EU Court Provides New Guidance On Price Discrimination

In Short

The Situation: The Court of Justice of the European Union ("CJEU") has provided guidance in assessing the validity of discriminatory pricing practices under EU competition law.

The Result: The CJEU followed its recent effect-based case law on abuse of dominance and ruled that an analysis of the competitive effects of an alleged abusive discriminatory pricing practice is a prerequisite to the finding of an abuse of dominance.

Looking Ahead: The ruling constitutes another step toward recognizing an effect-based approach in applying Article 102 TFEU (abuse of dominance) and lays the groundwork for future investigations regarding alleged discriminatory pricing abuses.

In April 2018, the CJEU provided guidance in assessing the validity of discriminatory pricing practices under EU rules governing dominant market players, in a preliminary ruling in case C-525/16 MEO v. Autoridade da Concorrencia. The central issue—price discrimination—is notoriously contentious in view of scarce case law and strong (opposing) views among scholars and economists.

Undertakings with a dominant position are prohibited under EU competition law (in the Treaty on the Functioning of the European Union or "TFEU") from applying "dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage." (Article 102 TFEU).

The CJEU was called upon to interpret the scope of this prohibition following the challenge by pay-television platform MEO to the Portuguese competition authority's decision concerning Portugal's copyright collecting society, the Cooperative for the Management of the Rights of Performing Artists ("GDA"). MEO had contested GDA's rate card, which consisted of three different tariffs. The complaint was rejected by the Portuguese competition authority on the ground that GDA's tariff differentiation had no restrictive effect on MEO's competitive position.

Following the rejection of its complaint, MEO brought a legal challenge in Portugal's Competition, Regulation and Supervision Court, which referred the matter to the CJEU. The referring court sought guidance on whether the concept of "competitive disadvantage," for the purposes of Article 102 TFEU, requires an analysis of the specific effects of differentiated prices and whether the seriousness of those effects must be taken into account.

Court Ruling

The CJEU's ruling emphasizes that discriminatory pricing is abusive only where the price...