The future of Article 102 TFEU after Intel

Subject: Competition Law

Submitted by: Prashant Kerketta

Rollno. - 119
Semester - IX

Submitted to: Mr. Mohd Atif Khan

(Faculty of Competition Law)

Submission on: 28 april, 2018

HIDAYATULLAH NATIONAL LAW UNIVERSITY, NEW RAIPUR

1
DECLARATION

I Prashant Kerketta, hereby declare that whatever has been produced in this project is completely
my own research and hard work. This project is not at all a result of any plagiarism or copying
from different sources. Material of course has been taken from various websites but its pure
research and not plagiarism.
Thanking you!

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 ACKNOWLEDGEMENTS

I would like to place on record a special thanks to Mr.Mohd Atif Khan, faculty of Competition
law, for his personal care, timely suggestions, critical evaluation and creative guidance throughout
this project research and with whose help the practical realization of this project has been possible.

The other person I owe a great deal of gratitude is to the Vice Chancellor of this University, Dr.
Sukhpal Singh for providing extensive database resources in the Library and through internet.

Some printing errors might have crept in, which are deeply regretted. I would be grateful to
receive comments and suggestions to further improve this project report.

PRASHANT KERKETTA
Roll No. 119
SEMESTER IX
Batch – XIII

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 TABLE OF CONTENTS

I. Chapter1- Introduction..................................................................,,,,,,,,,,,,,,,,,.......................4
II. Chapter 2- Intel: a summary

2.1 -Commission decision……………………………………………….........…………,…7

2.2-GC ruling……………………………………………………………………………….8

2.3-AG Wahl’s Opinion on appeal.........................................................................................9

2.4-Court ruling.....................................................................................................................11

III Chapter 3- . Meaning of Intel ruling.

3.1 -Key lessons.....................................................................................................................12

3.2 -Lessons in context..........................................................................................................13

3.3- Explaining Intel..............................................................................................................14

IV Chapter 4- meaning of capability

4.1- Defining Capability......................................................................................................16

4.2 -Defining Likelihood......................................................................................................18

4.3-When do the thresholds of capability and likelihood apply?........................................20

V Chapter5- Implementing Intel: a practical guide

5.1 -Rebutting the presumption of capability.......................................................................22

5.2-Evidence required for Rebutting the presumption of capability..............,....................24

5.3-An application to exclusive dealing and rebates..................................................,........25

VI Chapter 6 – Conclusion..............................................................................................,..........27

Bibliography/Webliography....................................................................................................28
,

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 Chapter1. Introduction

No judgment in the past decade has been awaited as eagerly as the appeal ruling in Intel.1 There is

something surprising about the expectation created around the case. The legal issues that sparked

commentators’ interest when the General Court (hereinafter, the ‘GC’ judgment came out in 2014

had seemingly been settled for decades. The prima facie prohibition of exclusive dealing and

loyalty rebates under Article 102 TFEU has indeed been reiterated many times over the years. In

spite of this inauspicious background, the Intel judgment managed to surprise commentators and

stakeholders. The Court of Justice (hereinafter, the ‘Court’ or the ‘ECJ’ introduced an important

clarification that will have a significant impact on the analysis of abusive practices under Article

102 TFEU.

Intel makes two fundamental contributions to our understanding of the notion of abuse.

First, it states that, as a matter of principle, Article 102 TFEU is only concerned with the exclusion

of rivals that are as efficient as the dominant firm. The departure from the market of rivals that are

less attractive in terms of, inter alia, price, quality or innovation is deemed to be a natural outcome

of the competitive process and as such unproblematic. The explicit statement of this position is

important in that it confirms that what is true in relation predatory pricing and selective price cuts

is true across the board, at least as a rule. Second, the Court held that practices are only caught by

Article 102 TFEU insofar as they are capable of having anticompetitive effects. By the same

token, it should always be possible for a dominant firm to provide evidence showing that, in the

context in which it is implemented, the practice is incapable of having such effects. In other

words, the presumption underlying the prima facie prohibition of exclusive dealing and loyalty

rebates can be rebutted by a dominant firm.

1
Case , Intel Corporation Inc v Commission, EU:C:2017:632.
5
6
The ruling provides several valuable hints about the sort of evidence that dominant firms may put

forward to challenge the capability of a practice having an anticompetitive effect. The relevant

factors in this sense include the relative position of the dominant firm, the share of the market

covered by the practice and the conditions agreed with customers (such as the length of the

agreement or the amount of the rebates given).For instance (and to mention an obvious example),

a dominant firm could convincingly argue that an agreement providing for exclusive dealing is

incapable of having exclusionary effects insofar as it covers just 1% of the relevant market. Some

elements of the framework crafted in the judgment, however, are not developed in detail. These

include, for instance, the very notion of capability, which is not defined by the Court. Only in

subsequent litigation will this and other concepts be fleshed out.

This piece seeks to explore these questions and, more generally, to discuss the implications

of Intel for the enforcement of Articles 101 and 102 TFEU by the Commission and national

competition authorities. It shows, to begin with, that the clarification made explicit in the

judgment could already be inferred from prior case law – albeit not necessarily the case law on

rebates and exclusive dealing. In this sense, Intel is an expression of a common set of principles

that is relevant across the board in EU competition law. Second, the piece discusses, in light of the

relevant case law, how the notion of capability may be defined, and how it differs from that of

likelihood (which the Court was careful not to use in the judgment). Finally, it addresses the

implications of the framework laid down by the Court for some ongoing and future cases,

including how the factors identified in the judgment may be implemented and fleshed out in

concrete scenarios.

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Chapter2. Intel: a summary

2.1.Commission decision

In May 2009, the Commission adopted a decision finding that Intel had infringed Article 102

TFEU. The company received a EUR 1.06 billion fine. According to the decision, Intel granted

rebates on several computer manufacturers and on a retailer. In addition, the Commission claimed

that the company had granted payments aimed at delaying, cancelling or restricting the sale of its

main rival’s (AMD) products. These rebates were alleged to be conditional on exclusivity or

quasi-exclusivity from the customer (that is, loyalty rebates). They were deemed, in other words,

to fall within the scope of the prima facie prohibition rule enunciated in Hoffmann-La Roche.2 The

legal characterisation of the rebates was not entirely uncontroversial, and this for two main

reasons. First, the Commission reached its conclusion on the basis of a broad range of evidence, as

the written agreements concluded by the firm were not unequivocal about the conditions that

customers had to satisfy. In this sense, Intel raised the sort of issues that are typically found in

cartel cases.

Second, the rebates in some cases did not cover all or most of the requirements of the customers,

but only all or most of their requirements for some product segments (such as notebooks or

textbook computers).

From a legal and a policy perspective, the Intel decision is a faithful expression of the

administrative practice that followed the review process that started with the Discussion Paper of

2005. On the one hand, the Commission reiterated the rule laid down in Hoffmann-La Roche,

under which exclusive dealing and loyalty rebates are prima facie prohibited without it being

necessary to examine their concrete impact on competition. On the other hand, the decision

examined at length, in line with the principles set out in the Guidance Paper (issued before the

adoption of the decision but after the start of the investigation) the anticompetitive effects of the

2
Hoffmann-La Roche & Co. AG v Commission, EU:C:1979:36
8
said practices. The analysis of the effects was conducted for prioritisation purposes, not as a legal

requirement. It revolved around the so-called ‘as efficient competitor’ test, which seeks to

establish whether, given the rebates granted by the dominant firm, an equally efficient rival would

be forced to sell its products at a loss.

2.2.GC ruling

The challenge brought by Intel against the Commission decision was dismissed in its entirety by

the GC in 2014.3 The plea on which this piece focuses relates to the test against which the legality

of rebates must be assessed under Article 102 TFEU. According to the firm, the Commission erred

in law by failing to consider all the circumstances relating to the award of the rebates, and more

precisely whether they were capable of restricting competition. Put differently, Intel argued that

the practice should be characterised as a ‘by effect’ infringement requiring a case-by-case

assessment of its exclusionary impact. This interpretation of Article 102 TFEU was tersely

dismissed by the GC. The first instance judgment revolves around a tripartite division between

loyalty rebates, which are prima facie prohibited irrespective of their effects; quantity rebates,

which are prima facie lawful; and the so-called ‘third category’ rebates. The GC, echoing the

preceding case law, held that the assessment of ‘all the circumstances’ is only appropriate for

schemes falling under the latter category.

The GC justified the prima facie (‘by object’) prohibition of exclusivity and loyalty rebates

by reference to the inherent capability of loyalty rebates to tie customers to the dominant supplier

and to foreclose rival suppliers.In addition, it reiterated the idea (already found in Hoffmann-La

Roche) that this practice lacks an economic justification and is thus deemed to be aimed at

restricting competition.4 In this regard, the GC did not see a contradiction with the relevant Article

101(1) TFEU case law (in particular Delimitis), which is based on the premise that exclusive

dealing is not restrictive by object and has a pro-competitive justification.In line with British
3
Case T-286/09, Intel Corp v Commission, EU:T:2014:547.
4
Case C-234/89, Stergios Delimitis v Henninger Bräu AG, EU:C:1991:91.
9
Plasterboard, the GC held that the considerations identified in Delimitis cannot be transposed,

without more, to Article 102 TFEU. This is so not only due to the fact that competition is

weakened by the very presence of a dominant firm, but due to the ‘special responsibility’ that such

a firm bears.

2.3.AG Wahl’s Opinion on appeal

The above legal issue generated a considerable amount of research pieces substantially more, in

fact, than the due process5 and the extraterritoriality aspects of the Commission decision, which

were also considered by the GC. Commentators did not discuss whether the legal characterisation

of facts in the Intel decision was appropriate, or whether the case law supported the conclusion

that loyalty rebates amount to a ‘by object’ infringement. The discussions were typically

normative in nature. In other words, commentators focused on whether the ‘by object’

qualification for exclusive dealing and loyalty rebates is justified. Several authors expressly

argued, in this sense, that the rule laid down in Hoffmann-La Roche had to be abandoned.First,

these authors explained that, even when applied by dominant companies, exclusive dealing and

loyalty rebates do not necessarily have exclusionary effects. Second, it was emphasised that these

practices are implemented for reasons that are unrelated to the exclusion of rivals. Other authors,

by contrast, defended the rule in Hoffmann-La Roche as being not only economically sound but

also in line with the purpose and overall logic of the Treaty.6

AG Wahl examined these views in the opinion he delivered in October 2016.7

 The opinion proposed to set aside the first instance ruling and to send the case back to the

GC. However, he did not advocate a change in the law. Instead, he argued that the case law

is more complex and subtle than the GC appeared to imply. In essence, his analysis sought

to emphasise the gap that exists between what the Court said and did in exclusive dealing

and loyalty rebate cases. This gap, according to AG Wahl, could be observed in Hoffmann-

6
Wils, ‘The Judgment of the EU General Court in Intel and the So-Called More Economic Approach’
7
Case C-413/14 P, Intel Corporation Inc v Commission, EU:C:2016:788, Opinion of AG Wahl.
10
 La Roche. Even though the Court declared that loyalty rebates are prima facie prohibited

without it being necessary to establish their anticompetitive effects, it went on to assess the

exact nature of the rebates as well as their impact. 27 In practice, the opinion explains, an

assessment of ‘all the circumstances’ takes place in all cases involving the practice.

Crucially, he added that there is no theoretical and practical reason to distinguish between

different categories of rebates. In line with mainstream economics, he explained that the

difference between the various schemes (loyalty, quantity, ‘third category’) is one of

degree, not of principle.They are all similar in their nature, purpose and potential

exclusionary effects. For AG Wahl, the question, against this background, is how thorough

the assessment should be in the contex of a particular case.

 The opinion sketched, in this regard, a two-step approach, pursuant to which the scrutiny is

more or less intense depending on the probability of an anticompetitive effect. Thus, the

assessment can be confined to step 1 where the rebate can be expected to have, in all

likelihood, exclusionary effects.In such circumstances, it would not be necessary to engage

in a detailed evaluation of the likely impact of the scheme.A more in-depth analysis

 Step 2 – would be required where the likelihood of an anticompetitive effect cannot be

immediately established. This two-step framework is not fundamentally different from the

divide that exists between restrictions by object and by effect in the context of Article

101(1) TFEU. Like the framework proposed by AG Wahl, the ‘by object’ label applies to

practices that reveal a ‘sufficient degree of harm’ on competition. 8 A case-by-case

assessment is required for other – ‘by effect’ – practices.

8
Case C-67/13 P, Groupement des cartes bancaires v Commission, EU:C:2014:2204
11
2.4.Court ruling

The Court, in line with AG Wahl, set aside the GC judgment. The judgment is worded in terser

terms than the Opinion. The Court did not sketch, let alone develop, an analytical framework for

the assessment of rebate schemes. Intel merely introduces a clarification in the interpretation of

Article 102 TFEU. It restates the rule pursuant to which exclusive dealing and loyalty rebates are

prima facie prohibited irrespective of their effects on competition. 33 On the other hand, the Court

points out that, where a dominant firm provides evidence showing that the rebate scheme is not

capable of having an anticompetitive effect, the Commission is required to consider the nature,

purpose and operation of the practice, including its coverage, the extent of the dominant position,

the conditions imposed on customers as well as any evidence of an anticompetitive strategy.

Moreover, the judgment reiterates that, if a prima facie infringement is established, it is possible

for a dominant firm to come up with an objective justification for its behaviour and/or claim the

efficiencies deriving from it.

The application of these principles to the case at hand led the Court to the conclusion that

the GC ruling was based on an erroneous interpretation of Article 102 TFEU. According to the

appeal ruling, the GC failed to take into consideration Intel’s evidence suggesting that its

behaviour was not, in the specific economic and legal context in which it was implemented,

capable of having exclusionary effects. In particular, it noted that the ‘as efficient competitor’ test,

described above, played a prominent role in the analysis, and that the dominant firm had advanced

evidence rebutting the findings of the Commission. In spite of this fact, the GC took the view that

the ‘as efficient competitor’ test was not necessary to establish the abusive nature of the rebates

applied by Intel and thus whether the Commission’s application of the test was correct.In doing so,

it erred in law.

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Chapter3. Meaning of the Intel ruling

3.1.key lessons

The Intel ruling clarifies some fundamental points about the scope of Article 102 TFEU (and also

Article 101 TFEU):

 As a matter of principle, Article 102 TFEU is concerned with the exclusion of rivals that

are as efficient as the dominant firm. The departure of firms that are less attractive in terms

of – inter alia – price, quality or innovation is an inherent feature of the competitive

process and as such unproblematic.

 Second, for exclusive dealing and rebates to be caught by Article 102 TFEU, they must at

least be capable of restricting competition. If, in the relevant economic and legal context,

these practices fail to meet the threshold of capability, they are not prohibited under this

provision. The same is true in the context of Article 101 TFEU.

 On the other hand, a dominant firm can adduce evidence showing that the ‘by object’

practice is not capable of restricting competition in the specific economic and legal context

in which it is implemented. In other words, the dominant firm may rebut the presumption

of capability underlying the legal test applying to ‘by object’ conduct. Where a dominant

firm produces evidence in this sense, an authority is required to engage with it and

establish that the practice is capable of having anticompetitive effects on the basis of an

analysis of the relevant market and the nature and operation of the contentious practice.

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3.2.The four lessons in context

 The clarifications introduced in Intel are not surprising if one considers that similar

principles had already been introduced in the context of Article 101 TFEU. In T-Mobile,

the Court held that, for a practice to be restrictive of competition by object, it is sufficient

that it is capable of having restrictive effects on competition 9.It is well established in the

case law, moreover, that capability need not be established by a claimant or authority. 41 In

other words, an authority or a claimant can discharge their burden of proof by showing that

the ‘by object’ agreement has been implemented. In this sense, the case law suggests that

the capability of restrictive effects is presumed, by which it is meant that such effects are

inferred from the very existence of the ‘by object’ arrangement. In Murphy, the Court

further clarified that the parties to an agreement can rebut this presumption. It held that

they can show that there are factors pertaining to the economic and legal context that

reveal that the practice under consideration is ‘not liable to impair competition’ 10.In other

words, the firms bear the evidential burden of showing that the practice is not capable of

having restrictive effects.

 There should be no doubt after Intel that the same principles apply in the context of Article

102 TFEU. There is, in other words, a consistent approach to ‘by object’ practices across

the board. What is more, the relevant Article 101 TFEU case law gives some indications of

how, and in what instances, the presumption of capability may be rebutted in practice by a

dominant firm. Suffice it to think of two examples. E.On Ruhrgas is a particularly eloquent

one insofar as it was a cartel-like arrangement. The GC concluded that the Commission

had not established that competition could be restricted in the period during which firm
9
Case C-8/08, T-Mobile Netherlands BV, KPN Mobile NV, Orange Nederland NV and Vodafone Libertel NV v Raad
van bestuur van de Nederlandse Mededingingsautoriteit, EU:C:2009:343
10
Joint Cases C-403/08 and C-429/08, Football Association Premier League Ltd and Others v QC Leisure and Others
and Karen Murphy v Media Protection Services Ltd, EU:C:2011:631
14
 entry into Germany was precluded by virtue of the legal context. During that period, the

practice was not capable of restricting competition due to the fact that the regulatory

framework created a de facto monopoly on the relevant geographic market. Micro Leader

provides an example in relation to agreements aimed at restricting parallel trade, which are

also prima facie ‘by object’ infringements. The GC ruled – in line with the Commission

that an agreement prohibiting Canadian distributors from selling Microsoft’s products into

the French market was not capable of having restricting effects because the software

manufacturer was able to enforce its intellectual property rights to prevent imports into the

EU. The agreement could not restrict competition, in other words, since there was no

competition to restrict in the first place.

3.3.Explaining Intel

Intel merely articulates a principle that was already explicit in the context of Article 101 TFEU. In

other words, the Court has clarified that what is true under Article 101 TFEU is also true under

Article 102 TFEU. To understand the logic behind this case law, it makes sense to discuss the

reason why an authority or a claimant is not required to establish, on a case-by-case basis, the

anticompetitive effects of ‘by object’ conduct. The case law suggests that the ‘by object’ category

– under both Articles 101 and 102 TFEU – seems appropriate for behaviour with a purpose that is

objectively anticompetitive. The ‘by object’ approach is considered to be warranted, in other

words, where a practice is deemed to have no rationale other than the restriction of competition. It

has already been mentioned above that, in Hoffmann-La Roche, the Court took the view that

exclusive dealing and loyalty rebates have no economic justification other than rival foreclosure.

Similarly, the Court explained in AKZO that the exclusion of competition is, at least prima facie,

the only plausible explanation for pricing below average variable costs. It is against this

15
background that the Court found it unnecessary to require evidence of the actual or likely effects

of the practices.

Where a practice falls within the ‘by object’ category, it is only sensible to presume that it is at

least capable of having restrictive effects on competition. Because the ‘by object’ label is based on

the premise that the only plausible rationale for the conduct is the restriction of competition, it is

logical to presume that such effects must also be plausible – the behaviour would otherwise be

devoid of purpose. By the same token (and this is the essence of the clarification introduced in

Intel), if it appears that the practice is incapable of having anticompetitive effects, it is no longer

safe to presume that the rationale for the practice is anticompetitive. If there is evidence indicating

that the parties involved in a practice cannot plausibly hope to restrict competition, the explanation

for the behaviour is unlikely to lie in the restriction of competition, but elsewhere. In all

likelihood, the practice has a different, pro-competitive, rationale. In Delimitis, for instance, the

exclusive dealing agreement was implemented by a firm which, with a 6.4% market share 11, could

not realistically hope to foreclose rivals. In such circumstances, the behaviour could be safely

presumed to be driven by the pro-competitive objectives identified by the Court in the judgment –

aligning the incentives of suppliers or distributors, effective planning and economies of scale,

securing outlets and supplies. If a dominant firm finds itself in the same position as the supplier in

Delimitis – in the sense that it cannot plausibly expect to harm competition – it should not be

subject to Article 102 TFEU. In such circumstances, the premise behind the presumption laid

down in Hoffmann-La Roche – that its behaviour has an anticompetitive purpose – would not hold.

For the same reasons, it is reasonable to give the dominant firm the chance to show that

anticompetitive effects are implausible in the context in which the behaviour takes place.

In a sense, the clarification introduced by the Court in Intel is an acknowledgement that not

all restrictions by object are created equal. As the case law stands, the ‘by object’ label applies to a

set of practices that is not homogeneous. On the one hand, it applies to cartel conduct.

11
Case C-234/89, Stergios Delimitis v Henninger Bräu AG, EU:C:1990:358, Opinion of AG Van Gerven,
16
\Chapter 4. On the meaning of capability (and likelihood)

The Court judgment in Intel clarifies that a dominant firm can rebut the presumption that the ‘by

object’ practice under examination is capable of having restrictive effects. In addition, it identifies

the factors that should be taken into consideration in this regard. On the other hand, the ruling fails

to define the notion of capability and does not provide details about what dominant firms need to

show if they wish to rebut the presumption in practice. The preceding case law sheds some light

on these two questions. First, this case law suggests that the notion of capability can be

distinguished from that of likelihood. The threshold of capability is a relatively low one, and can

be equated with plausibility. Second, Intel, when read together with the case law, hints at how a

dominant firm can show that anticompetitive harm is implausible, that is, that the contentious

practice is not capable of excluding equally efficient rivals.

4.1.Defining capability

The Intel judgment is brief and carefully worded. The fact that it refers to the threshold of

capability and only capability – is one of the aspects that stands out immediately. This expression

has been used in the past by the Court. However, it has never been given a precise definition. What

is more, some judgments give the impression that the expression is used interchangeably with the

related notion of likelihood. The Court, in Intel, did not conflate the two concepts. In this sense, it

addressed the question in a way that differs from the approach taken by AG Wahl. In line with

what has been described above, AG Wahl argued that a practice is capable of restricting

competition where it would, in all likelihood, have anticompetitive effects. The interpretation

advanced in the opinion suggests that the notion of capability defines instances in which there is

virtual certainty of a restrictive effect. In addition, AG Wahl took the view that the notions of

17
capability and likelihood are synonymous. According to this interpretation, the threshold of effects

under the two steps of his analysis would be the same.

As the Court chose not to address these questions, one cannot assume that the Intel ruling endorses

the views expressed by AG Wahl. What is more, a careful analysis of the case law suggests that the

threshold of capability is significantly lower than suggested by the Advocate General. Several

Article 102 TFEU rulings lead to this conclusion. In AKZO, the Court explained that pricing

below average total cost can drive – is capable of driving – equally efficient rivals out of the

market.However, nowhere did the Court claim that pricing at such a level would, in all likelihood,

have exclusionary effects.

Among rebate cases, British Airways 12 and Tomra13 provide two valuable examples confirming

this view. British Airways is interesting insofar as there were several factors pertaining to the

operation of the rebate scheme, on the one hand, and the economic and legal context of the

practice, on the other, which suggested that an exclusionary effect in the case was unlikely. Indeed,

the probability of such an effect was, if at all, low. For instance, it was documented that the

dominant firm’s market share had declined during the implementation of the rebate scheme.

Because the Court endorsed a standard of capability, however, these considerations were deemed

irrelevant. Tomra, in turn, is valuable insofar as the Commission drew in its decision a neat

distinction between capability – which it considered to be the threshold required by virtue of the

case law – and likelihood – which is a higher threshold that it imposed upon itself for prioritisation

purposes.

Importantly, the threshold of capability appears to have been set at the same, relatively low,

level in Article 101 TFEU rulings. Suffice it to think of T-Mobile, where the Court expressly

endorsed a threshold of capability. The preliminary reference in the case concerned a single

meeting in which sensitive information had been exchanged. As argued by the firms in

12
Case C-95/04 P, British Airways plc v Commission, EU:C:2007:166.
13
Case C-549/10 P, Tomra Systems ASA and others v Commission, EU:C:2012:221
18
proceedings at the national level, a one-off meeting is not the sort of arrangement that is

particularly likely to have restrictive effects on competition. This is all the more so considering

that the information exchanged by the parties was not directly related to the prices paid by end-

users. According to the Court, however, a single meeting such as the one at stake in the case meets

the threshold of capability. Bananas is another case in point. It concerned an exchange of pre-

pricing information by employees who were not responsible for setting prices. In these

circumstances, the firms argued, a practice is not capable of removing uncertainty as to the

behaviour of rivals.Again, these arguments were deemed irrelevant by the Court, for which the

standard of capability was satisfied in spite of the remote link between the nature of the

discussions and the prices charged by firms.

A combined reading of the abovementioned judgments suggests that the capability

threshold is met where restrictive effects on competition are plausible. It would be sufficient to

show that an anticompetitive outcome is ‘not contrary to logic and experience’, by reference to the

expression used by Lianos. In other words, the standard of capability is met where a restriction of

competition is a conceivable – but not necessarily likely – outcome. Where a dominant firm prices

below average total costs, the exclusion of rivals is, absent other factors, certainly plausible.

Similarly, it is reasonable to presume that exclusivity obligations can conceivably lead to the

exclusion of equally efficient competitors. The probability of such outcomes may not be

particularly likely in the context of a particular case, but these outcomes are, as a matter of

principle, not implausible. This interpretation of the notion of capability is also compatible with

suggestions by the Court that the tendency of a practice to restrict competition is sufficient to

trigger Article 102 TFEU.

4.2.Defining likelihood

There are some cases in which the applicable threshold is not one of capability, but a higher one.

The higher threshold appears to be relevant in relation to practices that are not deemed restrictive
19
by object – that is, those for which a case-by-case analysis of their effects is necessary. There are

two particularly eloquent examples showing how the standards of capability and likelihood make a

difference in practice. Deutsche Telekom (and, in general ‘margin squeeze’ cases) is one of them.

In its decision in that case, the Commission suggested that a standard of capability would be

sufficient to establish the abusive nature of a ‘margin squeeze’. More precisely, the Commission

argued that Article 102 TFEU can be triggered if it can be shown that the ‘margin squeeze’ would

force rivals to sell below cost. This threshold, which would be consistent with the standard of

capability set in AKZO, was not endorsed on appeal. The Court held that an anticompetitive effect

would need to be demonstrated on a case-by-case basis – the Court held, in other words, that such

an effect is not simply presumed, even when the ‘margin squeeze’ amounts to pricing below costs.

Post Danmark14 is another example. The Court introduced in the case a two-step test to evaluate

whether a system of standardised rebates amounts to an abuse under Article 102 TFEU. This two-

step test hints at the difference between capability and likelihood. According to the ruling, the first

step of the analysis revolves primarily around the nature and operation of the rebate scheme

(including its retroactive or incremental nature, as well as the duration of the obligations). This

first step provides hints, in particular, about the capability of a scheme to restrict competition.

The legal assessment had been confined to this first step in previous rebate cases, including British

Airways and Tomra. In Post Danmark II, however, the Court introduced a second step, which is of

particular importance when evaluating the likelihood of an exclusionary effect in the economic

and legal context of which the practice was part. The factors that are evaluated in closer detail

under this second step comprise the extent of the dominant position, the coverage of the practice

and the nature of the product.

Post Danmark II gives a sense of where the threshold of likelihood lies. While the Court

did not address the question directly, the Advocate General did. AG Kokott claimed that the

threshold of likelihood is satisfied where a practice is more likely than not to have anticompetitive

14
, Post Danmark A/S v Konkurrencerådet, EU:C:2015:651
20
effects. It would seem, in other words, that, for the Advocate General, intervention would be

justified where it can be shown that the probability of an anticompetitive effect is above 50%. This

threshold was clearly satisfied in Deutsche Telekom and Post Danmark II. In the first,

anticompetitive effects were likely due to the fact that the infrastructure controlled by the

dominant firm was indispensable to provide services on the relevant downstream market. In Post

Danmark II, rival foreclosure could be expected from the fact that the dominant firm enjoyed a

quasi-monopoly position that was, in addition, partially protected by exclusive rights.

4.3.When do the thresholds of capability and likelihood apply?

The thresholds of capability and likelihood appear have each a discrete scope of application. As

already suggested, capability seems relevant in relation to ‘by object’ infringements, under both

Articles 101 and 102 TFEU. Likelihood, in turn, is relevant where a prohibition requires a case-

by-case assessment of the actual or potential effects of the practice under consideration (that is,

‘by effect’ conduct). The application of a separate threshold for each of the two broad categories of

conduct seems necessary for the appropriate operation of the EU competition law system.

Conflating the thresholds of capability and likelihood would render the distinction between

restrictions by object and by effect meaningless in practice. Such a conflation would either lead to

‘by object’ behaviour being subject to a case-by-case analysis of effects (which would directly

contradict a consistent line of case law since Consten-Grundig) or to ‘by effect’ conduct being, for

all practical purposes, prohibited by its very nature.

If the threshold of capability applied to ‘by effect’ behaviour (or, similarly, if likelihood

were understood to mean plausibility), the difference between the object and effect would indeed

become non-existent. When implemented by a dominant firm, all the ‘by effect’ practices

described above – such standardised rebates schemes and constructive refusals to deal – can be

safely presumed to be capable of having restrictive effects. In principle, they can all be deemed a

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plausible source of anticompetitive harm. If capability applied, an authority or a claimant would

just have to show, as a matter of principle, that the contentious practice has been implemented. As

the Court held in British Airways or Tomra, anticompetitive effects would be implicit in the

operation of the practice on the relevant market. Accordingly, all behaviour would be treated, in

practice, as a ‘by object’ infringement. Such an outcome would be at odds with the framework

sketched in Post Danmark II and Deutsche Telekom.

Conversely, if (as suggested by AG Wahl) the threshold of likelihood applied to ‘by object’

conduct, the rationale and logic of the ‘by object’ category would be diluted. It would be easy for

any firm to show why, in the economic and legal context in which the practice is implemented,

anticompetitive effects are unlikely (or, at least, that the likelihood of anticompetitive effects is

below 50%). As a consequence, an authority or a claimant would have to engage in what would

be, for all practical purposes, a fully-fledged analysis of effects in every case. If there is something

that is clear from the case law, is that that this sort of analysis is not required in the case of ‘by

object’ conduct. As mentioned above, the threshold of capability is met even when anticompetitive

effects are unlikely to result from the practice.

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Chapter5. Implementing Intel: a practical guide

5.1.Rebutting the presumption of capability: what needs to be proved?

The presumption that a practice is capable of having anticompetitive effects can be rebutted, first,

where a firm can provide evidence showing that the conditions of competition would have been

the same with and without the contentious behaviour. One can think of several instances in this

regard. The first is one in which the practice is not capable of altering the conditions of

competition as a result of the underlying regulatory framework. It may be the case, as in E.On

Ruhrgas, that market entry is precluded by virtue of legislation creating a de facto monopoly.

Intellectual property rights may also render market entry implausible. In a situation similar to the

one at stake in Servier, for instance, one could claim that the acquisition of a firm is not capable of

restricting competition due to the fact that the intellectual property rights enjoyed by the dominant

firm would not have allowed the target firm to offer its products on the relevant market.15

A second instance is one in which a particular practice is objectively necessary in order to offer a

particular product or, more generally, achieve a particular aim that is not in itself anticompetitive.

It may turn out that, for instance, co-operation between two firms is objectively necessary for them

to achieve the aims of the agreement. If such circumstances, the agreement would not be caught

by Article 101(1) TFEU, whether by object or effect. Suffice it to think of an exclusive distribution

agreement that is indispensable for a supplier to enter a market.The ancillary restraints doctrine,

whereby some clauses fall outside the scope of Article 101(1) TFEU insofar as they are necessary

15
Case T-691/14, Servier SAS and others v Commission, pending.
23
to achieve the aims of the agreement, is a variation on this same idea. There appears to be no

reason why these same principles should not apply in the context of Article 102 TFEU. For

instance, it should be possible for a dominant firm to show that a tying practice is not capable of

restricting competition insofar as it is objectively necessary for it to offer a particular product.

Intel suggests a dominant firm may also adduce evidence to the effect that that the causal

link between the practice and its (actual or alleged) effects is implausible. The judgment makes it

clear beyond doubt that a firm can attempt to rebut the presumption of capability by claiming that

the practice would not force equally efficient rivals to sell below cost. Evidence in this sense does

not exclude altogether a finding of infringement but, as suggested in Intel, requires an authority or

claimant to identify other factors showing that, in spite of this fact, anticompetitive effects remain

plausible. For instance, the Court suggested in TeliaSonera that a finding of abuse in a ‘margin

squeeze’ case cannot be completely ruled out where downstream rivals would have positive

margins. Such a finding, however, would no longer be automatic, or presumed. Similarly, in Post

Danmark II, the Court suggested that, in certain circumstances – for instance, where the position

of the incumbent is protected by exclusive rights in a recently liberalised industry – the exclusion

of a less efficient rival may justify intervention. Again, it would be for an authority or claimant to

spell out the reasons why it is justified to depart from the principle.

In line with what has been discussed above, additional factors could be considered in the

analysis of the capability of a practice to restrict competition. These include the proxies identified

by the Court in Intel, which comprise the coverage of the practice, the extent of the dominant

position and the length of the obligations. The judgment sheds little light on how claims relating to

these proxies would operate in the context of a particular dispute. What is more, the case law hints

at an obstacle that dominant firms may face when challenging the capability of a practice to

restrict competition in light of these additional factors. In Post Danmark II, the Court declared that

it is not necessary to show that the effect of a practice is of a serious or an appreciable nature for

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Article 102 TFEU to apply.By the same token, it took the view that it is not appropriate to set a de

minimis threshold in relation to abusive practices.

A careful analysis of Article 101 TFEU case law, however, suggests that there is nothing in

the applicable precedents that precludes dominant firms from challenging the presumption of

capability in light of the abovementioned factors. One should bear in mind, in this sense, that

agreements that restrict competition by object are also deemed capable, by their very nature, of

having anticompetitive effects.The Court has held that it is not necessary or appropriate to set a de

minimis or appreciability threshold for ‘by object’ infringements under Article 101 TFEU.

Provided that they are capable of affecting trade between Member States, such infringements are

deemed to have, by their very nature, appreciable effects on competition.In this regard, the status

of ‘by object’ infringements under Article 101 TFEU is identical to that of exclusive dealing and

loyalty rebates under Article 102 TFEU. In spite of this fact, it is clear from the case law that it

always possible for the parties to a prima facie ‘by object’ agreement to provide evidence showing

why, in light of the relevant economic and legal context, the practice under consideration is not

capable of having restricting effects. There seems to be no reason to depart from this principle in

the context of Article 102 TFEU.

5.2.Rebutting the presumption of capability: what level of evidence is required?

It is clear from Intel that dominant firms can show that their behaviour is incapable of having

anticompetitive effects (that is, what dominant firms need to show). However, the judgment does

not give any hints about the level of evidence that dominant firms would have to meet if they want

to discharge their burden of proof. This question could have – and will probably have – significant

implications in practice. An authority could refuse to evaluate the capability of a practice to

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restrict competition on grounds that the evidence adduced is insufficient to discharge the dominant

firm’s burden. In this regard, there are two approaches to the issue that come across as reasonable.

Under one approach, dominant firms would have to satisfy the same level of evidence that the

Commission has to meet to discharge its legal burden of proof. This approach would follow the

principles set out in Tetra Laval.16 It would have the virtue of putting claimants and defendants on

a level playing field.

However, there are reasons why one could argue that the level of evidence that dominant

firms must satisfy in this context is lower. Under this second approach, it would be sufficient for

the dominant firm to raise doubts about the capability of the practice to restrict competition.

Arguably,dducing evidence that has an ‘air of reality’ should be sufficient to trigger an obligation

on the authority or claimant to establish that the practice is capable of restricting competition. The

main argument in favour of this second approach is that it would be consistent with the

presumption of innocence, and with the fact that the burden of establishing an infringement lies

with the authority or claimant. As explained by the GC in AstraZeneca, any doubt about the

existence of a breach must, in these circumstances, favour the firm under investigation, not the

authority or claimant.17

5.3.An application to exclusive dealing and rebates

The principles sketched above can be readily applied to exclusive dealing and rebates. The most

obvious application is the ‘as efficient competitor’ test, which was directly addressed by the Court

in Intel. It would seem from the judgment that, once the dominant firm concludes, in light of the

test, that an equally efficient rival would not have been forced to sell below cost, the Commission

cannot avoid engaging with the question in practice. Accordingly, the authority (or claimant)

would have to show why the analysis of the dominant firm is incorrect or why other features of the

16
Case C-12/03 P, Commission v Tetra Laval BV, EU:C:2005:87; and Case T-5/02, Tetra Laval BV v Commission,
EU:T:2002:264.
17
Case T-321/05, AstraZeneca AB and AstraZeneca plc v Commission, EU:T:2010:266
26
practice and/or the relevant market – namely the factors identified by the Court in Post Danmark

II – lead to the conclusion that the practice is capable of having restrictive effects, in spite of the

conclusions flowing from the application of the ‘as efficient competitor’ test.

It is less straightforward to see how a dominant firm can challenge the presumption of

capability in light of factors such as the coverage of the practice, the extent of the dominant

position and the duration of the obligations. However, the very practice of the Commission hints at

the way in which these criteria could apply in concrete scenarios. For instance, a dominant firm

could claim that its practice is not capable of having anticompetitive effects given that the relevant

period is below three months – a period that the Commission itself has used as a rule of thumb in

its practice. The fact that the contentious rebate scheme is not retroactive but incremental, or that it

can be terminated at will by customers, could also be considered in this sense. More importantly,

and according to the approach embraced in the Guidance Paper (and implied in Post Danmark II)

a dominant firm could adduce evidence showing that it is not an unavoidable trading partner for its

customers and thus that anticompetitive effects are implausible. In such circumstances, the whole

of customers’ demand would be contestable, which would render exclusion implausible.

As this piece was being prepared, the Commission announced the adoption of a prohibition

decision against Qualcomm.The information available gives an idea of how the framework crafted

in Intel might operate in practice. According to the press release, the Commission considered

arguments advanced by the dominant firm and suggesting that the practice was not capable of

having anticompetitive effects. However, the authority concluded to the abusive nature of the

practice in light of other considerations, including the extent of Qualcomm’s dominant position

(the firm is said to have enjoyed a market share of around 90%), the coverage of the market

(Apple, the customer receiving payments in exchange for exclusivity, amounted to a third of the

relevant market) as well as the nature and operation of the exclusivity obligation (the press release

notes that Apple would have been required to return the exclusivity payments had it decided to

source some of its supplies from a rival manufacturer).

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 Chapter6. Conclusion

The Court judgment in Intel clarifies two crucial aspects relating to the interpretation of Article
102 TFEU.
 As a matter of principle, the provision is only concerned with the exclusion of rivals that
are as efficient as the dominant firm.
 Dominant firms can adduce evidence rebutting the presumption that exclusive dealing and
loyalty rebates are capable of having anticompetitive effects.

It is possible to infer from the judgment an analytical framework applying to all abusive practices.

In the same way that the Treaty of Rome was conceived as a traité-cadre and not a traité-loi, the

Intel judgment can be characterised as an arrêt-cadre, not an arrêt-loi. While it is tightly argued

and

carefully drafted, the framework it introduces will only become meaningful following the

elaboration of the underlying principles in the case law and administrative practice. This said, it

introduces two valuable clarifications about the nature and scope of Article 102 TFEU that are of

immediate relevance. First, the ruling unambiguously takes the view that Article 102 TFEU is, as a

matter of principle, concerned with equally efficient rivals. In this sense, the ruling shows that the

Guidance Paper and the case law are not far apart in their general philosophy and approach to

abusive conduct.

Second, the Court has now clarified that, even when evidence of an anticompetitive effect

is not necessary to establish an infringement, a dominant firm can always show that, in the specific

economic and legal context in which it is implemented, the contentious practice is not capable of

having restrictive effects on competition. It has long been uncontroversial that this possibility is

available under Article 101 TFEU. Intel makes it explicit that the same is true in the context of

Article 102 TFEU. These principles put an end to some major controversies in the field, and pave

28
the way for the consistent interpretation and enforcement of EU competition law provisions across

the board.

Bibliography/Webliography

 academic.oup.com

 chillingcompetition.com

 www.crai.com

 ecp.crai.com

 lawprofessors.typepad.com

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