IBC Slides Petit - Abuse of Dominance - Huawei and Post Danmark

Current Trends and Practical Considerations in Article 102 Current Trends and Practical Considerations in Article 102 Current Trends and Practical Considerations in Article 102 Current Trends and Practical Considerations in Article 102 TFEUTFEUTFEUTFEU

IBC LegalIBC LegalIBC LegalIBC Legal

Professor Nicolas Petit, University of Liege (Professor Nicolas Petit, University of Liege (Professor Nicolas Petit, University of Liege (Professor Nicolas Petit, University of Liege (ULgULgULgULg))))

7 February 2016, Brussels7 February 2016, Brussels7 February 2016, Brussels7 February 2016, Brussels

@CompetitionProf

www.lcii.euwww.lcii.euwww.lcii.euwww.lcii.eu

� Let’s read the antitrust case-law through the “veil of ignorance”

� So we can agree on a “fair” interpretation of the

case-law

� Huaweï v ZTE

� Post Danmark II

Thought Experiment

� In Rawls’ justice as fairness, principles of justice in

society are set behind a “veil of ignorance”. State of

nature not thought as historical, but as a “primitive condition of culture”.

� “No one knows his place in society, his class position or social status, nor does any one know his fortune in the distribution of natural assets and abilities, his intelligence, strength and the like”.

� “Ensures that no one is advantaged or disadvantaged in the choice of principle by the outcome of natural chance or the contingency of social circumstances”

� “Fundamental agreements reached in it are fair”

� Purpose of Rawls: “determine which principles of justice would be chosen in the original position”.

Case C-170/13, Huawei Technologies Co. Ltd v ZTE Corp., ZTE

Deutschland GmbH


From Existence of Abuse, to Absence of Abuse

QuestionQuestionQuestionQuestion

� ““““Does Does Does Does the proprietor of [an SEP] which the proprietor of [an SEP] which the proprietor of [an SEP] which the proprietor of [an SEP] which informs a standardisation body that it is informs a standardisation body that it is informs a standardisation body that it is informs a standardisation body that it is willing to grant any third party a licence on willing to grant any third party a licence on willing to grant any third party a licence on willing to grant any third party a licence on [FRAND] terms abuse its dominant market [FRAND] terms abuse its dominant market [FRAND] terms abuse its dominant market [FRAND] terms abuse its dominant market position if it brings an action for an position if it brings an action for an position if it brings an action for an position if it brings an action for an injunction against a patent infringerinjunction against a patent infringerinjunction against a patent infringerinjunction against a patent infringer”?”?”?”?

ResponseResponseResponseResponse

� Paragraph 55, the Court talks about how Paragraph 55, the Court talks about how Paragraph 55, the Court talks about how Paragraph 55, the Court talks about how

““““the proprietor of an SEPthe proprietor of an SEPthe proprietor of an SEPthe proprietor of an SEP” can “” can “” can “” can “prevent an prevent an prevent an prevent an action for a prohibitory injunction or for action for a prohibitory injunction or for action for a prohibitory injunction or for action for a prohibitory injunction or for the recall of products from being regarded the recall of products from being regarded the recall of products from being regarded the recall of products from being regarded as abusiveas abusiveas abusiveas abusive””””

� Paragraph 71: a SEP holder that complies Paragraph 71: a SEP holder that complies Paragraph 71: a SEP holder that complies Paragraph 71: a SEP holder that complies

with specific conduct conditions does “with specific conduct conditions does “with specific conduct conditions does “with specific conduct conditions does “not not not not abuse abuse abuse abuse its dominant position … by bringing its dominant position … by bringing its dominant position … by bringing its dominant position … by bringing an action for infringementan action for infringementan action for infringementan action for infringement””””

� German question: tell me what is abuse?

� EU reply: let me tell you what is NOT abuse

� Safe harbor for SEPs holder


Liability for Practicing Entities, Immunity for Non

Practicing Entities?

� Paragraph 52: risk that a SEP proprietor “Paragraph 52: risk that a SEP proprietor “Paragraph 52: risk that a SEP proprietor “Paragraph 52: risk that a SEP proprietor “can prevent products manufactured by can prevent products manufactured by can prevent products manufactured by can prevent products manufactured by competitors from appearing or remaining on the market and competitors from appearing or remaining on the market and competitors from appearing or remaining on the market and competitors from appearing or remaining on the market and thereby reserve to itself thereby reserve to itself thereby reserve to itself thereby reserve to itself the manufacture of the product in questionthe manufacture of the product in questionthe manufacture of the product in questionthe manufacture of the product in question””””

� Practical implication: Non Practicing Entities (“NPEs”) at bay from Article 102 TFEU Practical implication: Non Practicing Entities (“NPEs”) at bay from Article 102 TFEU Practical implication: Non Practicing Entities (“NPEs”) at bay from Article 102 TFEU Practical implication: Non Practicing Entities (“NPEs”) at bay from Article 102 TFEU

liability?liability?liability?liability?

� Paragraph 53 argument?Paragraph 53 argument?Paragraph 53 argument?Paragraph 53 argument?

� “[…] an undertaking to grant licences on FRAND terms creates legitimate expectations on the part of third parties” such that a “refusal by the proprietor of the SEP to grant a licence on those terms may, in principle, constitute an abuse within the meaning of Article 102 TFEU”

� Forgets the introduction of the paragraph: “In those circumstances”


And Again

5th question to the CJEU5th question to the CJEU5th question to the CJEU5th question to the CJEU

� Is a FRAND pledged SEP owner barred Is a FRAND pledged SEP owner barred Is a FRAND pledged SEP owner barred Is a FRAND pledged SEP owner barred

from applying for damages?from applying for damages?from applying for damages?from applying for damages?

� §§§§73: “73: “73: “73: “The exercise by the proprietor of a The exercise by the proprietor of a The exercise by the proprietor of a The exercise by the proprietor of a SEP of its IPRs, may be characterized, in SEP of its IPRs, may be characterized, in SEP of its IPRs, may be characterized, in SEP of its IPRs, may be characterized, in circumstances as in the main proceedings, circumstances as in the main proceedings, circumstances as in the main proceedings, circumstances as in the main proceedings, as an abuse, as an abuse, as an abuse, as an abuse, where those proceedings are where those proceedings are where those proceedings are where those proceedings are liable to prevent products complying with liable to prevent products complying with liable to prevent products complying with liable to prevent products complying with the standard in question manufactured by the standard in question manufactured by the standard in question manufactured by the standard in question manufactured by competitors from appearing or remaining competitors from appearing or remaining competitors from appearing or remaining competitors from appearing or remaining on the marketon the marketon the marketon the market””””

Marco Rubio glitch?Marco Rubio glitch?Marco Rubio glitch?Marco Rubio glitch?


Antitrust Liability vis a vis Competitors

� Only abusive for a SEP holder to seek an injunction and/or product recall Only abusive for a SEP holder to seek an injunction and/or product recall Only abusive for a SEP holder to seek an injunction and/or product recall Only abusive for a SEP holder to seek an injunction and/or product recall

against an implementer with whom it does (or will) compete in a marketagainst an implementer with whom it does (or will) compete in a marketagainst an implementer with whom it does (or will) compete in a marketagainst an implementer with whom it does (or will) compete in a market

� Network equipment supplier can seek injunction against handset Network equipment supplier can seek injunction against handset Network equipment supplier can seek injunction against handset Network equipment supplier can seek injunction against handset

provider?provider?provider?provider?


Antitrust Liability for Exclusion of Competitors, not

Exploitation� Court is silent on the risk that SEPs owners resort to patent litigation Court is silent on the risk that SEPs owners resort to patent litigation Court is silent on the risk that SEPs owners resort to patent litigation Court is silent on the risk that SEPs owners resort to patent litigation –––– or or or or

threats thereof threats thereof threats thereof threats thereof –––– to charge extortionate licensing to charge extortionate licensing to charge extortionate licensing to charge extortionate licensing termstermstermsterms

� Did Did Did Did it miss “it miss “it miss “it miss “patent holdpatent holdpatent holdpatent hold----upupupup”?”?”?”?

� Unlikely?Unlikely?Unlikely?Unlikely?

� Mentioned in German reference, discussed at hearing

� Acknowledged in AG Wathelet’s Opinion under the case


FRAND a Range, not a Pixel

� FRAND offer and counter offer may not FRAND offer and counter offer may not FRAND offer and counter offer may not FRAND offer and counter offer may not matchmatchmatchmatch

� §67: “it is for that alleged infringer, from the point at which its counter-offer is rejected, to provide appropriate security”

� §68: “where no agreement is reached on the details of the FRAND terms following the counter-offer by the alleged infringer” => “independent third party”

� Upper and lower boundUpper and lower boundUpper and lower boundUpper and lower bound

� FRAND is not a pixel priceFRAND is not a pixel priceFRAND is not a pixel priceFRAND is not a pixel price


FRANDFRAND


Take Aways

1.1.1.1. From Existence of Abuse, to Absence of From Existence of Abuse, to Absence of From Existence of Abuse, to Absence of From Existence of Abuse, to Absence of AbuseAbuseAbuseAbuse

2.2.2.2. Antitrust liability for Practicing Entities, Immunity for Antitrust liability for Practicing Entities, Immunity for Antitrust liability for Practicing Entities, Immunity for Antitrust liability for Practicing Entities, Immunity for Non Non Non Non

Practicing Practicing Practicing Practicing Entities?Entities?Entities?Entities?

3.3.3.3. Antitrust Antitrust Antitrust Antitrust Liability for Exclusion of Competitors, not Liability for Exclusion of Competitors, not Liability for Exclusion of Competitors, not Liability for Exclusion of Competitors, not ExploitationExploitationExploitationExploitation

4.4.4.4. Judgment very unhelpful for DG COMP’s developing policy on Judgment very unhelpful for DG COMP’s developing policy on Judgment very unhelpful for DG COMP’s developing policy on Judgment very unhelpful for DG COMP’s developing policy on

PAEs:PAEs:PAEs:PAEs:

European Commission JRC Science and Policy Report, Innovation in the

Digital Single Market: The Role of Patents, 17 March 2015: “The preliminary ruling is also expected to have ramifications for the future of Patent Assertion Entities (PAE) practices”

CJEU, C-23/14, Post Danmark A/S v Konkurrenceradet


Definitions and Legal Regime

Type of rebate Definition Legal Regime Relevant §

« Quantity discount » Linked « solely to the

volume of purchases » and

« corresponding to the costs

savings »

Per se lawful §§27 and 28

« Loyalty rebate » « coupled with an obligation

for, or promise by,

purchasers to obtain all or a

given proportion of their

supplies » from DomCo

Per se unlawful §28

Other rebate schemes Rule of reason, « all the

circumstances, particularly

the criteria and rules

governing the grant of the

rebate »

§29 and following


Other Rebates?� AG AG AG AG KokkottKokkottKokkottKokkott Opinion at Opinion at Opinion at Opinion at §§§§11 and 11 and 11 and 11 and fnfnfnfn 7 and ECA 7 and ECA 7 and ECA 7 and ECA economicseconomicseconomicseconomics

� RebatesRebatesRebatesRebates schedulesschedulesschedulesschedules and and and and exclusivityexclusivityexclusivityexclusivity options, options, options, options, standardizedstandardizedstandardizedstandardized or or or or invidualizedinvidualizedinvidualizedinvidualized

� And all the And all the And all the And all the othersothersothersothers: : : : targettargettargettarget rebatesrebatesrebatesrebates, etc., etc., etc., etc.

� ClearsClearsClearsClears Intel Intel Intel Intel nonnonnonnon----sensesensesensesense thatthatthatthat de facto de facto de facto de facto exclusivityexclusivityexclusivityexclusivity isisisis per se per se per se per se abusiveabusiveabusiveabusive

Level Letters per year Or gross postage value

(DKK) per year

Rebate

1 0-29,999,00 0-299,999,00 0%

2 30,000-74,999 300,000-749,999 6%

3 75,000-149,999 750,000-1,500,000 7%

4 150,000-499,999 1,500,000-5,000,000 8%

[...] [...] [...] [...]

10 From 2,000,000 upwards From 20,000,000

upwards

16%



« Quantity discount » Linked « solely to the volume

of purchases » and


savings »



for, or promise by, purchasers

to obtain all or a given

proportion of their supplies »

from DomCo


Other rebate schemes,

including

• rebates schedules and

exclusivity options

• Individualized and

standardized

• Target rebates, etc.

Rule of reason, « all the

circumstances, particularly the

criteria and rules governing

the grant of the rebate »

§29 and following


Assessment: « All the circumstances »

General General General General parametersparametersparametersparameters

� §§§§33: more 33: more 33: more 33: more problematicproblematicproblematicproblematic if «if «if «if « extendextendextendextend to to to to purchasespurchasespurchasespurchases in the in the in the in the aggregateaggregateaggregateaggregate » => » => » => » =>

retroactiveretroactiveretroactiveretroactive

� §§§§34: «34: «34: «34: « relativelyrelativelyrelativelyrelatively long long long long referencereferencereferencereference periodperiodperiodperiod » » » »

(«(«(«(« of one of one of one of one yearyearyearyear »)»)»)»)

� §§§§35: 35: 35: 35: rolerolerolerole of «of «of «of « non contestablenon contestablenon contestablenon contestable » » » » shareshareshareshare

� §§§§44444444----45: «45: «45: «45: «large proportion of large proportion of large proportion of large proportion of customerscustomerscustomerscustomers » » » »

thatthatthatthat are are are are affectedaffectedaffectedaffected no no no no evidenceevidenceevidenceevidence of abuse, but of abuse, but of abuse, but of abuse, but

influences «influences «influences «influences « likelihoodlikelihoodlikelihoodlikelihood of of of of anticompetitiveanticompetitiveanticompetitiveanticompetitiveexclusionaryexclusionaryexclusionaryexclusionary effectseffectseffectseffects »»»»

� §§§§47474747----49: «49: «49: «49: « counterbalancedcounterbalancedcounterbalancedcounterbalanced or or or or outweighedoutweighedoutweighedoutweighedby by by by advantagesadvantagesadvantagesadvantages in in in in termstermstermsterms of of of of efficiencyefficiencyefficiencyefficiency »»»»

Case Case Case Case specificspecificspecificspecific factorsfactorsfactorsfactors

� §§§§39: «39: «39: «39: « structural structural structural structural advantagesadvantagesadvantagesadvantages conferredconferredconferredconferred, , , , inter alia, by the inter alia, by the inter alia, by the inter alia, by the statutorystatutorystatutorystatutory monopolymonopolymonopolymonopoly »»»»



« Quantity discount » Linked « solely to the volume

of purchases » and


savings »






from DomCo



including


exclusivity options


standardized


Rule of reason, « all the

circumstances, particularly the

criteria and rules governing

the grant of the rebate » =>

qualitative assessment,

including efficiency defense

EXCEPT for legacy industries

§33-49


Relevance of AEC Test

� §§§§57575757: “: “: “: “it is not possible to infer from Articleit is not possible to infer from Articleit is not possible to infer from Articleit is not possible to infer from Article 82 EC or the case82 EC or the case82 EC or the case82 EC or the case----law of the Court law of the Court law of the Court law of the Court that there is a legal obligation requiring a finding to the effect that a rebate that there is a legal obligation requiring a finding to the effect that a rebate that there is a legal obligation requiring a finding to the effect that a rebate that there is a legal obligation requiring a finding to the effect that a rebate scheme operated by a dominant undertaking is abusive to be based always on scheme operated by a dominant undertaking is abusive to be based always on scheme operated by a dominant undertaking is abusive to be based always on scheme operated by a dominant undertaking is abusive to be based always on the asthe asthe asthe as----efficientefficientefficientefficient----competitor testcompetitor testcompetitor testcompetitor test”.”.”.”.

� §§§§58585858: : : : ““““nevertheless that nevertheless that nevertheless that nevertheless that conclusion ought not to have the effect of excluding, on conclusion ought not to have the effect of excluding, on conclusion ought not to have the effect of excluding, on conclusion ought not to have the effect of excluding, on principle, recourse to the asprinciple, recourse to the asprinciple, recourse to the asprinciple, recourse to the as----efficientefficientefficientefficient----competitor test in cases involving a rebate competitor test in cases involving a rebate competitor test in cases involving a rebate competitor test in cases involving a rebate scheme for the purposes of examining its compatibility with Articlescheme for the purposes of examining its compatibility with Articlescheme for the purposes of examining its compatibility with Articlescheme for the purposes of examining its compatibility with Article 82 EC82 EC82 EC82 EC”.”.”.”.

� §§§§61: “61: “61: “61: “one one one one tool amongst otherstool amongst otherstool amongst otherstool amongst others”.”.”.”.

� §§§§59: “59: “59: “59: “of no relevanceof no relevanceof no relevanceof no relevance” in legacy markets with unparalleled structural dominance” in legacy markets with unparalleled structural dominance” in legacy markets with unparalleled structural dominance” in legacy markets with unparalleled structural dominance

� §§§§62: Not a “62: Not a “62: Not a “62: Not a “necessary conditionnecessary conditionnecessary conditionnecessary condition”, but possibly sufficient?”, but possibly sufficient?”, but possibly sufficient?”, but possibly sufficient?



« Quantity discount » « linked solely to the volume

of purchases » and


savings »



for, or promise by,

purchasers to obtain all or a

given proportion of their

supplies » from DomCo



including


exclusivity options


standardized


Rule of reason

• Qualitative assessment,

including efficiency

defense EXCEPT for legacy

industries

• Or quantitative AEC test,

EXCEPT FOR legacy

industries

§33-49; §§57-62


De minimis?

� CJEU CJEU CJEU CJEU separatesseparatesseparatesseparates twotwotwotwo issues:issues:issues:issues:

� §63: « Anticompetitive effect [...] must be, on the one hand, probable and on the other, serious or appreciable »

� §68: probability or likelihood assessment carried « out in light of all relevant circumstances », see previous paragraphs

� §73: « fixing an appreciability threshold for the purposes of determining whether there is an abuse of a dominant position is not justified »



« Quantity discount » « linked solely to the volume

of purchases » and


savings »






from DomCo


All other rebate schemes,

including


exclusivity options


standardized


Probability assessment Appreciability

assessment

§33-49;

§§57-62;

§§63-68-73Rule of reason

• Qualitative assessment,

including efficiency

defense EXCEPT for

legacy industries

• Or quantitative AEC test,

EXCEPT FOR legacy

industries

Per se


Conclusion

� RuleRuleRuleRule of of of of reasonreasonreasonreason for all for all for all for all rebatesrebatesrebatesrebates w/o w/o w/o w/o formalformalformalformal exclusivityexclusivityexclusivityexclusivity «««« obligationobligationobligationobligation » or «» or «» or «» or « promisepromisepromisepromise »»»»

� Qualitative Qualitative Qualitative Qualitative analyzisanalyzisanalyzisanalyzis, , , , withwithwithwith optionaloptionaloptionaloptional AEC testAEC testAEC testAEC test

� But But But But optionaloptionaloptionaloptional for for for for whomwhomwhomwhom ((((DomCoDomCoDomCoDomCo defensedefensedefensedefense)?)?)?)?

� 102(3) 102(3) 102(3) 102(3) cementedcementedcementedcemented, but , but , but , but praticalpraticalpraticalpratical problemsproblemsproblemsproblems: : : : efficienciesefficienciesefficienciesefficiencies in the in the in the in the darkdarkdarkdark????

� All All All All truetruetruetrue, , , , exceptexceptexceptexcept for the Commission for the Commission for the Commission for the Commission whichwhichwhichwhich isisisis formallyformallyformallyformally «««« boundboundboundbound » to » to » to » to applyapplyapplyapply the Guidance the Guidance the Guidance the Guidance

PaperPaperPaperPaper, , , , unlessunlessunlessunless itititit withdrawswithdrawswithdrawswithdraws itititit

� To know To know To know To know whywhywhywhy, , , , seeseeseesee http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2695732http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2695732http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2695732http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2695732


Final remarks: Justice is Blind (literally)

HuaweïHuaweïHuaweïHuaweï

� No No No No interestinterestinterestinterest for for for for contemporarycontemporarycontemporarycontemporary legallegallegallegal debatedebatedebatedebate

� PAEs => affirms conservative standard of

liability (Huaweï v ZTE), despite preliminary ref

phrased in very general terms

� Silence on « holdup » conjecture

� HuaweïHuaweïHuaweïHuaweï v ZTE v ZTE v ZTE v ZTE more more more more patenteepatenteepatenteepatentee friendlyfriendlyfriendlyfriendly thanthanthanthan Samsung Samsung Samsung Samsung licensinglicensinglicensinglicensing frameworkframeworkframeworkframework

� SettlementSettlementSettlementSettlement withwithwithwith Commission Commission Commission Commission maymaymaymay bebebebe more more more more onerousonerousonerousonerous

thatthatthatthat Court’sCourt’sCourt’sCourt’s mademademademade----lawlawlawlaw

Post Post Post Post DanmarkDanmarkDanmarkDanmark IIIIIIII

� No No No No interestinterestinterestinterest for case for case for case for case contextcontextcontextcontext

� RebateRebateRebateRebate dateddateddateddated back to 2000; back to 2000; back to 2000; back to 2000; BringCityBringCityBringCityBringCity Mail entry in Mail entry in Mail entry in Mail entry in

2007200720072007: : : : RebateRebateRebateRebate not not not not strategicstrategicstrategicstrategic; ; ; ; RebateRebateRebateRebate diddiddiddid not not not not precludeprecludeprecludepreclude

entry; entry; entry; entry; BringCityBringCityBringCityBringCity Mail Mail Mail Mail subsidiarysubsidiarysubsidiarysubsidiary of of of of NorwayNorwayNorwayNorway postal postal postal postal

incumbentincumbentincumbentincumbent…………

� Exit Exit Exit Exit causedcausedcausedcaused by State by State by State by State aidaidaidaid? ? ? ? SeeSeeSeeSee AnnualAnnualAnnualAnnual report:report:report:report:““““Bring Bring Bring Bring CitymailCitymailCitymailCitymail Denmark was woundDenmark was woundDenmark was woundDenmark was wound----uuuupppp ffffrrrroooommmm JJJJaaaannnnuuuuaaaarrrryyyy.... TTTThhhheeeeyyyy ddddiiiissssttttrrrriiiibbbbuuuutttteeeedddd ccccoooommmmmmmmeeeerrrrcccciiiiaaaallll mmmmaaaaiiiillll iiiinnnn tttthhhheeee CCCCooooppppeeeennnnhhhhaaaaggggeeeennnn aaaarrrreeeeaaaa since 2007. The since 2007. The since 2007. The since 2007. The inception inception inception inception was hit by the financial was hit by the financial was hit by the financial was hit by the financial crisis and recession. At the same time Bring crisis and recession. At the same time Bring crisis and recession. At the same time Bring crisis and recession. At the same time Bring CCCCiiiittttyyyymmmmaaaaiiiillllDDDDeeeennnnmmmmaaaarrrrkkkk hhhhaaaadddd aaaa VVVVAAAATTTT lllliiiiaaaabbbbiiiilllliiiittttyyyy ooooffff 22225555 ppppeeeerrrrcccceeeennnntttt,,,, ccccoooommmmppppaaaarrrreeeedddd with Post with Post with Post with Post DanmarkDanmarkDanmarkDanmark, , , , which is VAT which is VAT which is VAT which is VAT exemptexemptexemptexempt”. ”. ”. ”.

httphttphttphttp://www.postennorge.com/group/financial://www.postennorge.com/group/financial://www.postennorge.com/group/financial://www.postennorge.com/group/financial----

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IBC Slides Petit - Abuse of Dominance - Huawei and Post Danmark