On 9 December 2021, Advocate General (“AG”) Rantos delivered his Opinion in Servizio Elettrico Nazionale (Case C‑377/20), a request for a preliminary ruling from the Italian Consiglio di Stato. The case concerns the conduct of the ENEL Group (“ENEL”) in the context of the liberalisation of the electricity market in Italy. ENEL, the incumbent, allegedly used customer data obtained before liberalisation to make offers to customers in order to “transfer” them to its operator active on the liberalised market, seeking to prevent the large-scale departure of customers.

The conduct at issue. ENEL separately sought its customers’ consent to having ENEL’s operator in the liberalised market make them offers and to having third parties making offers. The Italian competition authority found that, as a result of the manner in which ENEL sought consent, customers were more likely to consent to receive offers from the ENEL operator than from third parties, as they often believed that consent was necessary or appropriate due to their contractual relationship with ENEL. Only 30% of consenting customers consented to receive offers from third parties (para. 15 of the Opinion). This meant that ENEL’s operator could target offers to a materially larger proportion of customers than its competitors could reach.

ENEL’s approach may well have been informed by the 2017 French Autorité de la concurrence’s (“Autorité”) decision to fine ENGIE (formerly GDF Suez) for using customer data inherited from its former monopoly status to make offers to customers in circumstances where there was no third party database that “. As the market liberalised, GDF Suez began supplying gas and electricity at unregulated prices. The Autorité took issue, inter alia, with GDF Suez simply using its database to make offers in the liberalised market.

In its 2014 interim measures decision, the Autorité ordered GDF Suez to grant competitors access to customer data, because the offers could be made purely as a result of GDF Suez’s former status as monopolistic gas supplier. However, while ENEL tried to insulate its liberalised operators’ offers by obtaining consent separately for both its and third party offers, the consent mechanism used was not sufficient to insulate ENEL.

What is “competition on the merits”? The Italian court described ENEL’s conduct as “atypical”, and asked whether it could constitute “competition on the merits”. AG Rantos first notes that there are no per se abuses under Article 102 (para. 55 of the Opinion). Given that the analysis is based on the anti-competitive effects, rather than form, whether the conduct is “typical” or “atypical” is not decisive (para. 54). However, conduct which departs from competition on the merits “is generally characterised by the fact that it is not based on obvious economic or objective reasons” (para. 62). If the conduct cannot be explained, other than having the goal of harming competitors, it will likely not be competition on the merits. This would be the case, for example, in most instances of pricing below average variable costs (either directly or as a result of a rebate). Similarly, while anti-competitive intent is neither necessary nor sufficient to establish abuse, it is a relevant factor (para. 126 et seq.).

According to AG Rantos, the meaning of “competition on the merits” goes hand in hand with the principle that dominant firms have a “special responsibility” (para. 58). It follows, for example, that a widespread practice is not necessarily legal if implemented by a dominant firm (para. 59). Generally, competition on the merits leads to lower prices, better quality, wider choice and new or improved products or services (para. 63). On the facts, AG Rantos took the view that ENEL’s improvement of its products and services in order to retain its customer base was fully legitimate – even expected – as “winning customers is an essential element of normal competition” (para. 66). Thus, the key question would be whether ENEL’s strategy had the potential to exclude new “as efficient” competitors (para. 67).

The “as efficient competitor” test in non-pricing practices. Post Danmark I and Intel established that competition on the merits may, by definition, lead to market exit by competitors that are less efficient than the dominant firm. Competition authorities use the “as efficient competitor” test (“AEC test”) to examine whether competitors could viably replicate the dominant firm’s pricing practices. AG Rantos took the view that the rationale for the AEC test is also relevant in non-pricing practices: in refusals to deal, the possibility of duplicating the asset to which access is sought is a decisive factor; in tying and bundling, the possibility of replicating the bundle is important in assessing anti-competitive foreclosure (para. 71).

In the present case, given that it was objectively impossible for competitors to replicate ENEL’s legal monopoly, AG Rantos concluded that it would not be appropriate to apply the AEC test. However, he endorsed the application of a “test based on the logic” of the AEC test, specifically examining whether equally efficient competitors could have adopted a similar strategy to that of the dominant firm by, for example, using data available on the market of similar value to the data used by ENEL (para. 74). If this was not possible, ENEL’s conduct could have anti-competitive exclusionary effects.

To carry out such assessment, AG Rantos set out three elements for the Consiglio di Stato to consider (para. 76 et seq.):

• the importance of the customer data used by ENEL from a competitive point of view, noting that the possibility of contacting a customer does not make the customer “captured”;
• whether the customer data was made available to competitors in a discriminatory manner; and
• whether competitors could obtain comparable data – taking into account availability, price, content and geographic scope – which would enable them to effectively compete for the customers.

In doing so, AG Ramos has proposed an analytical framework that was not provided in GDF Suez.

Protection of consumer welfare versus preservation of the competitive structure. It is clear from the case law that the ultimate goal of Article 102 is the maximisation of consumer welfare. As explained by AG Rantos, what the referring court views as separate goals of protecting consumer welfare and the preservation of the competitive market structure are inherently linked and not mutually exclusive (para. 100). While exploitative practices may cause direct harm to consumers, exclusionary practices may harm consumers indirectly through marginalising competitors.

Given the potential for exclusionary practices to indirectly harm consumers, competition authorities need not show actual harm to establish abuse. However, merely demonstrating that the conduct is capable of affecting the structure of the market is not sufficient, as this “does not necessarily or automatically translate” into a potential decrease in consumer welfare (para. 106). Competition authorities must show not only that the exclusionary practice can affect the effective competitive structure, but also that it can cause actual or potential harm to consumers (para. 108).

As a result, the analysis of potential effects is a key element of any Article 102 case. Competition authorities must show that the conduct is “likely” or “capable” of having anti-competitive effects – words used interchangeably by the CJEU in Intel, Post Danmark II and Generics. The AG notes that the standard of proof  will vary depending on the legal and economic context of each case (para. 118), with more severe conduct requiring a lower standard of proof.

In this context, AG Rantos noted that, even though the analysis is prospective in nature, if a dominant firm submits convincing evidence showing that its conduct has had no actual anti-competitive effects, this could lead to the conclusion that “the practice was not even theoretically capable of harming competitors, with the result that the theory of harm proves to be purely hypothetical” (para. 119).

Conclusion. The case is noteworthy, as the conduct related to non-price-related exclusionary practices. As a result, it could be a step towards a unified approach to the analysis of effects of price- and non-price-related conduct under Article 102. As AG Ramos says, “this case gives the Court the opportunity to clarify whether certain principles arising from recent case-law relating to price-related exclusionary conduct, in particular, the ‘equally efficient competitor’ test, can be said to apply in the context of exclusionary conduct not related to pricing” (para. 6).