European Competition Law provides a wide-ranging review of the European rules relating to competition: restrictive agreements, abuse of a dominant position, impact of intellectual property rights, procedure, merger control, State aid.

European Competition Law

The supervisory authorities were not long in reaching the finding that, when a dominant undertaking adopts “normal competitive behavior”, such action is not reprehensible . When assessing the abnormality of the undertaking's behavior, the EU courts apply a proportionality test based on a rule of reason: the action of the dominant undertaking is regarded as “abnormal” if it goes beyond what is nece …

Rule of reason

 V. VAN DER VIJVER, Article 102 TFEU: How to Claim the Application of the Objective Justifications in the case of prima facie Dominance Abuses ?, JECLAP, 2013, Vol. 4, No 2, 124 ; EILMANSBERGER, How to Distinguish Good from Bad Competition under Article 82 EC: In Search of Clearer and More Coherent Standards for Anti-Competitive Abuses, CMLR, Vol. 42, No 1, February 2005, 129-177; GRAVENGAARD, The Meeting Competitions Defence Principle - a Defence for Price Discrimination and Predatory Pricing?, ECLR, Vol. 27, Issue 12, December 2006, 658; ALBORS-LLORENS, The Role of Objective Justification and Efficiencies in the Application of Article 82 EC, CMLR, Vol. 44, No 6, December 2007, 1727-1761 ; DESOGUS, Parallel Trade and Pharmaceutical R&D: The Pitfalls of the Rule of Reason, ECLR, Vol. 29, Issue 11, November 2008, 649 ; VAN DER VIJVER, Objective Justification and Article 102 TFEU, World Competition, 2012, Vol. 35, No 1, 55; VAN DER VIJVER, Benighted We Stand: Justifications of Prima Facie Dominance Abuses in EU Member States, World Competition, 2013, Vol. 9, No 2, 465; AYAL, Is Monopoly Really Unfair? JECLAP 2014, 386.

The supervisory authorities were not long in reaching the finding that, when a dominant undertaking adopts “normal competitive behavior”, such action is not reprehensible . When assessing the abnormality of the undertaking's behavior, the EU courts apply a proportionality test based on a rule of reason: the action of the dominant undertaking is regarded as “abnormal” if it goes beyond what is necessary to protect its legitimate interests . Thus, the owner of a copyright, the exercise of which does not in itself constitute an abuse of a dominant position, oversteps the legitimate protection of his rights by refusing access to a product or service which is indispensable for carrying out a given activity, when there is potential consumer demand, insofar as the refusal is devoid of justification and that it is likely as to exclude all competition on a market for the derived product or service .

Strategies that are legitimate in themselves  can become abusive when pursued in conjunction with practices that go beyond safeguarding commercial interests . Moreover, on pain of rendering Article 102 TFEU devoid of substance, conduct cannot lose its abusive character on the grounds that it constitutes the practice generally followed in a given sector . Nor does case law recognize the right of an undertaking in a dominant position to align its prices absolutely with those of competitors, especially when this right would justify the use of predatory pricing prohibited by the Treaty. Similarly, the mere fact that a given undertaking may consider its behavior to be economically “rational” is not sufficient to justify it objectively within the meaning of competition law .

While a dominant position does not deprive an undertaking of the right to protect its own commercial interests when these are threatened, such protection must be based on criteria of economic efficiency and be in the interests of consumers . This is the case for measures aimed at ensuring the proper internal functioning of the undertaking , or dictated by technical necessity , or quality policies . Undertakings in a dominant position must demonstrate that their conduct is objectively necessary, or that the foreclosure effect it entails can be offset or even outweighed by advantages in terms of efficiency which also benefit consumers . But the taking into consideration of the efficiency gains of the practices concerned cannot depend on the objectives that may have been pursued by the party engaged in those practices or on whether those practices result from deliberate intention or, on the contrary, are only fortuitous or accidental .

Lastly, the significance of the anticompetitive effect is also taken into account. In the Intel case the Court of Justice adopted that approach, holding that not every exclusionary effect is necessarily detrimental to competition, as competition on the merits may, by definition, lead to the departure from the market or the marginalization of competitors that are less efficient and so less attractive to consumers from the point of view of, inter alia, price, choice, quality or innovation. Thus, the analysis of the capacity to foreclose at least as efficient competitors is relevant in assessing whether a system of rebates which, in principle, falls within the scope of the prohibition laid down in Article 102 TFEU, may be objectively justified in terms of efficiency which also benefit the consumer . 

Likewise, where a substantial share of the demand remains satisfied  or there are alternative sources for consumers , there is no abuse. Using a “rule of reason” eventually results in reducing the freedom of action of the dominant undertaking in proportion to the level of its power of dominance. The greater the power of the dominant undertaking in respect of market on which it operates, the more its autonomy of behavior is reduced. Thus, partial foreclosure of the market cannot be justified by showing that the contestable part of the market is still sufficient to accommodate a limited number of competitors  since customers in the foreclosed part of the market should have the opportunity to benefit from any degree of competition possible in the market, competitors should be able to compete on the merits for the whole market and not just for part of it, and it is not up to the dominant undertaking to determine how many viable competitors are allowed to compete for the portion of demand that can still be won .

Finally, according to the General Court, the “state action” exception makes it possible to exclude anticompetitive conduct from the scope of Article 102 TFEU, and thus exonerate an undertaking from liability for such conduct when it is imposed on it by national legislation, by a legal framework created by such legislation, or by irresistible pressure exerted by the national authorities. Consequently, the Commission wrongly relied on the conditions imposed by the Bulgarian gas network operator during the renegotiation of the 2005 agreement on the use of the Romanian gas pipeline 1, before accepting the amendment to said agreement, to impute a refusal of access to it, as those conditions did not constitute an infringement of Article 102 TFEU,  but, rather, reasonable measures to protect its commercial interests, since it was doubly constrained by its status as a public gas supplier, with the obligation to supply its customers on the Bulgarian gas supply markets, and its upstream dependence on gas supplies .

Case 27/76 United Brands v Commission [1978] ECR 207, LawLex200400002980JBJ; Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461, LawLex200400002971JBJ.

Cases 6/73 and 7-73, Istituto Chemioterapico Italiano SpA, Judgment of 6 March 1974, LawLex200400002884JBJ: an undertaking in a dominant position as regards the production of raw materials which, with the object of reserving such raw material for manufacturing its own derivatives, refuses to supply a customer, which is itself a manufacturer of these derivatives, goes beyond the protection of its own legitimate interests; Case 27/76 United Brands v Commission [1978] ECR 207, LawLex200400002980JBJ, para 158: “it is commendable and lawful to pursue a policy of quality, especially by choosing sellers according to objective criteria relating to the qualifications of the seller, his staff and his facilities, such a practice can only be justified if it does not raise obstacles, the effect of which goes beyond the objective to be attained”; Cases T-191/98, T-212/98, T-214/98 Atlantic Container Line and others v Commission [2003] ECR II-3275, LawLex200500004554JBJ; Case T-228/97 Irish Sugar v Commission [1999] ECR II-2969, LawLex200400002962JBJ; Case C-95/04 P, British Airways v Commission [2007] ECR I-2331, LawLex200700001501JBJ: although an undertaking in a dominant position is at liberty to demonstrate that its bonus system is economically justified in terms of efficiency and advantages for the consumer, that system must be regarded as abusive where the exclusionary effect bears no relation to those advantages, or if it goes beyond what is necessary in order to attain them; Case C-549/10 P Tomra Systems ASA, Judgment of 19 April 2012, LawLex201200000637JBJ, finding that the foreclosure by a dominant undertaking of a substantial part of the market cannot be justified by showing that the contestable part of the market is still sufficient to accommodate a limited number of competitors.

Case T-193-02 Piau, Judgment of 26 January 2005, LawLex200500006260JBJ: the regulations of a professional association of soccer clubs, which do not impose quantitative restrictions on access to the activity of players' agents detrimental to competition, but only restrictions of a qualitative nature which can be justified, do not characterize an abuse of a collective dominant position; On the recognition of the principle, Case 27-76 United Brands Company, Judgment of 14 February 1978, LawLex200400002980JBJ.

Case C-209-10 Post Danmark A/S, Judgment of 27 March 2012, LawLex201200000623JBJ.

Case C-307-18 Generics (UK) Ltd, GlaxoSmithKline plc, Xellia Pharmaceuticals ApS, Alpharma LLC, anciennement Zoetis Products LLC, Actavis UK Ltd, Merck KGaA c. Competition and Markets Authority, Judgment of 30 January 2020, LawLex202000000131JBJ.

Case C-413/14 P Intel Corporation, Judgment of 6 September 2017, LawLex201700001368JBJ.

Commission Decision No 1999/329/EC of 12 April 1999, P & I Clubs, IGA - P & I Clubs, Pooling Agreement LawLex200400002958JBJ.

Case 40/73 Suiker Unie and others v Commission [1975] ECR 1663, LawLex200400002777JBJ, there is no abuse where there are independent operators that can market the product on a sufficiently large scale or where the scope of the prohibition of competition is not enlarged to such an extent that it no longer corresponds to the nature of the legal and economic relationship in question; Commission Decision No 78/68/EEC of 8 December 1977, Hugin/Liptons, LawLex200400002806JBJ.

Case T-155/06 Tomra Systems ASA [2010], LawLex201000001328JBJ.

Case T-334/19 Qualcomm, Judgment of 18 September 2024, LawLex202400006536JBJ.

Case T-136/19 Bulgarian Energy Holding EAD, Bulgartransgaz EAD and Bulgargaz EAD, Judgment of 25 October 2023, LawLex202300012748JBJ.

Case T-69-89 Radio Telefis Eireann, Judgment of 10 July 1991, LawLex200400002913JBJ; Case C-241-91 P Radio Telefis Eireann, Judgment of 6 April 1995, LawLex200400002891JBJ; Case C-418-01 IMS Health GmbH & Co. OHG, Judgment of 29 April 2004, LawLex200500004507JBJ.

Cases C-468-06; C-469-06; C-470-06; C-471-06; C-472-06; C-473-06; C-474-06; C-475-06; C-476-06; C-477-06; C-478-06 Sot. Lélos kai Sia EE, Farmakemporiki AE Emporias kai Dianomis Farmakeftikon Proïonton, Konstantinos Xydias kai Sia OE, Ionas Stroumsas EPE, Pharmakapothiki Pharma-Group Messinias AE, K. P. Marinopoulos AE Emporias kai Dianomis Pharmakeftikon Proïonton, Kokkoris D. Tsánas K. EPE e.a. v. GlaxoSmithKline AEVE Farmakeftikon Proïonton; Judgment of 16 September 2008, LawLex200900000069JBJ: holding that a producer in a dominant position may refuse to sell to wholesalers active in parallel exports when faced with orders for abnormal quantities, i.e. in particular when, in a given Member State, certain wholesalers order medicines in quantities out of proportion to those previously sold by the same wholesalers to satisfy market needs.

Commission Decision No 76-353 of 17 December 1975, Chiquita, LawLex200400002387JBJ; Case 27-76 United Brands Company, Judgment of 14 February 1978, LawLex200400002980JBJ: for a system of contractual obligations binding the customer to the undertaking in a dominant position; Commission Decision No 87-500 of 29 July 1987, LawLex200400002442JBJ: reprisals against a customer associating with a potential competitor; No 92-163 of 24 July 1991, Tetra Pak II, LawLex200400002911JBJ; Case T-30-89 Hilti (AG), Judgment of 12 December 1991, LawLex200400002909JBJ: the alleged duty of care incumbent, in its capacity as manufacturer, on an undertaking in a dominant position cannot justify the obstacles it places in the way of competitors entering the market on the grounds of the dangerous nature or inferior quality of their products.

Case T-191-98 Atlantic Container Line AB, Judgment of 30 September 2003, LawLex200500004554JBJ.

Case T-671/19 Qualcomm, Judgment of 18 September 2024, LawLex202400006537JBJ.

See in particular Case T-228-97 Irish Sugar, Judgment of 7 October 1999, LawLex200400002962JBJ; Case T-128-98 Aéroports de Paris, Judgment of 12 December 2000, LawLex200400002977JBJ; Case C-163-99 République portugaise, Judgment of 29 March 2001, LawLex200400003024JBJ.

Case C-250-92 Gottrup-KIim Grovvareforeninger c. Dansk Landbrugs Grovvareselskab (AmbA), Judgment of 15 December 1994, LawLex200400002888JBJ; See also, Commission Decision No 92-213 of 26 February 1992, Aer Lingus/British Midland, LawLex200400002907JBJ: problems of currency convertibility or doubts about the solvency of the beneficiary airline may constitute legitimate reasons for refusing interlining.

Commission Decision No 82-861 of 10 December 1982, British Telecommunications, LawLex200400002961JBJ.

European Competition Law

156. Rule of reason(1)

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