Abuse of dominance, discriminatory pricing and the further application of an effects-based analysis

Serviços de Comunicações e Multimédia SA (MEO) v Autoridade da Concorrência (Case C‑525/16) – On 19 April 2018, the Court of Justice (COJ) issued a preliminary ruling concerning the interpretation of Article 102(c) of the Treaty on the Functioning of the European Union (TFEU). Article 102 TFEU prohibits any abuse by one or more undertakings of a dominant position where it may affect trade between Member States. Under Article 102(c) TFEU, one type of such abuse consists in applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage.

The request was made in the course of proceedings between MEO and the Autoridade da Concorrência (Portuguese competition authority). It concerned the latter’s decision to take no further action on MEO’s complaint against the Cooperative for the Management of the Rights of Performing Artists (GDA) (the only body responsible for the collective management of related rights in Portugal). It concerned an alleged abuse of a dominant position. In particular, it related to discrimination in the amount of the royalty which GDA charged MEO in its capacity as an entity which provides a paid television signal transmission service and television content.

The referring Portuguese court asked the COJ, whether the concept of ‘competitive disadvantage’, for the purposes of Article 102(c) TFEU, must be interpreted to require an analysis of the specific effects of differentiated prices being applied by an undertaking in a dominant position on the competitive situation of the undertaking affected. Also, it asked if the seriousness of those effects should be taken into account.

In referring to the recent Intel decision of the COJ (C‑413/14 P, EU:C:2017:632), the COJ concluded that the concept of ‘competitive disadvantage’ under Artilce 102(c) TFEU, should be interpreted to the effect that, where a dominant undertaking applies discriminatory prices to trade partners on a downstream market, it covers a situation in which that behaviour is capable of distorting competition between those trade partners. Such ‘competitive disadvantage’ does not require proof of actual quantifiable deterioration in the competitive situation. It must be based on an analysis of all the relevant circumstances of the case leading to the conclusion that the behaviour has an effect on the costs, profits or any other relevant interest of one or more of those partners, so that the conduct affects that situation.

Comment: The referring Portuguese court must now decide whether GDA's differential pricing could have placed MEO at a competitive disadvantage (and thus breached Article 102(c) TFEU). More importantly, the COJ seems to have followed Intel in applying an effects-based analysis of Article 102 TFEU. The referring Portuguese court is required to examine all the relevant circumstances in order to determine whether price discrimination produces or is capable of producing a competitive disadvantage.  When the referring Portuguese court carries out that specific examination referred, it is required to take into account all the circumstances of the case submitted to it and it is open to the court to assess.

In that context it should look at:

  • the undertaking’s dominant position
  • the negotiating power as regards the tariffs
  • the conditions and arrangements for charging those tariffs
  • their duration and their amount
  • the possible existence of a strategy aiming to exclude from the downstream market one of its trade partners which is at least as efficient as its competitors (i.e. see by analogy Intel).

This case provides a framework for assessment of similar Article 102 issues by the Irish courts (and the CCPC).

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For further information, contact Alan McCarthy, Partner, or any member of the EU, Competition & Procurement team at A&L Goodbody.

Date published: 29 May 2018