On 19 April 2018, the Court of Justice of the European Union (the "ECJ") delivered a judgment holding that investigations of price discrimination under EU competition law should involve an examination of all the relevant circumstances of the case in order to assess whether there is a "competitive disadvantage" (Case C-525/16, Meo – Serviços de Comunicações e Multimédia).

The ECJ delivered its judgment in response to a request for a preliminary ruling from the Portuguese Tribunal for Competition, Regulation and Supervision in a dispute between MEO (a branch of Portugal Telecom providing pay-TV services) and the Portuguese Competition Authority ("PCA"). MEO had filed a complaint with the PCA alleging that it paid higher rates for use of audiovisual content licensed by GDA, a collecting society that manages the performing rights of its members in Portugal. MEO argued that GDA's pricing practices amounted to unlawful discrimination in breach of Article 102(c) TFEU.

The PCA rejected MEO's complaint on the grounds that the imposition of discriminatory prices by a dominant company does not, in and of itself, breach Article 102 TFEU. It further held that the price difference was so small as to be absorbed in the normal course of business. MEO appealed against this decision, urging the Portuguese Tribunal to refer a series of questions to the ECJ for guidance.

In essence, the referring Tribunal asked for clarification on the meaning of the phrase "competitive disadvantage" contained in Article 102(c) TFEU, and in particular whether this concept requires an examination of the effects of the dominant company's behaviour and the seriousness of the discriminatory trading conditions on the competitive position of the disadvantaged client.

The ECJ's judgment follows the opinion of Advocate General Nils Wahl ("AG Wahl") on 20 December 2017, which held that investigations of price discrimination under EU competition law should assess all the circumstances of the practice, including its impact and context (see VBB on Competition Law, Volume 2017, No. 12, available at www.vbb.com).

The ECJ first emphasised that in order to demonstrate a "competitive disadvantage", it is not only necessary for the dominant undertaking's behaviour to be discriminatory, but also that it tends to distort the competitive relationship between trading partners.

The ECJ concluded that a finding of a "competitive disadvantage" does not require proof of actual quantifiable deterioration in the competitive situation; instead, any determination must be based on an analysis of all the relevant circumstances of the case, including: (i) the parties' negotiating power as regards the tariffs; (ii) the conditions and arrangements for charging these tariffs; (iii) the duration and the amount of the tariffs; and (iv) the possible existence of a strategy aiming to exclude from the downstream market one of its trading partners which is at least as efficient as its competitors.

Turning to the specifics of the case and referring to AG Wahl's Opinion, the ECJ made a number of additional interesting observations:

  • The ECJ noted that – although GDA is the only undertaking managing collective rights of authors or performers in Portugal – it was clear from the file that MEO and NOS (its competitor) had a certain degree of negotiating power vis-à-vis GDA. Although the ECJ (unlike the Advocate General) did not use this observation to specifically question whether GDA held a dominant position, it did consider the negotiating power of customers a relevant factor to determine whether the tariffs were anticompetitive.
  • The ECJ observed that the tariffs in question represented a relatively small percentage of the total costs of MEO, so that the differentiation in tariffs may well have had a limited effect on MEO's profits. The ECJ noted that in such instances, it could well be found that the differentiated tariff is not capable of having any effect on the operator's competitive position.
  • The ECJ also found that, in a case concerning the application of differentiated tariffs on the downstream market, a non-integrated dominant undertaking has in principle no interest in adopting a strategy of excluding one of its trade partners from the downstream market, thereby suggesting the absence of an infringement.

The ECJ's judgment clarifies that a more flexible legal standard applies for the evaluation of downstream price discrimination claims. It also arguably "clarifies" its previous case-law in British Airways, which suggested that charging different prices will almost invariably be unlawful under Article 102 TFEU(c).

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