In Enel, a judgment of 12 May 2022 (C-377/20), the Court of Justice of the European Union (“CJEU”) complemented the framework for analysing exclusionary abuses developed in earlier case-law, notably where it applies to a context of market liberalisation:
- Abuse: The concept of “abuse” relates to conduct that departs from “competition on the merits”. Conduct that an equally efficient competitor can replicate is generally not abusive (“equally efficient competitor test”).
- Anti-competitive effects: While it is not necessary to demonstrate actual anti-competitive effects or the company’s intention to carry out an exclusionary strategy, such factors are relevant in assessing whether the conduct is abusive or not.
- Harm: Conduct that harms consumers indirectly as a result of its effect on the structure of the market is per se abusive; it is not required to demonstrate an actual or potential direct harm to consumers.
- Objective justification: The prohibition set out in Article 102 TFEU does not prohibit conduct that is objectively justified and proportionate, or where the behaviour is counterbalanced or outweighed by pro-consumer efficiency-benefits.
The judgment largely endorses the opinion of Advocate General Rantos (see our blog post), but adds some important nuance.
ENEL, the Italian electricity incumbent, developed an alleged foreclosure strategy by transferring data on customers in the protected market (activities of Servizio Elettrico Nazionale (“SEN”)) for the use in its activities on the free market (activities of Enel Energia (“EE”)). This strategy was a response to mitigate the erosion of SEN’s customer base after the liberalisation of the electricity market in Italy.
By decision of 20 December 2018, the Italian competition authority fined ENEL EUR 93 million for abuse of dominance. In July 2020, the Italian highest administrative court referred the matter to the CJEU for a preliminary ruling to clarify the legal framework for finding non-pricing exclusionary abuses, notably in the context of market liberalisation.
“Competition on the merits” and the “equally efficient competitor test”
The CJEU confirmed that “not every exclusionary effect is necessarily detrimental to competition”. The finding of abuse of dominant position pre-supposes that such effects are a consequence of departing from “competition on the merits” (see paras 73-75 of the judgment).
The CJEU implemented this notion by referring to the “equally efficient competitor test”, applying the same logic to pricing and non-pricing abuses (see para. 79 of the judgment). The key question is whether the conduct of the dominant company can be replicated by equally efficient competitors. This analytical framework underpinned both the CJEU’s analysis of non-pricing abuses such as the refusal to supply in Bronner (i.e., replication of distribution network) and pricing abuses such as that in TeliaSonera (i.e., ability to reduce margins) – and is now confirmed in Enel.
The CJEU then gave some suggestions on how to apply the “equally efficient competitor test” to data practices in the assessment under Article 102 TFEU:
- Different conditions of access to a database: The CJEU concluded that SEN should have enabled its customers to receive retail offers from companies that were not part of ENEL on the same terms as ENEL companies (see paras 94-95 of the judgment).
- Non-discriminatory application of data protection rules: While the rules on data protection are a legitimate consideration, ENEL should have also paid attention not to distort the process of collecting consumer consents, for example, by causing a behavioural bias in its favour (see para. 96 of the judgment).
- Competitive advantage: The difference in treatment between ENEL and its competitors could have given ENEL a competitive advantage through an increased interest in its services over those provided by its competitors (see paras 97-100 of the judgment).
- No ability to replicate the behaviour by other undertakings: The CJEU emphasised that no company had a structure capable of providing access to as many consumer details in the protected market as ENEL (see para. 101 of the judgment).
Interestingly, the CJEU did not follow Advocate General Rantos in assessing the importance of data in the competitive process and the extent to which competitors can use alternative data sources to compete on an equal footing with the dominant company. The CJEU focuses instead on the exploitation of means or resources that are available the dominant company.
The CJEU emphasised that when an undertaking loses the legal monopoly it previously held on the market, it must refrain throughout the liberalisation phase from using means available to it as part of its former monopoly and which, as such, are not available to its competitor to strengthen or leverage its market position into adjacent markets (see paras 91-92 of the judgment).
No need to demonstrate actual effects or intent
The CJEU also confirmed that competition authorities do not need to prove actual anti-competitive effects to establish an infringement of Article 102 TFEU. Even if a given practice has been implemented for a longer period of time, it is sufficient that the abuse is established based on predicted (ex-ante) analysis of the capability of a behaviour to restrict competition. That said, the absence of actual exclusionary effects should be taken into account by the competition authority, as it may indicate that the conduct was not per se abusive. The dominant company must provide supporting evidence to demonstrate that this absence results from the inability of the behaviour to produce exclusionary effects and is not caused by other factors.
The CJEU reiterates that an abuse of a dominant position is an objective notion. The dominant company’s intent is therefore not decisive for finding an infringement of Article 102 TFEU. However, similarly to actual effects, proof of intent is an element that may be taken into account to determine the abuse. Thus, the CJEU clarifies what was discussed in Intel (T-286/09)at first instance (see paras 1602 and 1603 of the initial judgment and paras 199-201 of the re-adopted judgment).
No need to demonstrate direct harm to consumers
While the CJEU acknowledges that consumer welfare is the ultimate objective on which competition law is based, it does not require evidence of direct consumer harm in every case. The CJEU concludes that there are two equally important alternative sources of harm to consumer welfare: (i) direct harm (e.g., higher prices or limited output), and (ii) indirect harm caused by negative changes in the market structure. It is sufficient to prove only one type of harm to establish the infringement of Article 102 TFEU.
The CJEU considers that consumer welfare is the ultimate objective justifying the intervention of competition law to address the abuse of a dominant position. Therefore, the prohibition laid down in Article 102 TFEU does not apply if the anti-competitive effects that may result from the conduct can be counterbalanced by positive effects for consumers (e.g., in terms of price, choice, quality and innovation).
Enel offers guidance on the analysis of exclusionary abuses, including non-pricing data practices, and the application of the “equally efficient competitor test” under Article 102 TFEU. In particular, it emphasises the importance of collecting consumer consents for the data use in a non-discriminatory fashion.
It also clarifies that an incumbent cannot use its client database in a discriminatory manner, without risking falling foul of Article 102 TFEU. This judgment is part of a broader trend across the EU of national competition authorities scrutinising how historic monopolists or public utilities grant access to their data (e.g., ENGIE/GDF Suez in France or Deutsche Bahn in Germany).