BELGIUM: An Introduction to Competition: EU
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Overview: Recent developments in EU competition law: challenges and opportunities
Van Bael & Bellis
Although the basic rules of EU competition law – Articles 101 and 102 of the TFEU – have remained unchanged for decades, gradual adjustments to their interpretation and implementation have been a constant phenomenon, reflecting new market developments, shifts in policy priorities, and new economic insights.
But the pace of change has markedly accelerated in recent years, a trend that is bound to continue. We highlight four areas in which we expect developments in EU competition law, changes in the regulatory framework, and shifts in enforcement priorities to materially impact business activities across Europe, creating opportunities for new business strategies, but also new challenges that companies will have to incorporate into their risk assessment.
Dominant firms may have more leeway for their pricing strategies, but may have to adjust to new risks. In January 2022, the landmark Intel judgment confirmed that dominant firms have more leeway to use loyalty rebate schemes and other exclusivity inducing arrangements than was assumed to be the case under decades old precedent. Although re-affirming that loyalty rebates are presumptively anticompetitive, the Court held that, once a dominant firm has submitted credible evidence that rebates are not capable of foreclosing rivals, a finding of infringement must be based on a detailed analysis of why the rebates would likely have foreclosure effects in practice.
Intel creates more opportunities for dominant firms to compete effectively with rebate schemes. But their implementation will require a realistic assessment of market conditions, especially as the impact of Intel on the decisional practice of competition authorities remains unclear and the risks for dominant firms remain significant if they overstep the mark.
While Intel signals more leeway for certain pricing strategies, enforcement action in the digital space signals that dominant firms may have to pay greater attention to risks created by non-price strategies. The General Court’s 2021 judgment in Google Shopping provides robust support for enforcement action against “self-preferencing” strategies by dominant firms, i.e., allegations that they use their substantial market presence to promote their own products and disadvantage those of their rivals. Firms with a very strong market position in the EU will have to watch carefully whether the impact of Google Shopping will extend beyond the digital sector and set limits to certain common business strategies.
Many players in digital markets will have to adjust to a new regulatory and competition law environment. The EU has in recent years directed increased attention to competition in digital markets and this trend is certain to continue. There have already been several groundbreaking antitrust decisions using Article 102 to intervene in digital markets, and the number of pending investigations against large platforms suggests further decisions are forthcoming. These decisions will set limits on the business conduct of large platforms, creating opportunities for other players in digital markets to increase their presence. But they could also negatively affect many players as they may limit the benefits many players derive from their existing collaborative arrangements with large platforms.
The EU’s focus on the digital economy will impact other areas of EU competition law. Concerns that numerous (allegedly anticompetitive) mergers in the digital sector fall outside the Commission’s review powers under the EU Merger Regulation (EUMR) were the main driver behind the Commission’s new interpretation of the jurisdictional reach of the EUMR, which encourages referrals of mergers from national competition authorities to the Commission even though they do not meet national notification thresholds. Subject to the currently pending court challenge of this novel interpretation in Illumina/Grail, the Commission’s new policy significantly increases its ability to review transactions that in the past would not have required notification anywhere in Europe. Companies and their advisors will have to adjust their evaluation of contemplated transactions considering this expanded jurisdictional reach.
The expected adoption of the EU’s Digital Markets Act (DMA) will trigger an unprecedented experiment of market intervention with a combination of regulatory oversight and competition law enforcement tools. The DMA will contain an extensive list of prohibited and required business conduct, and there can be little doubt that the DMA’s numerous do’s and don’ts, even though they are purportedly crystal clear, will raise numerous contentious compliance questions. Not only will this require intervention by the European Commission, but it will also create rich opportunities for market participants to raise concerns and seek to further their interests.
Branded good producers will be able to explore new opportunities for their distribution strategies in the EU. By June 2022, the EU revised competition law regime governing vertical agreements will come into effect. While the final versions of the Vertical Agreements Block Exemption and the accompanying Guidelines have not yet been adopted, it is already clear that some core tenets of EU competition law, such as a hostile attitude towards resale price maintenance, will remain unchanged.
However, there will be several changes to how Article 101 TFEU applies to vertical agreements. Most notably, the EU’s traditionally very strict stance against restrictions of online sales will in certain respects be relaxed, creating new and welcome opportunities for producers of branded products to develop more effective distribution strategies. Most notably, brands will be able to use dual pricing strategies (charging lower wholesale prices for offline sales than for online sales by distributors of their products), continue to prohibit sales over third party platforms, and set certain limits to online advertising by distributors.
The greater flexibility will inevitably come with certain risks, as the dividing line between permissible restrictions and those that continue to be hardcore competition law violations remains vaguely defined. Firms seeking to benefit from greater flexibility will have to carefully monitor future enforcement practice by the European Commission and national competition authorities to effectively manage competition law risks.
Major EU policy initiatives will shape EU competition policy and law enforcement. To a much greater extent than ever before, the EU’s increasingly ambitious policy goals will affect EU competition policy and law.
For example, the EU’s ambitious sustainability goals for the European economy have prompted calls that EU competition law treat more leniently collaborative agreements that advance sustainability goals. Further guidance will be provided when the Commission adopts revised guidelines on the assessment of agreements between competitors. It remains unclear, however, whether the guidance will be sufficiently concrete to alleviate concerns of firms that their agreements with competitors would create material competition law risks, even if they may have positive effects on sustainability.
Finally, the EU’s “levelling the playing field” initiatives in international trade relations will have major repercussions on business and M&A activities in the EU. Although the final shape of the EU’s proposed Regulation on foreign subsidies remains subject to intense legislative negotiations, it can be expected that the Regulation will give the Commission the power to review transactions where the acquirer has received more than de minimis subsidies from a third country. This would add a parallel and potentially complex “subsidy” review process to the existing review process under the EUMR, thus complicating transactions, increasing costs and the risk of intervention, and making advice by counsel with experience not only in EUMR review, but also trade law and EU state aid law, ever more important.