The ECJ’s Unilever-judgment; Confirms the ‘Intel Ruling’ and Establishes that a Dominant Firm May be Held Solely Responsible for the Actions of Its Distributors

In a recent preliminary ruling regarding Unilever, the Court of Justice of the European Union (ECJ) reaffirms the position taken in Intel, declaring that a national competition authority (NCA) cannot disregard claims that an exclusivity scheme is incapable of producing anticompetitive effects. The era when certain forms of conduct were considered abusive by nature thus seems to be drawing to an end. In addition, the ECJ found that a dominant firm is responsible for the actions of its distributors under certain circumstances.

Background
In October 2017, the Italian Competition Authority (AGCM) imposed a MEUR 61 fine on Unilever for abuse of a dominant position contrary to Article 102 TFEU. It found that Unilever had pursued an exclusionary strategy through its distributors by requiring them to enter into exclusivity agreements with the retailers. Unilever appealed the decision. The lower court dismissed the appeal, prompting Unilever to appeal to the Council of State which turned to the ECJ with two questions. First, whether the actions of independent distributors forming part of the distribution network of a dominant supplier may be imputed to that supplier, and if so, under what conditions. Second, whether an exclusivity scheme is anti-competitive by its nature or if the NCA must establish that the exclusivity clauses in question are actually capable of excluding as efficient competitors from the market.

Abusing Dominance through Intermediaries
The ECJ held that dominant firms have a special responsibility not to allow their behaviour to impair genuine, undistorted competition in the market. Thus, Article 102 TFEU can catch also those situations where a dominant firm requires independent distributors to carry out its instructions. This is especially so where the conduct takes the form of the supplier’s standard contracts and containing exclusivity clauses for the benefit of its products.

Confirmation of the Intel-ruling; Presenting Economic Evidence may be Worthwhile
The ECJ acknowledged that in Hoffmann La Roche it had held that clauses where customers undertook to purchase all or a considerable part of their requirements from a dominant firm were abusive by their very nature. However, it referred to its ruling in Intel and declared that when the dominant firm provides evidence in support of an argument that the conduct was incapable of restricting competition, the NCA must assess the possible existence of a strategy to exclude as efficient competitors and analyse the dominant firm’s capacity to foreclose the market (without having to prove any actual effects). In addition, the NCA must also assess any objective justifications presented by the dominant firm.

Referring to the right to be heard, the ECJ stated that an NCA cannot exclude the relevance of a study presented by the investigated company even if studies on the as efficient competitor tests may be considered inappropriate for certain non-pricing practices. The NCA must at least examine the probative value of the studies presented. Thus, while the NCAs may not have to prove any actual anti-competitive effects to establish an abuse, the room for arguing that certain types of conducts are abusive by their very nature has been narrowed considerably. The ECJ’s ruling in Intel was thus not a one-off but constitutes an important precedent also for other types of abuse.