In the ECJ’s judgment of 19 April 2018, C-525/16, the ECJ considered a number of fundamental questions from a Portuguese court to assess a national case concerning a dominant company's charging of differentiated prices from its trading partners on a subsequent market. The dominant company, Cooperativa de Gestão dos Direitos dos Artistas Intérpretes ou Executantes (GDA), charged differentiated prices from its customers. The judgment concerns the question what is required to determine that a trading partner is “placed at a competitive disadvantage under article 102 (2) (c) of the TEUF.
According to this article, it is considered abuse of a dominant position if a dominant company applies “dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage”. An example is price discrimination where a dominant company charges different prices for the same service.
DOMINANT COMPANY CHARGED DIFFERENTIATED PRICES
The specific case arises out of a dispute between two Portuguese companies before the Portuguese competition authorities. The dominant company (GDA), which administered copyright-related rights, charged different prices from 2009 to 2013 from three customers which were all providers of payment services by way of transmission of TV signals and content. One of the customers, Serviços de Comunicações e Multimédia (MEO), filed a complaint about price discrimination to the Portuguese competition authorities claiming abuse of a dominant position.
The competition authorities decided, however, to file the case because there was not sufficient evidence of abuse. MEO then appealed against this decision as it, according to MEO’s opinion, was subject to legal errors: In MEO’s opinion, the competition authorities should have investigated whether the conduct might distort the competition.
The national courts then sent eight fundamental questions to the ECJ. The questions were considered aggregately and all related to the question whether the concept “placed at a competitive disadvantage” in article 102 (2) (c) of the TEUF implied that an analysis was to be made of the specific implications of the price differentiation in relation to the affected company's competitive positions, and whether the seriousness of these implications should be taken into account.
THE EUROPEAN COURT OF JUSTICE: DISTORTION OF COMPETITION DEPENDS ON A SPECIFIC ANALYSIS
Referring to previous practice, the ECJ found that the requirements for applying article 102 (2) (c) of the TEUF are that the dominant company’s conduct must, first of all, be discriminating and aimed at distorting competition. The fact that the higher prices will be a disadvantage to the company that has to pay a higher price does not in itself imply that the competition is or may be distorted.
Discrimination is only considered unlawful in the situation where the dominant company’s conduct distorts the competition between competing customers.
This means that an analysis must be made of all relevant circumstances to determine whether the price discrimination creates or may create distorting competition between competing customers. The analysis may for instance include an assessment of the company’s dominant position and whether the company has a strategy the purpose of which is to exclude competitors that are at least as effective from the subsequent market.
The ECJ found that a dominant company’s application of discriminating prices to its trading partner on the subsequent market may potentially result in distortion of competition between trading partners. The fact that a trading partner “is placed in an inferior position in competition” does, however, not require that evidence should be provided substantiating an effective and quantifiable deterioration of the competitive position. But it should be investigated whether the conduct in question is suited for distorting competition.
For more information on the judgment: The European Court of Justice’s judgment of 19 April 2018 in C-525/16
LIMITED CASE LAW WITHIN THIS AREA
Cases concerning discrimination under article 102 of the TEUF are not among the most common cases - neither before the ECJ nor the national competition authorities.
For example, the ECJ has considered the question on discrimination in the United Brands case where United Brands Company sold bananas to trading partners at different prices. The pricing varies depending on the buyer’s domicile Member State. The ECJ found that this constituted abuse of a dominant position as there were no objective considerations justifying the price differentiation.
The Danish competition authorities have also considered the question in the CPH Go case. Copenhagen Airports A/S has abused its dominant position by laying down discriminating conditions for the use of the airport’s low price facilities at CPH Co. Copenhagen Airports A/S had laid down 18 conditions all of which had to be fulfilled by the airline companies wishing to use CPH Go. The Competition Council found that three of these conditions were contrary to the Competition Act as they were suited for excluding certain airline companies from using CPH Go, and there were also no objective reasons for the conditions.