CN03 - Court of Justice delivers guidance on abuses of dominance through data transfers

On 12 May 2022, the European Court of Justice ("the Court") delivered a preliminary ruling on abuse of dominance through the exploitation of data. As the historic monopolist, ENEL had access to customer data which it used to strengthen its position. 

Key takeaways

• ENEL prevented its competitors' access to valuable customer data that it collected as monopolist on the regulated market.
• Even though third parties offered similar customer data, by providing discriminatory data access ENEL did not compete on the merits.
• An abuse of dominance does not require proof of direct harm to consumers, nor proof of concrete effects on the market.
• The "as efficient competitor" test can be applied to non-price practices.

Facts

In the context of the liberalisation of the electricity market, the historic monopolist ENEL entrusted the supply of electricity on the free market to its subsidiary Enel Energia ("EE") and the management of the regulated regime to another subsidiary, Servizio Elettrico Nazionale ("SEN").

On 20 December 2018, the Italian Competition Authority imposed a fine of EUR 93 million on ENEL for discriminating against its competitors when collecting customer data and transferring this data from SEN to EE to send free market offers. 

After a partially successful appeal in Italy, which reduced the fine to EUR 27.5 million, ENEL brought the case before the Italian Supreme Court. The Italian Supreme Court suspended the proceedings and asked the Court five questions on the interpretation of Article 102 of the Treaty on the Functioning of the European Union ("TFEU").

Preliminary ruling of the Court

Firstly, in relation to the demonstration of effects, the Court confirmed that it is not necessary to show: 

• direct harm to consumers. It is sufficient to establish adverse effects on the structure of the market. The dominant undertaking can escape the prohibition of Article 102 TFEU by proving positive effects for consumers; and
• concrete exclusionary effects. ENEL argued that the conduct was unsuccessful and therefore had no effect. However, the Court held that it is sufficient for the conduct to have had the capacity to restrict competition at the time it was put in place. In other words, even if after the event it transpires there was no effect, this is not a "get out of jail free" card. However, the lack of effects, combined with other evidence, can be used by the dominant company to demonstrate the conduct is inherently incapable of producing such effects.

Secondly, the Court held that the conduct should deviate from "competition on the merits" to constitute an abuse. Such anti-competitive conduct includes:

• a practice which has no economic interest other than that of eliminating its competitors; and
• a practice which could not be adopted by a hypothetical as efficient competitor ("AEC") because it relies on the use of resources or means inherent to the holding of a dominant position. The Court held that ENEL had acted in a discriminatory manner in granting access to data available to it as a result of its former monopoly to maintain a dominant position on the newly liberalised market. In the circumstances, that was regardless of whether competitors could use similar customer data lists of third parties.

Thirdly, the Court confirmed well-established Article 102 TFEU principles:

• evidence of anticompetitive intent is not required to establish the abuse. However lack of intent may be taken into account, if supported by other elements, to deny the existence of the abuse of dominance; and
• parental liability is assumed when the abuse is carried out by one or more subsidiaries of one economic unit. However, the parent company can rebut the presumption if it had no influence over the conduct of the subsidiaries concerned.

Comment

This is a significant judgment in the application of Article 102 TFEU. This is the first time the Court has confirmed the AEC test is not only applicable to pricing abuses but applies by analogy to non-pricing abuses.

The Court also set out that demonstration of potential anticompetitive effects must be supplemented by evidence that the practice does not constitute competition on the merits. 

Finally, given the discriminatory access granted by SEN to EE, the potential ability of competitors to access similar data by different means did not change the conclusion on the existence of an abuse in this case. 

With thanks to Astrid Dorigny-Sicard of Ashurst for her contribution.