Recent case law of the Court of Justice of the EU on abuse of dominant position on the market and exclusivity clauses in distribution contracts

The Court of Justice of the European Union (»CJEU«) has delivered its judgment in a case concerning the abuse of a dominant position in the EU market under Article 102 of the Treaty on the Functioning of the EU (»TFEU«), Case C-680/20 of 19 January 2023, in which it assessed the relationship between a manufacturer and its distributors as regards to the liability for abuse of a dominant position on the market. It also answered the question whether there is a duty on the competition authorities to take a view on the arguments put forward by the dominant undertaking in proceedings against it to the effect that there has been no abuse.

In 2017, the Italian competition authority AGCM imposed a fine on Unilever for allegedly abusing its dominant position in the market for individually packaged ice creams, contrary to Article 102 TFEU. Article 102 TFEU prohibits any abuse by one or more undertakings of a dominant position in the internal market or a substantial part of it, in so far as it may affect trade between Member States. According to AGCM, Unilever’s strategy on the market was exclusionary and could hinder the growth of its competitors, as the company’s distributors had set exclusivity clauses for the operators of the outlets, obliging them to source exclusively from Unilever for all their requirements of individually packaged ice cream. In return, these operators were granted discounts and commissions, the granting of which was conditional on the turnover or marketing of a certain type of Unilever products. Those discounts and commissions were intended to encourage the operators to continue to source exclusively from that undertaking and to discourage them from terminating their contract.

Unilever appealed against the dismissal of its action before the Court of First Instance and the Court of Appeal referred two questions to the CJEU for a preliminary ruling.

First, the referring court asked whether the actions of Unilever’s distributors including exclusivity clauses could be attributed to the company itself as a manufacturer. In the judgment at issue, the CJEU held that Article 102 TFEU must be interpreted as meaning that the conduct of distributors who are part of the distribution network of products or services of a manufacturer with a dominant position can be attributed to the manufacturer if it is established that those distributors did not decide independently to engage in that conduct, but that it forms part of a policy unilaterally decided by that manufacturer and is implemented through those distributors. This is particularly the case where such conduct is the result of the conclusion of standard contracts drawn up entirely by the manufacturer with a dominant position and containing exclusivity clauses in favour of its products, which must be made available for signature by the territorial distributors of that manufacturer to the operators of the points of sale without their being able to modify them.

Second, the referring court asked whether, in the presence of exclusivity clauses in distribution contracts, the competent competition authority is required, in order to find an abuse of a dominant position, to establish that those clauses have the effect of excluding from the market competitors that are as efficient as the dominant undertaking and whether, in any event, where there are a number of contested practices, that authority is required to examine in detail the economic analyses produced, where applicable, by the undertaking concerned, in particular where they are based on an »as efficient competitor« test. The CJEU ruled that Article 102 TFEU must be interpreted as meaning that, in principle, where distribution agreements contain exclusivity clauses, the competition authority must take into account all the relevant circumstances and, in particular, economic analyses, in order to establish an abuse of a dominant position, which the dominant undertaking may submit concerning the lack of ability of the practices at issue to exclude from the market competitors which are equally efficient as that undertaking, to demonstrate that those clauses are capable of restricting competition.  The use of an »as efficient competitor test« is optional. However, if the results of such a test are submitted by the undertaking concerned during the administrative procedure, the competition authority is required to assess the probative value of those results.

Case law has established the rule that Article 102 TFEU protects in principle only against acts of a dominant undertaking which exclude equally efficient competitors, but not less efficient competitors. In its reasoning, the CJEU explains that, although exclusivity clauses by their very nature give raise to legitimate competition concerns, their ability to exclude competitors is not automatic and it is for the competition authority to convince itself of that ability.

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