Posted by Chantal Lavoie on 7 October 2015
The Court of Justice of the European Union (the Court) adopted on 6 October 2015 a long-awaited judgment in relation to rebate schemes. The case is commonly referred to as 'Post Denmark II'.
The judgment in Post Denmark II is an important one as it considers the appropriate test for determining whether the rebate scheme under review constituted an abuse of a dominant position contrary to Article 102 TFEU. It follows a series of decisions from the EU courts regarding different types of rebate schemes and the test applicable for finding an abuse. By way of background, the Court had already found quantity rebates to be presumptively legal in Hoffmann-La Roche whereas loyalty-inducing rebates were found capable of amounting to an abuse in Tomra.
In Post Denmark II, the Court was asked to consider the nature of the rebate scheme operated by Post Denmark, the incumbent postal operator, whether it had an exclusionary effect contrary to Article 102 TFEU and the criteria to be applied to make this determination. The main conclusions of the Court can be summarised as follows:
- The Court makes a distinction between the rebate scheme under consideration and quantity rebates and loyalty rebates. In this case, the dominant undertaking - Post Denmark - had put in place a rebate system in the bulk mail market based on a standardised rebate scale i.e. all customers were entitled to the rebate based on aggregate orders placed by all customers over a one-year period. The Court found that this scheme differs from a quantity rebate which is granted based on individual orders. In addition, the rebate scheme did not require purchasers to obtain all or a given proportion of their supplies from Post Denmark, thus distinguishing it from loyalty rebates.
- The test for deciding if a rebate scheme constitutes an abuse of a dominant position within the meaning of Article 102 TFEU is whether the rebates produce an exclusionary effect i.e. whether they are capable of making market entry very difficult or impossible for competitors and whether they are capable of making it more difficult or impossible for parties benefitting from the rebates to select other sources of supply. If so, the burden falls on the dominant undertaking to show whether there is an objective justification for the rebates granted.
- To determine whether a rebate scheme produces an exclusionary effect, the Court ruled that "it is necessary to examine all the circumstances of the case, in particular, the criteria and rules governing the grant of the rebates, the extent of the dominant position of the undertaking concerned and the particular conditions of competition prevailing on the relevant market". This confirms the Court's previous case-law applying an 'effects-based' approach to schemes such as loyalty-inducing rebates. In Post Denmark II, the Court found that it is not necessary for the rebate scheme to impose a formal tying obligation on the purchaser for it to have an exclusionary effect. It is sufficient that this scheme had a "suction effect" as a result of the fact that the discounts were applied retroactively over a lengthy one-year period; that they applied to all purchases in the aggregate and not only to the individual purchases of the relevant undertaking; that they applied to the majority of customers on the market; and that they applied to both the contestable and non-contestable part of the market.
- The application of the "as-efficient-competitor test" is not a necessary condition to finding a rebate scheme abusive. In fact, in this particular case, the Court concluded that the test was of no relevance because the market structure with high barriers to entry made the emergence of an "as-efficient-competitor" almost impossible.
- The Court confirms that the anti-competitive effect must be actual or likely (not just hypothetical but no need either for it to be concrete). It need not be of a serious or appreciable nature. The Court therefore rejects the idea of a 'de minimis' threshold for determining whether a conduct is abusive.
The case provided the Court with an opportunity to clarify the test for determining whether a rebate scheme - which, strictly speaking, was not a quantity rebate or a loyalty rebate - amounted to an abuse. Combined with the fact that Post Denmark held a 95% share of the bulk mail market, the scheme was found to produce an anti-competitive exclusionary effect.
Ultimately the Court opted to preserve the subjective test based on examining "all the circumstances" surrounding the grant of a rebate - as set out in previous judgments such as Michelin I - rather than opt for a more economic approach based on the 'as-efficient-competitor-test' used to-date by the Court in 'low-pricing practices'. Although the Court did not reject the use of the 'as-efficient-competitor' test to assess rebate schemes, it concluded that the test is "one tool amongst others" which in this particular case was of no relevance.