Competition on the Merits: A Crucial Element in Assessing Exclusionary Conduct

The distinction between legitimate competition and exclusionary conduct can be tricky, as they often appear similar. The idea of 'competition on the merits' is crucial, but its definition and application in current approaches are insufficient. Recent rulings have reaffirmed the significance of 'competition on the merits' as a vital component of abuse assessment.

The recent SEN judgment highlights two conditions for deeming an exclusionary practice by a dominant undertaking abusive:

1. The practice must have the potential to create an exclusionary effect.
2. It must rely on means that go beyond the scope of competition on the merits.

The efficiency of competitors impacted by exclusionary effects is not a requirement to establish the potential for exclusionary effects. The efficiency of hypothetical competitors pertains to the abuse assessment regarding the use of means not based on competition on the merits, rather than the condition concerning the capability of exclusionary effects. The condition requiring the dominant undertaking to employ means of competition 'on the merits' is often overlooked.

This oversight can lead to confusion and inconsistency in evaluating exclusionary conduct. It's essential to determine whether the dominant undertaking's actions aim to improve its competitive position through legitimate means or seek to exclude rivals through anti-competitive practices. The latter might involve tactics such as predatory pricing, tying, exclusive dealing, or refusal to supply.

The concept of 'competition on the merits' requires companies to compete based on efficiency, innovation, quality, and price, rather than resorting to unfair or anti-competitive strategies. This means firms should have the freedom to offer superior products or services at lower prices, invest in innovation, and enhance efficiency without facing unfair obstacles or barriers.

Therefore, when assessing whether a dominant undertaking's conduct is abusive, it's crucial to examine whether it's based on legitimate competition on the merits or aims to exclude rivals through anti-competitive practices. This necessitates a thorough analysis of the relevant market, the dominant undertaking's market power, the effects of its conduct on competition and consumers, and potential justifications for the conduct. A balanced approach considering both the benefits and harms of the conduct is necessary to differentiate between legitimate competition and exclusionary conduct.