On 19 January 2023, the Court of Justice confirmed that the Intel effects-based approach applies to exclusive dealing cases and held that national competition authorities must examine economic evidence produced by dominant undertakings in their defence. The Court also found that the conduct of independent distributors may, under certain circumstances, be imputed to a dominant producer (Case C-680/20).
In 2017, the Italian Competition Authority (the “AGCM”) fined Unilever Italia Mkt. Operations Srl (“Unilever”) EUR 60.7 million for an abuse of dominance in the wholesale supply of individually packaged ice creams intended for out-of-home consumption in Italy. It found that independent distributors of Unilever’s products had imposed exclusivity clauses on sales outlets, obliging them to source exclusively from Unilever in exchange for a wide range of rebates and commission fees. In the context of the appeal of Unilever against that decision, the Consiglio di Stato referred two questions to the European Court of Justice (“ECJ”).
• Who is to blame?
The first question concerned the circumstances in which the acts of formally autonomous and independent distributors may be imputed to the dominant producer of the distributed products.
Unilever had expressly instructed its distributors to implement a particular commercial policy and to sign standard contracts (containing exclusivity clauses) with the sales outlets without being able to amend them, unless the producer expressly agreed.
The ECJ held that abusive conduct by distributors forming part of the distribution network of a producer in a dominant position may be imputed to that producer under Article 102 TFEU if it is established that the conduct was not adopted independently by its distributors, but formed part of a policy decided unilaterally by that producer and implemented through those distributors. In such a scenario, the ECJ found that the distributors must be regarded as being “merely an instrument of territorial implementation of the commercial policy” of that producer and, as a result, the instrument by which the exclusionary practice at stake was implemented. In this context, the ECJ found that it is not necessary to show either that the distributors are part of the dominant undertaking or that there are hierarchical links between them to impute liability to the producer.
• When – if at all - to assess the effects of exclusivity clauses?
The second question concerned whether Article 102 TFEU requires national competition authorities (“NCA”) to establish that exclusivity clauses in distribution contracts have the effect of foreclosing equally efficient competitors from the market and whether an NCA is required to examine the economic analysis produced by the dominant undertaking, in particular where they are based on an “as efficient competitor test” (“AEC test”).
Unilever had submitted economic studies to show that no “as efficient competitor” would be excluded from the market in Italy because of the exclusivity clauses. These studies were ultimately disregarded by the AGCM on the basis that it was not required to assess the effects of Unilever’s conduct, considering it a per se infringement.
In this regard, the ECJ found that the Intel effects-based approach for rebates systems applies to exclusive dealing cases. In particular, the ECJ explained that “although, by reason of their nature, exclusivity clauses give rise to legitimate concerns of competition, their ability to exclude competitors is not automatic”. It follows that, according to the ECJ, where exclusivity clauses are included in distribution contracts, an NCA is required to establish whether, based on the relevant circumstances and, where applicable, economic analyses and justifications provided by the dominant undertaking, those clauses are capable of restricting competition. Only then can an NCA demonstrate that the conduct in question is liable to exclude competitors that are as efficient as the dominant undertaking and, therefore, is capable of restricting competition.
Moreover, while the use of the AEC test is optional, the ECJ clarified that, if the results of such a test are submitted by the dominant undertaking in its defence during the administrative procedure, the NCA is required to examine this evidence and assess its probative value in order to respect the right to be heard of the undertaking. More specifically, the NCA cannot exclude the relevance of an AEC test without setting out the reasons why it considers that it does not contribute to demonstrating that the practices at issue were incapable of hindering effective competition.
For further information about this case and/or for general legal advice relating to European and Belgian competition law, please contact Pierre de Bandt or Jeroen Dewispelaere.