Abuse of Dominance: Imputation of Liability and Assessment of Exclusivity Clauses | France

In the case of Unilever Italia (No c-680/20), the ECJ preliminarily ruled in its judgment of 19 January 2023 that dominant companies may be held liable for abusive behaviour carried out by distributors in the absence of a corporate link. The ECJ also clarified the standard of proof regarding abuse of dominant position implemented through exclusivity clauses.

In its decision of 31 October 2017, the Italian Competition Authority (Autorità Garante della Concorrenza e del Mercato, or AGCM) imposed a fine of more than EUR60 million on Unilever for abusing its dominant position in the Italian market. In respect of the sale of individually packaged ice-creams intended for “out-of-home” consumption, Unilever was found in breach of Article 102 of the Treaty on the Functioning of the European Union (TFEU).

In this case, the abuse described by the AGCM resulted from conduct materially committed not by Unilever but by its distributors, who had imposed exclusivity clauses on the operators of the sales outlets. The AGCM considered Unilever solely responsible for the abuse on the grounds that Unilever and its distributors formed one and the same economic entity, owing to Unilever’s involvement in its distributors’ commercial policy.

In addition, the AGCM considered that the mere use of exclusivity clauses by an undertaking in a dominant position was sufficient to establish the abuse under Article 102 of the TFEU. Therefore, the AGCM declined to analyse the economic studies produced by Unilever purporting to demonstrate that the practices had no exclusionary effects because they were not capable of foreclosing an equally efficient competitor.

Seized in appeal, the Italian Council of State (Consiglio di Stato) referred two practical questions to the ECJ regarding the application of abuse of dominance under Article 102 of the TFEU.

In a nutshell, the ECJ had to determine:

In the Unilever case, the ECJ did not directly answer the first question – ie, the circumstances in which the conduct of one autonomous and independent undertaking may be attributed to another company. Nor did it make reference to the concept of a “single economic unit”. Instead, the ECJ focused on the conditions required for the imputation of liability between independent undertakings. In a nutshell, the ECJ held that – under certain conditions – a dominant company may be held liable for the actions of distributors forming part of the distribution networks.

The ECJ ruled that a dominant company can be held liable for the abusive conduct of its distributors if it is established that (i) said conduct was not adopted independently by those distributors but, rather, (ii) formed part of a commercial policy that was decided unilaterally by the supplier and (iii) implemented through the distributors.

As such, the distributors and the network to which they belong must be considered “merely an instrument of territorial implementation of the company in dominant position” where said company has unilaterally decided to put in place the abusive conduct. In such situations, the dominant company must be regarded as the perpetrator and is thus liable for the implementation of the practices.

This particularly applies to scenarios (such as the Unilever case) in which the supplier in a dominant position compels its distributors to enter into standard contracts with sales outlets if such contracts are drawn up entirely by the supplier and contain exclusivity clauses for the benefit of the supplier’s products.

Had the ECJ expanded the concept of “single economic entity”, the victims of the abusive conduct in the Unilever case could have sued any member of this entity for damages – in particular, the distributor who followed the instructions of the producer. By focusing on the notion of imputation, however, the ECJ prevents victims of abusive conduct from claiming for damages against any party other than the producer.

As regards the second question, the ECJ recalled that – even though it is down to competition authorities to prove the abusive nature of a conduct – it is not necessary to prove that the conduct actually has anti-competitive effects. Rather, it is sufficient to prove “by tangible evidence” that the conduct was capable of restricting competition on the merits. This demonstration should not be limited to empirical or behavioural studies – indeed, the specific circumstances of the case must also be taken into account.

In a similar vein to its landmark Intel judgment of 6 September 2017 (Intel v Commission, C-413/14 P), which related to rebates, the ECJ explained that exclusivity clauses – despite, by their very nature, giving rise to legitimate concerns of competition – are not automatically able to exclude competitors. Therefore, where a competition authority suspects an abuse by a company in a dominant position and where said company provides supporting evidence during the administrative procedure that disputes the capacity of the exclusivity clauses to exclude equally effective competitors from the market, the ECJ places an obligation on the competition authority to ensure that those exclusivity clauses are – given the circumstances of the case – effectively capable of excluding from the market those competitors who are as efficient as the undertaking in question.

As with the Intel case, the foregoing enables undertakings to argue that exclusivity clauses can be objectively justified when their restrictive effects on competition are outweighed by efficiencies. Consequently, the ECJ held that – where a dominant company has put forward evidence demonstrating the lack of restrictive capacity of exclusivity clauses – a competition authority must examine such evidence.

Finally, as regards the standard of proof, the ECJ asserted that a competition authority is not required to use the “as efficient competitor test” in order to prove the capacity of a practice to produce exclusionary effects. However, should a party produce the results of such a test, the competition authority must then assess the probative value of those results.

By this decision, the ECJ clarifies the standard of proof that must be met when assessing exclusivity clauses under Article 102 of the TFEU and also realigns case law on rebates and exclusivity clauses. In terms of economic evidence, the recent Unilever ruling and the Intel case of 2017 respectively demonstrate that competition authorities must follow an effects-based approach for exclusivity clauses and rebates clauses alike.