Abuse: an access request you can’t refuse?
According to the European Court of Justice, the European Commission rightfully refrained from applying the essential facilities test to assess whether the removal of a railway track by a monopolist manager of a state-developed facility with a statutory obligation to grant third parties access to its facilities was abusive.
A dominant company can be forced to grant rivals access to its infrastructure only if the strict conditions of the essential facilities test are met. Companies should note that the narrow scope of this test is limited to ‘pure’ access cases. Infringement of a regulatory access obligation must be assessed under the general framework for abuse of dominance, since that obligation prevents dominant companies from refusing access. They can only influence the conditions for access.
This ruling may have consequences for the interplay between Big Tech antitrust investigations and the regulatory obligations of the Digital Markets Act.
In 2017, the European Commission (the Commission) imposed a EUR 27 million fine for abuse of dominance on Lietuvos Gelezinkeliai (LG), the Lithuanian national railway company. The alleged abuse related to the removal of a 19 km railway track, stretching from an oil refinery in Lithuania to the Latvian border. The owner of the refinery, an LG customer, was in negotiations to switch services to the Latvian national railway company (LDZ). LDZ needed the track if it was to make a competitive offer. The removal meant that a longer alternative route through Lithuania had to be used, making LDZ’s offer uncompetitive.
LG appealed the Commission’s decision with the General Court (see our December 2020 newsletter) and subsequently with the European Court of Justice (ECJ). On 12 January 2023, the ECJ upheld the General Court’s ruling that the Commission had been right to assess the track removal under the general framework for abuse of dominance, instead of applying the essential facilities test.
Under the essential facilities doctrine, a dominant company can be forced to grant rivals access to its infrastructure if the following strict conditions are met:
- the refusal to grant access will likely eliminate all competition on the part of the company requesting access;
- there is no objective justification for the refusal; and
- the infrastructure is indispensable.
The scope of application of this doctrine is intentionally narrower than the general framework for the assessment of abuse of dominance, in order to strike a fair balance between the protection of competition and a dominant company’s incentive to invest in the creation of its own infrastructure.
According to the ECJ, LG’s case differed from a refusal to provide access under the essential facilities doctrine for the following reasons:
- destroying infrastructure is not the same as refusing access to it, since destroyed infrastructure is unusable not only by competitors but also by the dominant company itself;
- there is no investment incentive to protect, now that LG does not own the infrastructure and the infrastructure is publicly funded;
- the applicable regulatory framework already imposes an access obligation on LG. As a result, LG cannot actually refuse to give access; although it can influence the conditions for access.
The Commission had therefore rightfully viewed LG’s removal of the track as an independent form of abuse that had to be assessed under the general framework for abuse instead of the essential facilities doctrine. The General Court had been entirely justified in upholding the Commission’s assessment that the track removal was capable of hindering LDZ’s market entry by making its access to the market more difficult. LG had a special responsibility not to impair genuine, undistorted competition on the market and had failed to meet this responsibility.
This ruling confirms that the essential facilities test applies to ‘pure’ access cases only: it does not come into play where the dominant company cannot legally refuse access due to a regulatory access obligation. An infringement of a regulatory access obligation must therefore be assessed under the general framework for abuse, without it having to be demonstrated that the relevant infrastructure, service or input is indispensable.
It will be interesting to see how this ruling may affect the interplay between the assessment of infringements under the regulatory access obligations of the Digital Markets Act (DMA) and Big Tech antitrust investigations. The chances of an essential facilities defence being accepted for infringements of the DMA’s access requirements seem near to zero after this ruling. The upcoming appeal against the General Court’s Google Shopping ruling may bring more clarity on the potential application of a quasi-essential facilities doctrine in this sphere (see our December 2021 newsletter).
This article was published in the Competition Newsletter of February 2023. Other articles in this newsletter: