MEO – Serviços de Comunicações e Multimédia SA v Autoridade da Concorrência (C-525/16)

Contents

Judgment of the Court (Second Chamber)19 April 2018^note(Reference for a preliminary ruling — Competition — Abuse of dominant position — Article 102, second paragraph, point (c), TFEU — Concept of competitive disadvantage — Discriminatory prices on a downstream market — Cooperative for the management of rights relating to copyright — Royalty payable by domestic entities which provide a paid television signal transmission service and television content)In Case C‑525/16,REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunal da Concorrência, Regulação e Supervisão (Competition, Regulation and Supervision Court, Portugal), made by decision of 13 July 2016, received at the Court on 13 October 2016, in the proceedingsMEO — Serviços de Comunicações e Multimédia SAvAutoridade da Concorrência,the other party to the proceedings being:GDA — Cooperativa de Gestão dos Direitos dos Artistas Intérpretes ou Executantes, CRL,THE COURT (Second Chamber),composed of M. Ilešič, President of the Chamber, A. Rosas, C. Toader, A. Prechal (Rapporteur) and E. Jarašiūnas, Judges,Advocate General: N. Wahl,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 5 October 2017,after considering the observations submitted on behalf of– MEO — Serviços de Comunicações e Multimédia SA, by M. Couto, S. de Vasconcelos Casimiro and P. Castro e Sousa, advogadas, and by N. Mimoso Ruiz and A. Norinho de Oliveira, advogados,– GDA — Cooperativa de Gestão dos Direitos dos Artistas Intérpretes ou Executantes, CRL, by O. Castelo Paulo, G. Gentil Anastácio, L. Seifert Guincho and P. Guerra e Andrade, advogados, and by A.R. Gomes de Andrade, advogada,– the Portuguese Government, by L. Inez Fernandes, M. Figueiredo, S. Carvalho Sousa and M. Caldeira, acting as Agents,– the Spanish Government, by M.A. Sampol Pucurull and A. Gavela Llopis, acting as Agents,– the European Commission, by P. Costa de Oliveira, A. Dawes, H. Leupold and T. Christoforou, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 20 December 2017,gives the following

Judgment

1This request for a preliminary ruling concerns the interpretation of point (c) of the second paragraph of Article 102 TFEU.

2The request has been made in the course of proceedings between MEO — Serviços de Comunicações e Multimédia SA (‘MEO’) and the Autoridade da Concorrência (competition authority, Portugal) concerning the latter’s decision to take no further action on MEO’s complaint against GDA — Cooperativa de Gestão dos Direitos dos Artistas Intérpretes ou Executantes (Cooperative for the Management of the Rights of Performing Artists, Portugal) (‘GDA’) concerning an alleged abuse of a dominant position, in particular, discrimination in the amount of the royalty which GDA charged MEO in its capacity as an entity which provides a paid television signal transmission service and television content.

Legal context

EU law

3According to the last sentence of Article 3(1) of Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles [101] and [102 TFUE] (OJ 2003 L 1, p. 1):‘Where the competition authorities of the Member States or national courts apply national competition law to any abuse prohibited by Article [102 TFEU], they shall also apply Article [102 TFEU].’

Portuguese law

4The content of Article 11(1) and (2)(c) of the Novo Regime Juridíco da Concorrência (new legal rules on competition) is the same as that of point (c) of the second paragraph of Article 102 TFEU.

The dispute in the main proceedings and the questions referred for a preliminary ruling

5GDA is a non-profit-making collecting cooperative which manages the rights of artists and performers; it manages the rights relating to the copyright of its members and of the members of foreign collecting societies with which it has concluded a representation agreement and/or a reciprocal agreement. In carrying out that task, GDA’s principal activity is to collect the royalties which arise from the use of the related rights and to pay them over to the rights holders.

6That cooperative is the sole body responsible for the collective management of related rights in Portugal.

7Among the undertakings which make use of the directories of GDA’s members, and of similar foreign bodies with which GDA has concluded a representation agreement or a reciprocal agreement, are entities which provide a paid television signal transmission service and television content. The applicant in the main proceedings, MEO, is one such provider, and therefore it is a customer of GDA.

8Between 2010 and 2013, as part of its wholesale offering, GDA applied three tariffs simultaneously, thereby imposing different tariffs on the various entities providing the paid television signal transmission service and television content.

9It is clear from the file submitted to the Court that GDA applied to MEO the tariff which had been set by an arbitration decision of 10 April 2012. The applicable domestic law requires that, in default of an agreement being reached when the rights are negotiated, the parties are required to proceed to arbitration.

10On 24 June and 22 October 2014, PT Comunicações SA, the predecessor in law of MEO, lodged a complaint with the competition authority alleging that GDA had abused its dominant position. It claimed that that abuse arose from the fact that GDA had been charging excessive prices for the rights related to copyright and that GDA had also been applying to MEO different terms and conditions from those which it had applied to another entity providing the paid television signal service and television content, NOS Comunicações SA (‘NOS’).

11On 19 March 2015, the competition authority opened an investigation which led to a decision of 3 March 2016 to take no further action on the ground that there was no evidence of sufficiently probative value of an abuse of a dominant position.

12The competition authority found that, between 2009 and 2013, GDA applied different tariffs to certain customers. However, that authority, relying, in particular, on the costs, income and profitability structures of the retail offerings of the television signal transmission service and television content, considered that that tariff differentiation had no restrictive effect on MEO’s competitive position.

13According to that authority, in order to establish an infringement of subparagraph (c) of the second paragraph of Article 102 TFEU, any price discrimination must actually be capable of distorting competition on the market by putting one or more competing undertakings at a competitive disadvantage compared to the others. To interpret all discriminatory conduct on the part of an undertaking in a dominant position as entailing, in and of itself, an infringement of point (c) of the second paragraph of Article 102 TFEU would be inconsistent with the case-law of the Court.

14MEO brought an action before the Tribunal da Concorrência, Regulação e Supervisão (Competition, Regulation and Supervision Court, Portugal), the referring court, against the competition authority’s decision of 3 March 2016 to take no further action, claiming that that decision is vitiated by an error of law, inasmuch as, rather than assessing the criterion of competitive disadvantage, as interpreted in the case-law of the Court, it examined whether there had been any significant and quantifiable distortion of competition. MEO claims that, in accordance with that case-law, the competition authority should have examined whether the conduct at issue was capable of distorting competition.

15The referring court indicates that the de facto monopoly on the relevant market enjoyed by GDA leads, in principle, to the conclusion that it has a dominant position. However, that court also states that there is evidence that the entities which provide a paid television signal transmission service and television content, nevertheless, have a considerable margin for negotiation vis-à-vis GDA.

16According to the referring court, the decision to take no further action of 3 March 2016 is based on the fact that the difference between the tariffs which GDA charged to MEO and NOS, respectively, was low compared to the average cost, so that that difference was not such as to undermine MEO’s competitive position, as it was in a position to absorb the difference. That court indicates, in that respect, that MEO’s share in the market for offerings of the paid television signal transmission service and television content increased during the period when GDA applied different tariffs to MEO and to NOS.

17In the main proceedings, MEO produced figures relating to the total and the average costs per consumer borne, respectively, by MEO and by NOS. MEO also produced figures concerning its profits and the profitability of its business during the period in question, that is to say, from 2010 to 2013.

18The referring court considers that it is not inconceivable that MEO’s competitiveness was affected by the tariff differentiation.

19According to that court, it is clear from the case-law of the Court that certain discriminatory conduct toward trading partners may, by its very nature, bring about a competitive disadvantage. In addition, it follows from that case-law that, in the case of first degree discriminatory conduct, affecting direct competitors present on the same relevant market, it is sufficient to show that that conduct is capable of restricting competition. With regard to discrimination on the downstream market, such as that at issue in the main proceedings, it is likewise not necessary a priori to carry out a specific assessment of the effects on the competitive situation of the undertakings affected.

20However, the Court has not yet given a clear ruling on the relevance of the specific effects on competition of a possible abuse of a dominant position in order to establish the presence of a ‘competitive disadvantage’, for the purposes of point (c) of the second paragraph of Article 102 TFEU.

21It is in that context that the Tribunal da Concorrência, Regulação e Supervisão (Competition, Regulation and Supervision Court) decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling:(1) If, in infringement proceedings, there is proof or evidence that an undertaking in a dominant position is applying discriminatory prices to a retail undertaking and that that is putting that undertaking at a disadvantage in relation to its competitors, is it necessary, in order for that conduct to be characterised as placing the undertaking at a competitive disadvantage, within the meaning of point (c) of [the second paragraph of] Article 102 TFEU, for the severity, the relevance or the significance of the effect on the undertaking’s competitive position and/or competitiveness to be assessed, in particular in so far as concerns its ability to absorb the difference in costs borne in connection with the wholesale offering?(2) If there is proof or evidence in infringement proceedings that the discriminatory prices charged by an undertaking in a dominant position are of significantly reduced importance for the costs incurred, income obtained and profitability achieved by the affected retail undertaking, is an assessment that there is no evidence of abuse of a dominant position and prohibited practices compatible with an interpretation consistent with subparagraph (c) of [the second paragraph of] Article 102 TFEU and the judgments of 15 March 2007, British Airways v Commission (C‑95/04 P, EU:C:2007:166), and of 9 September 2009, Clearstream v Commission (T‑301/04, EU:T:2009:317)?(3) Or, on the contrary, is such a circumstance insufficient to preclude the conduct in question from being characterised as abuse of a dominant position and a prohibited practice within the meaning of subparagraph (c) of [the second paragraph of] Article 102 TFEU, that circumstance being of relevance only for the purposes of determining the degree of liability or punishment of the infringing undertaking?(4) The fact that, under subparagraph (c) of [the second paragraph of] Article 102 TFEU, [the situation covered by that provision] has to be such as to place the trading partners at a “competitive disadvantage”, must that be interpreted to the effect that the advantage arising from the discrimination must equate to a minimum percentage of the costs structure of the undertaking concerned?(5) The fact that, under subparagraph (c) of [the second paragraph of] Article 102 TFEU, [the situation covered by that provision] has to be such as to place the trading partners at a “competitive disadvantage”, must that be interpreted to the effect that the advantage arising from the discrimination must equate to a minimal amount of the difference between the average costs borne by the competing undertakings for the wholesale offering at issue?(6) The fact that, under subparagraph (c) of [the second paragraph of] Article 102 TFEU, [the situation covered by that provision] has to be such as to place the trading partners at a “competitive disadvantage”, can that be interpreted to the effect that the advantage arising from the discrimination must, in the context of the market and the service in question, equate to values higher than the differences indicated in Tables 5 to 7 [referred to in this request for a preliminary ruling] in order for the conduct to be characterised as a prohibited practice?(7) If the answer to any of questions 4 to 6 is in the affirmative, how is such a minimum threshold of significance of the disadvantage in relation to the costs structure or the average costs borne by the competing undertakings in the retail market in question to be determined?(8) If such a minimum threshold has been defined, does the fact that it has not been reached every year rebut the presumption in the judgment, [of 9 September 2009, Clearstream v Commission (T‑301/04, EU:T:2009:317)], according to which it must be held that the application to a trading partner of different prices for equivalent services continuously over a period of five years and by an undertaking having a de facto monopoly on the upstream market could not fail to cause that partner a competitive disadvantage?’

Consideration of the questions referred for a preliminary ruling

22By its questions, which should be examined together, the referring court asks, in essence, whether the concept of ‘competitive disadvantage’, for the purposes of subparagraph (c) of the second paragraph of Article 102 TFEU, must be interpreted to the effect that it requires an analysis of the specific effects of differentiated prices being applied by an undertaking in a dominant position on the competitive situation of the undertaking affected and, as the case may be, whether the seriousness of those effects should be taken into account.

23Under subparagraph (c) of the second paragraph of Article 102 TFEU, undertakings with a dominant position in the internal market, or in a substantial part of that market, are precluded from applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage, as trade between Member States may be affected.

24In accordance with the case-law of the Court, the specific prohibition of discrimination under subparagraph (c) of the second paragraph of Article 102 TFEU is intended to ensure that competition is not distorted in the internal market. The commercial behaviour of the undertaking in a dominant position may not distort competition on an upstream or a downstream market, in other words, between suppliers or customers of that undertaking. Co-contractors of such undertakings must not be favoured or disfavoured in the area of the competition which they practise amongst themselves (judgment of 15 March 2007, British Airways v Commission, C‑95/04 P, EU:C:2007:166, paragraph 143). Thus, it is not necessary that the abusive conduct affects the competitive position of the dominant undertaking itself on the same market in which it operates, compared with its own potential competitors.

25In order for the conditions for applying subparagraph (c) of the second paragraph of Article 102 TFEU to be met, there must be a finding, not only that the behaviour of an undertaking in a dominant market position is discriminatory, but also that it tends to distort that competitive relationship, in other words, to hinder the competitive position of some of the business partners of that undertaking in relation to the others (judgment of 15 March 2007, British Airways v Commission, C‑95/04 P, EU:C:2007:166, paragraph 144 and the case-law cited).

26In order to establish whether the price discrimination on the part of an undertaking in a dominant position vis-à-vis its trade partners tends to distort competition on the downstream market, as the Advocate General submitted, in essence, in paragraph 63 of his Opinion, the mere presence of an immediate disadvantage affecting operators who were charged more, compared with the tariffs applied to their competitors for an equivalent service, does not, however, mean that competition is distorted or is capable of being distorted.

27It is only if the behaviour of the undertaking in a dominant position tends, having regard to the whole of the circumstances of the case, to lead to a distortion of competition between those business partners that the discrimination between trade partners which are in a competitive relationship may be regarded as abusive. In such a situation, it cannot, however, be required in addition that proof be adduced of an actual, quantifiable deterioration in the competitive position of the business partners taken individually (judgment of 15 March 2007, British Airways v Commission, C‑95/04 P, EU:C:2007:166, paragraph 145).

28Therefore, as the Advocate General submitted in paragraph 86 of his Opinion, it is necessary to examine all the relevant circumstances in order to determine whether price discrimination produces or is capable of producing a competitive disadvantage, for the purposes of subparagraph (c) of the second paragraph of Article 102 TFEU.

29With regard to the issue whether, for the application of subparagraph (c) of the second paragraph of Article 102 TFEU, it is necessary to take into account the seriousness of a possible competitive disadvantage, it must be pointed out that fixing an appreciability (de minimis) threshold for the purposes of determining whether there is an abuse of a dominant position is not justified (see, to that effect, judgment of 6 October 2015, Post Danmark, C‑23/14, EU:C:2015:651, paragraph 73).

30However, in order for it to be capable of creating a competitive disadvantage, the price discrimination referred to in subparagraph (c) of the second paragraph of Article 102 TFEU must affect the interests of the operator which was charged higher tariffs compared with its competitors.

31When it carries out the specific examination referred to in paragraph 28 above, the competition authority or the competent national court is required to take into account all the circumstances of the case submitted to it. It is open to such an authority or court to assess, in that context, the undertaking’s dominant position, the negotiating power as regards the tariffs, the conditions and arrangements for charging those tariffs, their duration and their amount, and the possible existence of a strategy aiming to exclude from the downstream market one of its trade partners which is at least as efficient as its competitors (see, by analogy, judgment of 6 September 2017, Intel v Commission, C‑413/14 P, EU:C:2017:632, paragraph 139 and the case-law cited).

32In the present case, in the first place, with regard to the dominant position and the negotiating power relating to the charging of tariffs on the downstream market, it is clear from the file submitted to the Court that MEO and NOS are GDA’s main clients. In that regard, the referring court states that there is evidence that they have a certain negotiating power vis-à-vis GDA.

33In addition, it is apparent from the information submitted to the Court, even though it is for the referring court to verify that that is indeed the case, that the determination of the prices by GDA is subject to legislation which requires the parties to have recourse to arbitration if they cannot reach agreement. In such a situation, GDA, as it did, in any event, at a given moment during the period at issue in the main proceedings in respect of the prices which it charged to MEO, merely applied the prices established by the arbitration decision.

34In the second place, with regard to the duration and the amount of the tariffs in question in the main proceedings, the referring court indicates, first, that the differentiated tariffs were applied between 2010 and 2013. Secondly, as regards the amounts which MEO paid annually to GDA, it is clear from the data set out in the competition authority’s decision of 3 March 2016 to take no further action, the accuracy of which may be verified by the referring court, that those amounts represented a relatively low percentage of the total costs borne by MEO in its service for retail offerings for subscription television access and that the differentiation in tariffs had a limited effect on MEO’s profits in that context. As the Advocate General stated in point 104 of his Opinion, where the effect of a tariff differentiation on the costs borne by the operator which considers itself to be wronged, or on the profitability and profits of that operator, is not significant, it may, in some circumstances, be deduced that that tariff differentiation is not capable of having any effect on the competitive position of that operator.

35In the third place, it must be pointed out that, in a situation such as that at issue in the main proceedings where the application of differentiated tariffs concerns only the downstream market, the undertaking in a dominant position, in principle, has no interest in excluding one of its trade partners from the downstream market. In any event, the file submitted to the Court does not contain any indication that GDA pursued such an objective.

36It falls to the referring court to determine, in the light of all the foregoing considerations, whether the tariff in the main proceedings was capable of placing MEO at a competitive disadvantage.

37In view of the foregoing, the answer to the questions referred is that the concept of ‘competitive disadvantage’, for the purposes of subparagraph (c) of the second paragraph of Article 102 TFEU, must be interpreted to the effect that, where a dominant undertaking applies discriminatory prices to trade partners on the downstream market, it covers a situation in which that behaviour is capable of distorting competition between those trade partners. A finding of such a ‘competitive disadvantage’ does not require proof of actual quantifiable deterioration in the competitive situation, but must be based on an analysis of all the relevant circumstances of the case leading to the conclusion that that behaviour has an effect on the costs, profits or any other relevant interest of one or more of those partners, so that that conduct is such as to affect that situation.

Costs

38Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Second Chamber) hereby rules: The concept of ‘competitive disadvantage’, for the purposes of subparagraph (c) of the second paragraph of Article 102 TFEU, must be interpreted to the effect that, where a dominant undertaking applies discriminatory prices to trade partners on the downstream market, it covers a situation in which that behaviour is capable of distorting competition between those trade partners. A finding of such a ‘competitive disadvantage’ does not require proof of actual quantifiable deterioration in the competitive situation, but must be based on an analysis of all the relevant circumstances of the case leading to the conclusion that that behaviour has an effect on the costs, profits or any other relevant interest of one or more of those partners, so that that conduct is such as to affect that situation.