The Court of Justice in Orange Polska: Where are we with effects?The Court of Justice of the EU has rejected an appeal by Orange Polska of a decision by the European Commission finding that Orange Polska had abused its dominant position and imposing a fine of €127.5 million (see here).
While the judgment may not be entirely surprising, it is important. The reasoning applied in the CJEU’s Intel judgment of last year (see our alert here) concerning the importance of an effects-based analysis in the context of the finding of an abuse was not extended by the CJEU to the determination of the fine, in this case.
For companies facing an abuse of dominance investigation by the EC, it means that any arguments raised in relation to the (lack of) effects of an abusive practice have to be carefully considered and dealt with by the EC in the context of the substantive part of the decision. However, when it comes to fines, the EC is not constrained by the requirement to take effects into account in its finding on the gravity of the infringement. At least for the time being.
What was the problem?
Orange Polska was the only supplier in Poland of the two wholesale broadband access products: Bitstream access (BSA) and local loop unbundling (LLU)1 . And the EC found that it held a dominant position in those markets. Because of its dominant position, Orange Polska had an obligation under EU competition rules to allow access to its network and provide wholesale broadband services to competing operators on downstream telecoms markets.
However, the EC found that Orange Polska restricted such access by employing a number of abusive practices. Consequently, the EC fined Orange Polska for these practices and the fines were upheld on appeal by the General Court and the CJEU.
Why are we concerned with Orange Polska?What is most interesting about the judgment is the debate around whether the EC has to take into account the effects of the infringement when assessing the gravity of the infringement in the context of setting fines.
So what about Intel?
In its decision in Intel, the CJEU confirmed a more effects-based approach to abuse of dominance cases. It held that the EC needs to analyse all of the relevant circumstances invoked by the dominant companies in its assessment of whether an abuse of dominance (in that case, loyalty rebates) are illegal. The GC, on appeal, must review all of the dominant company’s economic arguments against the EC's assessment, and cannot rely only on the exclusive nature of the rebates to confirm that they are illegal.
The Intel judgment has been interpreted to mean that the EC is no longer able to satisfy the burden of proof in abuse of dominance cases with assumptions. It represents a long-awaited change.
Effects and fines
Advocate General Wathelet in Orange Polska (siding with the dominant firm) argued earlier this year that the CJEU should go further than Intel. He argued that the GC should also have taken a more effects-based approach when assessing the gravity of an infringement in the context of setting fines (the Opinion is here).
However, the CJEU in the same case held that the effects of an abuse of dominance did not have to be taken into account by the EC when assessing gravity in the context of setting fines. The CJEU found that it was established by the GC that the EC had not taken into account the actual or likely effects when determining the infringement. The EC had concluded that the infringement was deliberate and intended to eliminate competition, and so it followed that it had the capacity to adversely affect competition and consumers. Thus, the CJEU confirmed that, in such cases, the EC did not have to show the existence of these effects in the fining part of the decision.
What does this mean for the future of abuse investigations?
The CJEU’s judgment in Orange Polska was related to situations where, in view of the nature of the infringement, the EC did not need to consider its effects in the first place (at the point of the finding of infringement). The CJEU did not extend the principles to fining because it accepted that the EC was not required to examine the effects at the outset (a per se finding of abuse).
However, it is important to remember that the EC decision and the GC judgment in Orange Polska pre-date Intel. That is, they pre-date a ruling by the CJEU which confirms that the EC is required to look at effects when determining an abuse of dominance and the GC is obliged to take those arguments into account on appeal. So the question is whether, post Intel, a situation where the EC was not required to or did not consider the effects in the substantive analysis could arise any more? And that essentially depends on one’s interpretation of Intel.
What is needed is clarification in cases where the EC did consider the effects in order to find an abuse (e.g. because of the Intel judgment). What impact would this have at the level of assessing the gravity of the infringement in the context of setting the fine?
A more controversial view is to suggest that Intel is limited to specific situations of effects-based arguments raised in the context of rebates and price discrimination, which only then is the EC to examine.
In conclusion, further clarification is needed to see whether the ruling in Orange Polska will affect the EC’s substantive analysis. In particular, would it again be sufficient for the EC that the measure in question has, by its nature, “the capacity of distorting competition” despite Intel?