indirect externalities is that users on one side benefit from an increase in the number of users on the other market side.10 Taking Facebook again as an example, as more users join the platform, the more valuable it becomes to the advertisers. Positive network effects occur when the value that a customer on one side realises from the platform increases with the number of customers on the other side.11
In the online context, user-data-based profiling and advertising are the leading multi-sided strategies.12 In an advertising-based business model, personal data is first collected by companies on the consumer market side and then further processed to create extensive profiles of the users and finally monetised on the advertising market side.13 The digital services are often offered to users free of charge, thus this side of the market operates on so called “zero-price markets”.14 The services are offered for free in order to attract as many users as possible. But, in reality the service is provided in exchange for the users personal data.
The data-driven economy has generated a large amount of innovations both in terms of new products and services that benefit consumers, as well as new marketing strategies that increase firm’s productivity. However, at the same time, strong network effects tend to lead to monopolies and as a consequence, the large amount of data is highly concentrated to a limited number of online platforms. This has generated both competition law and data protection related concerns.15
3 The legal framework of data protection law
3.1 Background
The origins of data protection can be traced back to the end of Second World War when the concept of “right to privacy” emerged in international law. The right to privacy was protected both in Article 12 of the Universal Declaration of Human Rights and later in
10 Duch-Brown p. 4.
11 OECD, Network Effects and Efficiencies in Multisided Markets, p. 3. 12 Kalimo & Majcher p. 212.
13 Ibid.
14 Duch- Brown p. 8.
15 Botta & Wiedemann, EU Competition Law Enforcement vis-à-vis Exploitative Conducts in the Digital
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Article 8 of the European Convention on Human rights (ECHR). According to this Article, “everyone has the right to respect for their private and family life, their home and correspondence”.
The process leading to the GDPR, which is at the moment the main instrument of EU data protection law, started in the early 1970s when the Council of Europe concluded that Article 8 EU Charter had some shortcomings. The development of technologies, uncertainty as to what exactly was covered by “private life” and the view of the possible misuse of personal information by companies were some of these concerns.16 As a result, the Council of Europe adopted the Data Protection Convention17 (Convention), which was ratified by 46 counties including all EU Member States. The purpose of the Convention is to secure for every individual, respect for their rights and fundamental freedoms with regard to automatic processing of personal data relating to them.18 Because some Member States were late in implementing the Convention and those who did so, had different outcomes, it was clear that data protection was not yet ensured sufficiently consistently across the Member States. Another concern that rose was the implications this could have on the development of internal market, where the processing of personal data played an increasingly important role.19 Therefore, the Directive 95/46/EC20 was adopted in 1995.
However, the reports on the directive highlighted a number of problems, including divergences in implementation between Member States. In January 2012, the Commission presented a package of proposals in order to modernise the present EU’s legal framework.21 When the Directive was adopted, the internet barely existed. In 2012, new technologies had been implemented and the globalisation required more effective protection. The Directive did not bring the degree of harmonisation that was needed for the legal system to be effective and consistent enough. Also, the Lisbon Treaty in December 2009 placed a considerable emphasis on the protection of fundamental rights
16 Council of Europe, Explanatory Report to the Convention for the Protection of Individuals with regard
to Automatic Processing of Personal Data, para 4.
17 Convention for the Protection of Individuals with Regard to Automatic Processing of Personal Data 1981,
ETS 108.
18 Article 1 Convention. 19 Hustinx p. 131.
20 Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the Protection
of Individuals with Regard to the Processing of Personal Data and on the Free Movement of Such Data.
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and the right of data protection. Article 8 of the EU Charter now laid down a separate right to data protection and a new horizontal legal basis for the adoption of rules on data protection could be found in Article 16 TFEU. All in all, a stronger, effective and consistent protection of personal data was needed for the new era of technologies. This led to the adoption of the current Regulation on data protection- the GDPR, which came into force in May 2016 and has taken effect from 25 May 2018.22
The underlying objectives of EU data protection law are both economic and rights- based. The EU data protection law aims to achieve the free flow of personal data between Member States. In addition, it seeks to grant individuals control over their personal data.23
3.2 The GDPR
The material scope of the GDPR is stated in Article 2(1); it applies to the processing of personal data wholly or partly by automated means, with limited exceptions. Processing is further defined in Article 4(2) as any operation on personal data whether or not by automated means, and includes the collection, recording, organisation, structuring, storage and use.
Personal data is defined in Article 4(1) as any information relating to an identified or identifiable natural person (data subject). An identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as name, an identification number, location data, an online identifier or to one or more factors specific to the physical, psychological, genetic, mental, economic, cultural or social identity of that natural person. GDPR does not apply to anonymous data that is being processed. Anonymous data can be non-identifiable already from the outset or through further processing. Once the data is not considered to be personal, the legal obligations stemming from GDPR does not grant data subject control of any kind.
The territorial scope is stated in Article 3, it does not only apply to all processing in the context of an establishment of the controller in the EU, but also when goods or services from an establishment in a third country are offered to the European market or the behaviour of data subjects in the EU is monitored.
22 Article 99 GDPR.
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The GDPR makes a distinction between the data controller and data processor. This distinction plays a crucial role since it determines who shall be responsible for compliance with the different rules and how data subjects can exercise their rights in practice. According to Article 4(7), the controller is the natural or legal person which alone or jointly with others, determines the purposes and means of processing of personal data. Processor, on the other hand, is according to Article 4(8) the natural or legal person, which processes personal data on behalf of the controller.
As soon as the material and the territorial scope are fulfilled, data controllers are responsible to ensure compliance with the provisions under GDPR and the rights afforded to the data subjects. This means that all undertakings which are data controllers are subject to obligations to protect personal data, no matter their size or even dominant position on the market. However, the European Court of Human Rights has emphasised that “The greater the amount and sensitivity of data held and available for disclosure, the more important is the content of the safeguards to be applied at the various crucial stages in the subsequent processing of data”.24 Therefore, the volume, complexity and intrusiveness of a company’s personal data processing activities are of relevance when considering to what extent the data protection provisions must be implemented. This could be seen as analogous to the concept of special responsibility of dominant undertakings in competition law.
Article 5 provides the principles which should lie in the heart of processing of personal data and with which the controller is responsible to comply with.25 According to Article 5(1)(a), personal data shall be processed lawfully, fairly and in a transparent manner. It should be clear to the data subject that personal data concerning them are being collected and used and to what extent this is happening or will be happening.26According to the purpose limitation in Article 5(1)(b), personal data shall only be collected for specified, explicit and legitimate purposes and not processed in a manner that’s incompatible with those purposes. The principle of data minimisation in Article 5(1)(c) means that personal data must be limited to what is necessary in relation to purposes of processing. Therefore only the minimum amount of data should be processed. According to the storage limitation in Article 5(1)(e), the collected data may not be stored longer than necessary
24 ECtHR 13 November 2012, 24029/07, M.M v UK, para. 200. 25 Recital 39 GDPR.
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for the purposes for which they are processed. The principle of transparency, expressed in Article 5(1)(a), requires the controller to inform the data subject of the processing of data in an easily understandable, clear and plain language.27 Article 14 expresses what information the controller shall provide for the data subject. The GDPR also provides rights for data subjects over their personal data. These include the right to information regarding the processing of their personal data, the right to delete personal data and the right to access the personal data.28
According to Article 83, an infringement of the GDPR can be subject to administrative fines up to 20 000 000 EUR or 4% of the worldwide annual turnover of the preceding financial year.
3.3 The legal basis of consent
The GDPR relies on the traditional principle of EU data protection law according to which the processing of personal data is prohibited unless the data controller has a valid legal basis for it. The principle of lawful basis stems from the Convention and is expressed in Article 8(2) of the EU Charter, which provides that personal data “must be processed fairly for special purposes and on the basis of the consent of the person concerned or some other legitimate basis laid down”. According to Article 5(1)(a), personal data must be processed “lawfully, fairly and in a transparent manner in relation to the data subject”. Processing of personal data is only considered to be lawful if one of the conditions provided in Articles 6 and 9 is fulfilled. The ECJ stated in Fashion ID that these conditions are exhaustive.29 Before the processing, the controller must determine the legal ground for processing for each purpose separately.30
Consent in Article 6(1)(a) is one of the most used legal bases for the conclusion of data processing transactions between data-based companies and digital users. Obtained in a full compliance with the GDPR, consent is a tool that gives data subjects control over whether or not personal data concerning them will be processed.31 Consent of the data subject is defined in Article 4(11) as freely given, specific, informed and unambiguous
27 Recital 39 GDPR. C-40/17 Fashion ID EU:C:2019:629, para. 104. 28 Articles 15 and 17 GDPR.
29 Case C-40/17 Fashion ID EU:C:2019:629, para 55.
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indication of the data subject’s wishes by which he or she, by a statement or by a clear affirmative action, signifies agreement to the processing of personal data relating to him or her. Controllers must use clear and plain language which is easily understandable for the average person and not only for lawyers when seeking consent.32
The GDPR requires the data subject to be informed what the consent is for. According to Article 7(3), each data controller needs to inform data subjects on the controllers identity and the intended purposes of the processing for which the personal data is required, the right to withdraw their consent at any time and many other information stated in Articles 12, 13, 14 GDPR.33
The element of “freely given” implies a real choice and control of data subjects.34 Consent is not valid when the data subject has no real and genuine choice, feels compelled to consent or is unable to refuse or withdraw consent without detriment.35 Silence, pre-ticked boxed or inactivity do not constitute valid consent.36 An inappropriate pressure or influence upon the data subject which prevents a data subject from exercising their free will renders consent invalid.37 Consent should neither be regarded as freely given when the provision of service is made conditional on consent to the processing of data and there is a “clear imbalance” between the controller and the data subject. Even though imbalances of power are exemplified with data subjects in relation to employers and public authorities, an imbalance of powers may also occur in other situations.38 Data subject needs to have a real choice with no risk of deception.39
The GDPR distinguishes between personal data and special categories of personal data. The special categories of personal data include all data racial or ethnic origin, political opinions, religious or philosophical beliefs or trade union membership, as well as genetic data, biometric data, health data or data relation to an individual’s sex life or sexual orientation, and are subject to Article 9. The processing of such data is prohibited according to Article 9(1) unless one condition under Article 9(2) is fulfilled. The “explicit consent” of data subject is one of these conditions according to Article 9(2)(a). “Explicit
32 Ibid., p. 16. 33 Recital 43 GDPR.
34 EDPB Guidelines 05/2016 p. 5. Recital 42 GDPR. 35 EDPB Guidelines 05/2016 p. 5. Recitals 42 – 43 GDPR. 36 Recital 32 GDPR.
37 EDPB Guidelines 05/2016 p. 6. 38 Ibid., p. 9.
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consent” is not defined in GDPR. Because a high level of individual control over this type of personal data is deemed necessary, explicit consent involves a higher standard compared to the “regular” consent requirement in GDPR. The term explicit refers to the way consent is expressed by the data subject. Data subject must thus give an express statement of consent for it to be valid.
The processing of personal data is regarded as an interface with one of the leading principles in EU data protection law developed by the German Constitutional Court, “the right to informal self-determination”40, unless the data subject has validly consented to the processing. The data subject should have full knowledge and control over what is happening with “their”41 data when granting consent.42 As a consequence, an adequate level of data protection is thought to be achieved when data subjects have control over their personal data. But, in practice, these ideas of control and informal self-determination do not live up to their goals in many situations.
4 The legal framework of Article 102 TFEU
4.1 Objectives
Competition law implements economic policy and exists to regulate competition in a free market economy.43 In a system of free market economy the allocation of resources is not directed by government regulation but instead by supply and demand in free markets. Free market economy and the competition between undertakings are considered to bring the best outcomes to society.44
A central objective of competition law is to prevent practices that would harm society and consumers through the exercise of market power. Market power is broadly referred to as the power to raise prices above the competitive level or to profitably limit production or quality below the competitive level.45 Competition law intervenes in the anticompetitive ways by which market power is obtained, maintained and enhanced to the detriment of customers. The prevention of misuse of market power, is thought to
40 BVerfGE 65, 1 – 71, Volkszählung.
41 There is no EU legislation (yet) that would specifically regulate the question of ownership in data. 42 Recital 32 GDPR.
43 Jones, Sufrin & Dunne p. 1. 44 Ibid., p. 2.
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achieve efficiency and produce the greatest benefits to society in the form of welfare.46 This thought is based on neoclassical economic theory. It teaches that in competitive markets the prices are lower, products are better, there is a wider choice, more innovation and a greater efficiency.47 By contrast, on markets which are monopolized the output is reduced, prices rise and consumers are deprived of choice, quality and innovation. It is important to clarify that market power as such does not always entail negative effects. Companies may obtain market power in entirely legitimate ways, for example by making better quality products or by producing more efficiently than the competitors. Market power can work as an incentive for competitors to develop their products and services. Consumers thus get more and better options which in turn increases the welfare of the society.
The two extremes of market models, perfect competition and monopoly, are useful benchmarks against which to measure the competitiveness of real market, even though their conditions are rarely fulfilled in the real world.48 These benchmarks highlight what competition enforcement is for and what it tries to prevent or remedy.
A perfectly competitive market has the following main characteristics: there are many producers and suppliers, producers and buyers have perfect information, there are no entry or exit barriers, the product is homogenous and there are no transaction costs.49 Companies are also aware of the most efficient production techniques and they are all equally efficient.50 Under perfect competition the social and consumer welfare are considered to be maximised.51 Perfect competition entails namely allocative and productive efficiency.52 With the given resources the undertaking produces the maximum output at the minimum average cost. Goods and services are being allocated between consumers according to the price they are prepared to pay.53 Consumers are considered to be sovereign in perfect competition.54 The price of the product and service is determined by the aggregate output of the market through supply and demand. Producer’s
46 Jones, Sufrin & Dunne p. 4. O’ Donoghue and Padilla p. 5. 47 Bailey & Whish p. 4.
48 Faull & Nikpay paras. 1.58 – 1.68. 49 Ibid., p. 20.
50 Ibid.
51 Bailey & Whish p. 4. 52 O’ Donoghue & Padilla p. 7. 53 Bailey & Whish p. 4 – 5.
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own unilateral actions will not have an existent influence on the market price because producers output is small compared to the total output.55
In monopoly, the situation is different. There is only one supplier in the market and many buyers and the market demand is for the undertaking’s product. In contrast to perfect competition, the monopolist can determine the market price since it is responsible for all the output. A monopolist can increase the price either by reducing the volume of its own production or can reduce sales by increasing the price.56 Monopolies have many disadvantages including higher prices and less choices for consumers as well as less incentive to innovate and invest.57
A primary objective of EU competition law is to ensure that competition in the internal market is not distorted, in order to achieve the objectives of the EU. Article 119 TFEU states that economic activities of the EU and its Member States should be “conducted in accordance with the principle of an open market economy with free competition”. Article 120 TFEU requires Member States and the EU to “act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources.” The principle of undistorted competition can be found in Protocol No. 27 on the Internal Market and Competition.58 The Protocol provides that the internal market includes a system ensuring that competition is not distorted.
In addition, competition law aims to promote the EU’s wider objectives. Article 102 TFEU forms part of the EU Treaties which include a wide range of different objectives that affect the scope and meaning of the competition provisions, including Article 102 TFEU. Article 3(1) TEU states that the aim of the Union is “to promote peace, its values and the well-being of its peoples”. Pursuant to Article 2 TEU, “the Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities.”
Article 3(3) TEU states that the Union shall establish an internal market. The definition of internal market is found in Article 26 TFEU which states that “the internal market shall compromise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of these
55 Faull & Nikpay para. 1.60. 56 Bailey & Whish p. 6.
57 Jones, Sufrin & Dunne p. 9 – 10.
58 The Protocol No. 27 on the internal market forms an integrated part of the Treaties according to Article
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Treaties.” According to Article 3(1)(b) TFEU, the Union has exclusive competence in establishing the competition rules necessary for the functioning of the internal market. Both the ECJ and the Commission have emphasised the fundamental nature of competition rules in serving the ultimate objective of single market integration. Commissioner Verstager stressed in 2015 that “…there would be no genuine integration without a Single Market and no functioning Single Market without a strong competition policy enforced by a central competition authority”.59
EU competition policy to a large extent is about protecting consumer welfare. After a modernisation of EU competition law, the Commission moved from a “form-based approach” towards “a consumer welfare approach” which is often called the “more economic approach”.60In the form-based approach some practices are per-se abusive or presumed abusive whereas the consumer welfare approach focuses on the outcomes of market exchanges, and does so by considering their effects on consumer welfare.61 Commissioner Kroes emphasised the modernisation in 2005: “Consumer welfare is now well established as the standard the Commission applies when assessing mergers and infringements of the Treaty rules on cartels and monopolies. Our aim is simple: to protect competition in the market as a means of enhancing consumer welfare and ensuring an effective allocation of resources”.62
4.2 Article 102 TFEU in general
Under EU competition law a basic distinction can be made between contractual relations which involve two or more undertakings and the unilateral conduct of a single undertaking. Article 101 TFEU is the instrument governing agreements between undertakings whereas Article 102 TFEU places restrictions on the unilateral conduct of firms.
Article 102 TFEU sets out the following prohibition:
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
59 Verstager, The values of competition policy, Speech in Brussels 13/10/2015. 60 Jones, Sufrin & Dunne p. 48.
61 Claassen & Gerbrandy, p. 2.
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incompatible with the internal market insofar as it may affect trade between Member States. Such abuse may, in particular, consist in:
(a) Directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b) Limiting production, markets or technical development to the prejudice of consumers;
(c) Applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(d) Making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
Article 102 TFEU thus sets standards for the conduct of undertakings holding such economic strength that they can have an immunity from the normal disciplining effects of a competitive market. It seeks to avoid the misuse of market power and bring some results which would occur if competition did exist on the market. As a result, Article 102 TFEU has for instance been used to force prices down to a level that exists in a competitive market and force the increase of prices where low prices are used as a plan to exclude competitors. Dominant firms have a “special responsibility”63 and therefore Article 102 TFEU can also require dominant undertakings to refrain from conducts that would be lawful if carried out by a non-dominant firm.64
Five cumulative conditions must be satisfied before a violation of Article 102 TFEU can be established. Firstly, it must be question of one or more undertakings. Secondly, that undertaking must hold a dominant position on a properly defined market. Thirdly, the dominant position must be held within the internal market or substantial part of it. Fourthly, there must be an abuse and finally, this abuse must affect trade between Member States. Article 102 TFEU however surrounds two of these concepts: dominance and abuse. To understand the further analysis in this thesis, the next two sections will elaborate the meaning of dominant position and abuse.
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4.3 Dominant position
EU courts have taken a broad view on the concept of undertaking. The focus lies in the activity performed rather than the formal characteristics of the entity. The case -law has defined an undertaking as “every entity engaged in economic activity, regardless of the legal status of the entity and the way in which it is financed.”65
Article 102 TFEU only applies to undertakings holding a dominant position. In Continental Can the ECJ stated that in applying Article 102 TFEU, dominance must be established first and then the judgement can be made on whether the conduct was abusive or not.66 The definition of dominance was established in United Brands where the ECJ stated that it “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 giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers.”67 This definition was later developed in Hoffman-La Roche where the Court added that the dominant position does not always restrict the competition, but it enables the undertaking to “have an appreciable influence on the conditions under which that competition will develop” and to act independently of its competitors.68
Assessing dominance requires an analysis on the undertaking’s degree of market power.69 It is a two-stage procedure: firstly, the relevant market must be identified and second, the power of the undertaking on that market must be assessed.70 The relevant market needs to be defined both from the standpoint of the product and from the geographical point of view.71 In its product dimension, the relevant market can be analysed both from the demand-side substitution and supply-side substitution. In its geographic dimension, the market compromises the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished
65 Case C-41/90 Klaus Höfner and Fritz Elser v Macrotron GmbH EU:C:1991:16, para. 21. 66 Case C-6/72 Continental Can EU:C:1973:22, para. 26.
67 Case C-27/76 United Brands EU:C:1978:22, para. 65. 68 Case C-85/76 Hoffmann-La Roche EU:C:1979:36, para. 4. 69 Jones, Sufrin & Dunne p. 306. O’ Donoghue & Padilla p. 141. 70 Jones, Sufrin & Dunne p. 306.
71 Case C-27/76 United Brands EU:C:1978:22, para. 11. Commission notice on the definition of relevant
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from neighbouring areas because the conditions of competition are appreciably different in those area.72
Once the market has been defined, the power of the undertaking on the market must be assessed in order to determine whether it is dominant or not. It has been settled in Hoffman-La Roche that market shares are the starting point for the assessment of dominance.73 Market shares namely represent the present state of competition in the market even though their importance varies from market to market.74 The ECJ further explained that “very large market share” being held by an undertaking for sometime are indicators of dominance.75 This was further developed in AKZO, where the ECJ interpreted the “very high market share” to 50% of the market.76 Ever since AKZO, the EU case law has adopted a presumption of dominance at 50%. It is frequently argued that Article 102 TFEU should include a safe harbour similar to the one provided by the block exemption in Article 101 TFEU.77 This way dominance could be ruled out when the market share is below a specific per cent. This would of course allow some undertakings with market power to escape Article 102 TFEU, but it would also generate legal certainty for undertakings. The Commission holds the view that low market shares are a good proxy for the absence of substantial market power and that dominance is not likely when the market shares are below 40%.78 However, the Commission has reserved its position over certain “specific cases” below that threshold which may deserve attention on the part of Commission.79
Instead of merely relying on market shares, the Commission is taking into account potential competition in its assessment of dominance in data-driven markets that are dynamic in character. In Microsoft/Skype merger decision, the Commission noted that market shares only provide a limited indication of market power in the context of the market for internet consumer communication services because of the nascent and
72 Commission notice on the definition of relevant market for the purposes of community competition law
para. 8. Case C-27/76 United Brands EU:C:1978:22, para. 11.
73 Case C-85/76 Hoffmann-La Roche EU:C:1979:36, para. 40. 74 Ibid., para. 40.
75 Ibid., para. 41.
76 Case C-62/86 AKZO EU:C:1991:286, para. 60. Further confirmed in case C-457/10 P AstraZeneca
EU:C:2012:770, para. 176.
77 Jones, Sufrin & Dunne p. 339.
78 Commission notice on the definition of relevant market for the purposes of Community competition
law para. 14.
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dynamic nature of the sector.80 Market shares can namely change quickly and within a short period of time. This is highlighted by the fact that even though Microsoft would have post-merger had a market share of 80% to 90% on the market, the Commission concluded that the concentration would not give rise to competition concerns because of the dynamic character of the sector and the existence of alternative providers consumers can switch to.81 Market power in the digital economy is partly measured by the degree to
which a given undertaking can actually, potentially or hypothetically collect and diffuse personal information.82 Measuring this control might however be challenging, as ordinary data on sales for example might not work.
In both United Brands and Hoffman-La Roche the ECJ has held that dominance derives from a combination of several factors, which taken separately are not necessarily determinative.83 In addition to market shares, there are a wide range of other factors indicating dominance such as barriers of entry and the overall size and strength of the undertaking.
4.4 Abuse
Article 102 TFEU does not prohibit a dominant position itself but the abuse of it. The reason why dominance itself is not undesirable in the market is that it can be a good incentive for competitors to provide services or produce goods at a reasonable price and of good quality. This incentive results in all competitors wanting to have the best products and best services, which in turn means better options for consumers which as a result increases the overall welfare of society. Nonetheless, the abuse of dominance may result in a market with fewer options for consumers, higher prices and less innovations.
There is no legal definition of abuse. Article 102 TFEU only provides a non-exhaustive list of examples of conducts that could be considered as an abuse of dominant position. As the list is not exhaustive, any other conduct not listed could also be considered abusive. This is understandable, cases on abuse are decided by reference to their own particular facts. Therefore, the concept of abuse is vague and broad. The Courts have throughout
80 Case No COMP/M.6281 – Microsoft/Skype, 7 October 2011, para. 78. 81 Ibid., paras. 120 and 132.
82 European Data Protection Supervisor, p. 28.
83 Case C-27/76 United Brands EU:C:1978:22, para. 66. C-85/76 Hoffmann-La Roche EU:C:1979:36 para.
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the years given guidance on the concept of abuse. In Hoffman-La Roche abuse was found to be conduct “which, through recourse of methods different from those governing normal competition in products or services on the basis of transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition”.84 Another definition is provided by AKZO, where the ECJ ruled that a dominant firm “is entitled to compete on the merits”.85 Therefore abuse could be defined as anything that is not competition on the merits.
The ECJ confirmed in Continental Can, that Article 102 TFEU is not only aimed at practices which may cause damage to consumers directly, but also at those which are detrimental to them through their impact on an effective competition structure.86 The ECJ thereby distinguished between two types of abuses under Article 102 TFEU: 1) exclusionary abuses and 2) exploitative abuses.87 Exclusionary abuses are the most common category of abuse. They are broadly defined as practices directed against competitors that indirectly cause a loss in consumer welfare by unlawfully limiting competitors ability to compete. The definition of abuse introduced in Hoffman-La Roche is therefore a description of an exclusionary abuse.88 Exploitative abuses, on the other hand, are broadly defined as practices that directly harm customers, rather than excluding competitors.89
The ECJ in Continental Can made clear that the potentially abusive practices in the text of Article 102 TFEU are not “an exhaustive enumeration of the short of abuses of dominant position prohibited by the Treaty”. Despite this fact, this thesis takes as a starting point Article 102 (a) TFEU which states that an abuse may consist in unfair trading conditions.
84 Case C-85/76 Hoffman-La Roche EU:C:1979:36 para. 6.
85 Case IV/30.698 - ECS/AKZO, 14 December 1985, para 81, upheld in case C-62/86 AKZO
EU:C:1991:286.
86 Case C-6/72 Continental Can EU:C:1972:191, para. 26. 87 Faull & Nikpay para. 4.16. O’ Donoghue & Padilla p. 215. 88 Faull & Nikpay para. 4.258. Jones, Sufrin & Dunne p. 366.
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5 Exploitation by unfair trading conditions
5.1 About this chapter
Article 102(a) TFEU sets out the prohibition of directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions. These abuses are both exploitative as they directly harm consumers. There is no clear definition of unfair trading conditions, but they essentially concern contractual clauses that are unfair in that the dominant firm takes advantage of its market power to impose terms that could not be imposed by a firm that did not have market power.90 In order to establish a prima facie case of dominance under Article 102(a) TFEU, the Commission and competition authorities need to prove several elements. This chapter aims to analyse, on a general level, what requirements need to be proved in order to prohibit a conduct as exploitative abuse in the form of unfair trading conditions. In order to properly understand the nature of exploitative abuses, the analysis is done by comparing exploitative abuses to exclusionary abuses. Firstly, it will be analysed to what extent there is a requirement that the dominant undertaking’s dominance causes the abusive. Thereafter follows an analysis of the anticompetitive effects. Lastly, the notion of fairness in unfair trading conditions will be analyzed.
5.2 Causality requirement between market power and abuse
The element analysed in this chapter is the requirement of causality between market power and abuse. Is there such a requirement in Article 102 TFEU for exploitative abuses in the form of unfair trading terms?
A good starting point is to analyse the wording of the Article 102 TFEU. Article 102 TFEU provides that “an abuse of dominant position is prohibited”. The wording itself suggests that for the prohibition of Article 102 TFEU to apply, the dominant position must somehow be used for the abusive behaviour. Otherwise the wording could have been prohibition of “abuse by undertakings in a dominant position” or prohibition of “abusive behaviour by dominant firms”.91
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The Advocate General in Continental Can held the same view. In this case Continental Can Company Inc. (Continental) held through the medium of its subsidiary, Schmalbach-Lubeca-Werke AG (SLW) a dominant position over the substantial part of the Common Market on the market for light metal packaging. It was found that Continental had abused its dominant position by the purchase made by its subsidiary Europemballage Corporation of approximately 80% of the shares and convertible debentures of the Dutch undertaking Thomassen & Drijver-Verblifa N.V. of Deventer (TDV). Worth noticing is that Continental Can was a case decided before the EU merger regulation was enacted and the case was therefore processed under Article 86 EEC (102 TFEU) which back then applied to mergers that strengthened a dominant position. The Advocate General argued that the wording of Article 102 TFEU “appears to hint that its application can be considered only if the position of the market is used as an instrument and is used in an objectionable manner; these criteria are therefore essential prerequisites of application of law”.92 The Advocate General held the view that the application of Article 102 TFEU had to be excluded because Continental did not in connection with the acquisition of TDV shares, use its market strength acquired through SLW, as an instrument.93
But the ECJ in Continental Can took the opposite view. The ECJ stated that Article 102 TFEU has the objective of protecting undistorted competition in the internal market. Therefore, the strengthening of the dominant position of an undertaking may be an abuse and prohibited under 102 TFEU, regardless of the means and procedure by which it is achieved, if it has a negative impact on an effective competition structure.94 In other words, the ECJ established that in order to find an abuse it is only relevant whether the conduct has anticompetitive effects, regardless of the source thereof. No causal link was therefore required.
The causal link was again raised in Hoffman- La Roche. The applicants argued that the anticompetitive conduct must only be possible by reason of its dominant position.95 The applicants argued that this was not the case because the rebates in question were quite usual on the market.96 But the ECJ stressed that “the interpretation suggested by the applicant that an abuse implies that the use of economic power bestowed by a dominant
92 Opinion AG Roemer in case C-6/72 Continental Can EU:C:1972:101, p. 254. 93 Ibid.
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position is the means whereby the abuse has been brought about cannot be accepted”.97 The ECJ continued by explaining that “the concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened and which, through recourse to methods different from those which conditional normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition”.98
Conclusively, the ECJ has established that an undertaking can abuse its dominant position without relying on its market power. What matters is whether the dominant undertaking engages in conduct that is capable of leading to anticompetitive effects.
Several authors find that the ECJ’s interpretation is questionable. Eilmansberger notes that a closer reading of Continental Can and Hoffman-La Roche reveals that these cases only dismiss a the strictly causal nexus between dominance and abuse where the economic power associated with the dominant position constitutes the instrument for the perpetration of the abuse. The rejection of such a strict causation is, according to Eilmansberger, not surprising because this would exclude most, if not all, important anti-competitive abuses from the scope of abuse control.99
According to Eilmansberger, economic power connected with dominance and abusive behavior can however be linked in several ways.100 There are statements in case -law which suggest that causation is, in fact, needed in other ways. For example, Hoffman-La Roche suggests a causality by stating that “the dominant position…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…”. In addition, the ECJ in Tetra Pak II held that Article 102 TFEU “presupposes a link between dominant position and the alleged abusive
97 Ibid., para. 91.
98 Case C-85/76 Hoffman- La Roche EU:C:1979:36, para. 91. 99 Eilmansberger p. 141.
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conduct.”101 Further in Irish Sugar the Court held that the abuse “has to be capable of being identified as one of the manifestations of such a joint dominance”.102
According to O’ Donoghue and Padilla, saying that causation is entirely irrelevant under Article 102 TFEU goes too far.103 Notwithstanding the above-mentioned statements from the ECJ that the dominant position does not need to cause the abuse, it is important for the intellectual coherence of Article 102 TFEU that the causal requirement is required.104 Eilmansberger adds that teleological reasons support a causation requirement on some level. As mentioned above, a central objective of competition law is to safeguard the competitive process from disturbances stemming from market power. Therefore, market power should be a constructive, or at least a formative, element of the concept of abuse.105
The authors divide abuses under Article 102 TFEU into two categories.106 The first category consists of conducts that are in themselves abusive. These abuses can only be successfully carried out by a firm in a dominant position. In a fully competitive market, these attempts would be unsuccessful. A strict approach to causality is required for these types of abuses. The second category consist of conduct which are abusive because of their effects. The abusive effects would not occur if the firm was not dominant. These conducts can also be carried out by a non-dominant firm, but the harmful effect occurs only when there is dominance.107
It therefore seems, according to the authors, that the ECJ rejected only the strict causality in Continental Can and Hoffman- La Roche and instead used the causality requirement between the market power and the effect. Therefore, there actually exists two types of causality requirements under Article 102 TFEU.
Indeed, not requiring any causality between market power and abuse vastly expands the scope of Article 102 TFEU. The state of law without causation would make possible that dominant undertakings are liable for disrupting competition that cannot convincingly be linked to their conduct on the market. As the concept of abuse is already broad, the
101 Case C-333/94 P Tetra Pak II EU:C:1996:436, para 27. 102 Case T-228/97 Irish Sugar EU:T:1992:246, para. 66. 103 O’ Donoghue & Padilla p. 263.
104 Ibid.
105 Eilmansberger p. 142.
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lack of causality makes it even harder to foresee and predict for undertakings. This would cause problems for legal certainty.
Which causality requirement should then be used for exploitative trading conditions? Eilsmanberger argues that exploitative abuses belong to the first category of abuses and constitute an improper use of market power. Thus the strict causality requirement should be required. The dominant firm is trying to achieve an otherwise unobjectionable commercial goal by unacceptable means.108 While it may ultimately be the likely or typical effect on competition which underlies the prohibition of exploitative abuses, it is the instrumental use of the dominant position which in itself must trigger Article 102 TFEU.109
Nazzini holds the same view and argues for a strict causality requirement. According to him, exploitative abuses can only be carried out by an undertaking in a dominant position because the exploitation that Article 102 TFEU prohibits is not any exploitation of the customers by a business, but exploitation which consists in a severe form of exercise of market power.110 Nazzini rejects the causality requirement between market power and effects by stressing that terms which have no difference in relation to terms that would prevail under competitive circumstances, cannot be considered abusive under Article 102 (a) TFEU.111
Vogelenzang takes the same view and states that it is only possible for an undertaking in dominant position to impose unfair trading conditions on a client who is motivated to look for a fairer supplier.112 Faull and Nickpay agree by stating that unfair trading conditions are those which are set above the competitive level as a result of the exercise of market power.113
Conclusively, notwithstanding the language of Article 102 TFEU, Continental Can and Hoffman- La Roche seem to have excluded the requirement of causality. However, many authors hold the view that these two cases only rejected the strict causality requirement from those exclusionary abuses and that there actually exists two types of possible causalities under Article 102 TFEU. Many seem to hold the view that a strict
108 Eilmansberger p. 143. 109 Ibid., p. 148.
110 Nazzini p. 4. 111 Ibid.
112 Vogelenzang p. 68.
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causality requirement should be required for exploitative trading conditions. The question that needs to be asked in each individual case is therefore whether the trading conditions are such that can only be carried out by a dominant undertaking and that would not prevail in a fully competitive market. If the answer to these questions is yes, the strict causality requirement would be fulfilled for the exploitative trading conditions.
5.3 The effects of the abuse
The next step is to analyse the effects of the abuse. What effects justify an intervention of competition law and prohibit the conduct under Article 102(a) TFEU?
Unlike Article 101 TFEU, which prohibits practices which “have as their object or effect the prevention, restriction or distortion of competition”, Article 102 TFEU does not contain reference to the anticompetitive object or anticompetitive effect of the practice.114 However, the ECJ made clear in Hoffman-La Roche that Article 102 TFEU covers conduct that has “the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.” Due to the fact that Article 102 TFEU does not contain any per se prohibition, it is a logical consequence that absence of evidence of any noticeable effects means that the conduct is not abusive.
But what are the effects that must be demonstrated in order for the conduct to be abusive under Article 102 TFEU? As a reminder, according to Continental Can, exclusionary abuses are detrimental to consumers through their impact on an effective competition structure and exploitative abuses are practices which may cause damage to consumers directly.
When it comes to exclusionary abuses, the case -law supports the fact that conduct will be regarded as abusive if it has an anticompetitive effect on the market and restricts competition. In Michelin II, a case concerning rebates, the ECJ stated that “in the light of the context of Article 102 TFEU, conduct will be regarded as abusive only if it restricts competition”.115 This was further affirmed in Microsoft, a case concerning bundling, where the ECJ held that “while it is true that neither Article 82 (d) EC nor, more generally, Article 82 EC as a whole contains any reference to the anti-competitive effect of bundling, the fact remains that, in principle, conduct will be regarded as abusive only if it is capable
114 Jones, Sufrin & Dunne p. 55.
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of restricting competition”.116 In Post Danmark, the ECJ held that Article 102 TFEU covers conduct that has the effect, to the detriment of consumers, of hindering the maintenance of the degree of competition existing in the market or the growth of that competition.117
The Commission has set out its enforcement priorities in applying Article 102 TFEU in its Guidance Paper (2009). In this Guidance Paper the Commission states that consumer welfare is the overall guiding principle under Article 102 TFEU when it comes to exclusionary abuses, and therefore not protecting rivals per se. Exclusion therefore, also requires an expectation of eventual consumer harm.The exclusionary conduct needs to affect competitors and reduce their ability to compete which as a consequence causes negative consequences on consumers. O’Donoghue and Padilla argue that assuming that consumer welfare is now the overriding test for abusive conduct under Article 102 TFEU, “harm to an effective competition structure” and “direct consumer harm” should amount to the same thing.118According to them, there can be no case for intervention under competition law where there is harm to competitive process but none to consumers. The adverse effects on competitors and market require at least indirect harm to consumers.119
In its Guidance Paper the Commission acknowledged the separation of exclusionary and exploitative abuses but solely focused on exclusionary abuses.120 Exploitative abuses are left without any guidance regarding their substantive assessment and enforcement. Leaving exploitation outside of the Guidance Paper is paradoxical for several reasons. Firstly, it has been established in case -law that Article 102 TFEU applies to both exclusionary and exploitative abuses. Why leave the latter one out of the Guidance Paper? Secondly, considering the fact that the primary objective of EU competition law is to enhance consumer welfare it would be assumed that the enforcement priorities would at least have included exploitative abuses since they are the type of abuse that directly harm consumers. It is rather strange that the Commission focuses on exclusionary practices which can be expected in consumer harm but at the same time do not focus on prohibiting exploitative abuses.
116 Case T-201/04 Microsoft EU:T:2007:289, para. 867. 117 Case C-209/10 Post Danmark EU:C:2015:651, para. 24. 118 O’ Donoghue & Padilla p. 274.
119 Ibid.
120 Guidance on the Commission’s Enforcement Priorities in Applying Article 82 EC Treaty to Abusive
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What role do exploitative abuses then play in the enforcement of Article 102 TFEU? Do exploitative abuses need to have effects on competition structure, or is it enough that they only directly harm consumers, as Continental Can suggested? These are fundamental questions because they impact the scope of what is and is not considered lawful behaviour for businesses that have a dominant position on the markets.
Various arguments have been brought to explain the focus on exclusionary abuses rather than exploitative.121 Commissioner Kroes explained in 2005 that “Article 82 enforcement should focus on…behaviour that has actual or likely effects on the market, which harms consumers”. She continued by saying that “it is sound for our enforcement policy to give priority to so-called exclusionary abuses, since exclusion is often at the basis of later exploitation of customers”.122
Röller elaborates this by arguing that exploitation and exclusion are often part of the same economic logic for antitrust. The typical anticompetitive theory according to him is the one in which a firm reduces competition through anticompetitive means (exclusion) in order to reap the benefits of higher market power (exploitation).123 The Organization for Economic Co-operation and Development (OECD) held the same view in 2005, exploitative behaviour is often a consequence of exclusionary behaviour and not a cause of harm to competition or consumers in itself. For that reason, when exploitative abuse occurs, competition authorities should rather focus on addressing the exclusionary behaviour that is causing the harm to consumers than prohibiting the harm itself.124
Another argument put forward to explain the focus on exclusionary conducts are the positive effects of exploitation, which makes the intervention of competition law questionable. Röller argues that dominant firm’s ability to exploit its market power should only be restricted in exceptional circumstances because in the short term, the exploitation can have positive effects. If there was no possibility to exploit ones market power, there would be no incentive to compete.125 Pro-competitive behaviour can increase market power. Market power in turn often attracts new undertakings to the market, which in turn
121 As the majority of all exploitative antitrust cases concerns excessive pricing, the arguments brought
forward manly focus on that type of exploitation. Due to the fact that this thesis does not focus on excessive pricing, those arguments will not be elaborated here.
122 Kroes, Tackling Exclusionary Practices to Avoid Exploitation of Market Power: Some Preliminary
Thoughts on the Policy Review of Article 82
123 Röller p. 4 – 5.
