The Court of Justice of the European Union (CJ) judgment in Meo - Serviços de Comunicações e Multimédia1 clarifies the criteria for a dominant undertaking’s discriminatory pricing policy vis-à-vis trade partners be considered to violate Article 102 (2)(c) of the Treaty on the Functioning of the European Union (TFEU).2
In 2014, MEO lodged a complaint before the Portuguese Competition Authority (PCA), claiming that GDA3 had imposed different tariffs on the various pay-TV operators, therefore discriminating MEO. Yet, the PCA decided not to take further action, considering that the tariff differentiation had no restrictive effect on MEO’s competitive position. The latter appealed to the Portuguese Competition, Regulation and Supervision Court, the referring court.
The referred questions, as well as the CJ’s analysis, were mainly focused on the notion of “competitive disadvantage” (Article 102 (2)(c) TFEU): does a mere discriminatory pricing policy suffice, or must this tariff differentiation also have a disruptive impact on the competitive position of the discriminated undertaking?
The CJ started by restating that the undertaking whose competitive position is affected can either be a direct competitor of the dominant undertaking or a trade partner.4 However, a “mere immediate disadvantage” deriving from the application of different tariffs to equivalent services does not necessarily mean that competition is distorted or capable of being so.5 The dominant undertaking’s discriminatory behavior must be such as to lead to a distortion of competition between those business partners.6
After laying down the test, the CJ gave some guidance to national courts on how to ascertain whether such a distortion of competition is at stake. One should consider, among other things, the undertaking’s dominant position, it’s negotiating power, the conditions, duration and amounts of the tariffs charged and the possible existence of a strategy aiming to exclude from the downstream market one of its trade partners.7
Considering the circumstances of the case at stake, the CJ found that, since MEO and one of its competitors are GDA’s main clients, they may have a considerable negotiating power in relation to the latter.
The CJ also mentioned the reduced impact of the alleged excessive tariffs on MEO’s total costs and profits, in the context of its service for retail offerings for subscription television access.8 Finally, it stated that, where the differentiation only concerns the downstream market, the undertaking has no interest, in principle, in excluding one of its trade partners from the downstream market.
To sum up, after MEO, dominant undertakings may risk a violation of article 102 TFEU only if they pursue a discriminatory pricing policy with regard to trade partners that distorts competition between the latter.
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1 Judgment of 18 April 2018, Meo - Serviços de Comunicações e Multimédia, C-525/16, EU:C:2018:270 (MEO).
2 See also Article 11 (2) (c) of the Portuguese Competition Law, which replicates the European rule.
3 Portuguese Cooperative for the Management of the Rights of Performing Artists.
4 See §§ 24 and 25 of the judgment.
5 See § 26.
6 See § 27.
7 See § 31.
8 See § 34
