Competition Law Update
There have been a number of recent high profile decisions in UK and EU competition law that could have far reaching implications for businesses.
The first of these decisions was the £1.45 million fine against PING issued by the UK Competition and Markets Authority (CMA) in response to online sales bans enforced by PING against two UK retailers. Although this decision was taken by the CMA, a recent Advocate-General opinion submitted to the European Court of Justice (ECJ) in a separate case (Cote v. Akzente) supported online sales restrictions in certain circumstances. We may be seeing a divergence here.
More recently, the ECJ issued its decision in the appeal by Intel against the Commission decision that left them with a fine of over €1 billion for breaching rules on loyalty rebates. It seems that the ECJ has moved towards an effects based approach based on individual assessment of each circumstance rather than the categorisation of types of rebates as abusive by nature.
PING, online sale restrictions and the Advocate General
In the PING decision, the CMA considered the prohibition of online sales placed on two UK retailers to be a breach of competition law. PING had submitted that such restrictions were “necessary” for their legitimate business interest of encouraging custom in-store golf club fittings.
The CMA, although it did agree that certain restrictions were justified based on legitimate business interest, disagreed with PING that the restrictions were “necessary” and said that such a business interest could have been achieved through less restrictive means.
PING were fined £1.45 million for breaching Chapter 1 of the Competition Act 1998. For a full analysis of this case and its impact, please see our blog.
Cote v. Akzente – Advocate General Wahl Opinion
Prior to the PING decision, the Advocate-General had issued an opinion to the ECJ supporting online sales restrictions in the Coty v. Akzente case. This case relates to a prohibition issued by a luxury cosmetic supplier in Germany against retailers selling goods on third party platforms such as Amazon or Ebay. Advocate-General Wahl agreed with the luxury good supplier (Coty) that such a prohibition was not a breach of EU competition law. Advocate-General Wahl was of the opinion that such restrictions were permitted under EU competition law as they were not a blanket ban on internet sales and the restrictions were necessary to protect the brand image of Coty as a luxury cosmetic supplier.
Advocate-General Wahl said that a blanket ban on internet sales would breach EU competition law, and it seems the CMA have followed this approach when deciding on the PING case.
The Coty v. Akzente case has not yet been decided, however the ECJ, historically, agree with the Advocate-General in 4 out of 5 cases – so we could soon see a similar approach adopted in both EU and UK competition law regarding internet sales and restrictions placed on these resale media.
Intel, Rebates and the ECJ
The landmark overturning of the General Court decision against Intel by the ECJ has changed the way rebates are treated in EU competition law.
Spanning almost twenty years, the Intel investigation and decision have been one of the longest EU competition law cases to date and has seen varying decisions as to how rebates should be treated in competition law.
The case began when the European Commission issued its first decision after issuing abuse of dominance guidelines and was seen as the first case involving the new “effects based” approach followed in EU competition law.
Intel had been fined over €1 billion for abusing its dominant position by offering rebates to four customers on the condition that they purchased all of their Central Processing Units (CPU’s) from Intel. Intel contended that both the Commission and the General Court had failed to take into account the effects of the rebates and instead issued judgment based on the fact that loyalty rebates were treated as abusive due to their nature which made them capable of restricting competition.
The ECJ decision
Intel argued that the Commission and the General Court had both failed to examine the effects of the loyalty rebates offered to the four UK companies and instead considered the rebates abusive based on their nature alone.
The Commission had considered the AEC test (the “as efficient competitor” test) to analyse whether the loyalty rebates offered by Intel to customers, were capable of restricting competition and excluding competitors. However, the Commission did not include the AEC test and such findings as part of its decision as to the legality of such rebates.
The General Court agreed with the Commission that such rebates offered by Intel were, by their nature, abusive and capable of restricting competition, and therefore the Commission did not need to consider the AEC test or the impact of the rebates on competition. The General Court distinguished between fidelity rebates and conditional rebates and considered that conditional rebates were the only category of rebates that required assessment of the circumstances surrounding the rebate.
The ECJ, however, did not agree with the Commission and the General Court and considered that both the Commission and General Court had failed to assess the impact the rebates had on competition. The ECJ has ended the distinction between fidelity and conditional rebates and ruled that both types of rebates require analysis as to the effect they have on competition.
What happens now?
The ECJ has clarified confusion in EU competition law regarding loyalty rebates and asserted that, in order to prove such rebates are abusive, the Commission must consider the company’s dominant position, market share and the rebates themselves to ascertain whether these could be used to exclude competitors.
The ECJ has clarified that loyalty rebates are not infringements by nature, but require consideration as to their effects before such a decision against an organisation can be made.
The ECJ has referred the case back to the General Court, which will have to re-examine the Intel case and decision whether the Commission’s original decision against Intel remains legal in light of the ECJ judgment. We wait to see how Intel will fare during this next (and perhaps final) stage of an investigation that started almost twenty years ago!
This article was co-written by Rebecca Ferguson (firstname.lastname@example.org).