Last 10 June, the Spanish competition authority (Comisión Nacional de los Mercados y la Competencia or “CNMC”) served an interesting decision on a solar power plant developer, together with an EUR 4.9 million fine, for abusing its alleged dominant position as single point of contact with the transmission system operator for access and connection to the electricity grid. Although charging beneficiaries of regulatory privileges with abuse of dominance for guaranteeing a level playing field in the exercise of those privileges seems like a walk in the park for watchdogs after C 165/19 P Slovak Telekom (if it was not already after case C-52/09 TeliaSonera desacralised the essential facilities doctrine), the CNMC’s reasoning on market definition, market power and abusive conduct in case S/0022/20 Enel Green Power España provides an insightful corollary of how national trustbusters are getting their heads around the recent silent revolution in exclusionary abuses.
1. Plot (if you know the facts you can skip this section)
A succinct summary of the CNMC decision of 10 June 2022 in case S/0022/20 Enel Green Power España (the “Decision”) follows.
Enel Green Power España, S.L. (“Enel”), subsidiary of “Endesa Generación, S.A.” (in turn owned by the Italian multinational energy company Enel S.p.A.) is a renewable energy producer which developed, among others, two solar power plants in Andalusia and a third one in Castile and Leon. Under then applicable regulation, there existed the legally blurred device of “node-specific single point of contact” (interlocutor único de nudo or “IUN”) the specifics of which were not regulated in detail and which ended up being abrogated in 2020.
Then, before 2020, the first power plant developer to file an application with the unbundled transmission system operator (Red Eléctrica de España, S.A. or “REE”) for access and connection to a node of the transmission grid was in general appointed by the Spanish or the regional government, depending on the node’s voltage, as IUN for the node. This was an exception to the individual application for access and connection to the transmission grid which aimed to simplify the process by having a single applicant liaise with REE on behalf of all others. The IUN was subject to a “general principle” of non-discrimination in the application process.
Against this background, the CNMC considered proven that Enel, in its capacity as IUN, discriminated against third-party developers seeking access to the two relevant nodes in Andalusia and Castile and Leon to which he was applying for connection too for the three plants mentioned above. In particular, Enel supposedly delayed the applications of two of the third-party developers on the pretext of flaws that needed to be remedied before submission to REE, without being competent to perform such check (whether Enel was right or not in that the submissions were flawed), or by requiring updates of those applications. It did not processed either its own application jointly with the other developers’ as it was mandated by regulation.
In the CNMC’s view the consequence was expediting Enel’s application (which by the way did not complied itself with the essential requirement for guarantee deposit until it was warned by REE) and delaying the other developers’, thereby leading to an unfair allocation of capacity in the node. The regulatory non-compliance of Enel’s conduct was confirmed by the supervision chamber of the CNMC (competent to oversee the energy sector) in the requests for access conflict settlement filed by the affected third-party developers. The CNMC decisions ordered the join processing of all applications,[1] and one of those was confirmed by the National Court of Appeal.[2]
2. Scene
Traditionally, two mutually exclusive legal tests (entailing quite different standards) for the establishment of exclusionary abuses of dominance have coexisted for the last decades: the essential facilities doctrine (which sets a qualified standard by conditioning the abusive nature of dominant companies’ refusal to share some advantage or “facility” upon indispensability of such advantage for rivals in a related market to be able to compete viably) and the ordinary or generic exclusionary test (featuring a much lower standard that only requires for a conduct to exist which both (i) is “artificial”-“abnormal”-“not competition on the merits” – concept explained below, and (ii) has a potential for driving out competitors). The debate on the criteria to decide whether one or the other is applicable has lingered for more than ten years but it has become particularly pressing in digital economy, where indispensability is close to impossible to prove in practice.
Long story short (please bear with the inaccuracies that come with oversimplification):
In February 2011, the Court of Justice held in TeliaSonera that indispensability does not necessarily have to be proven for a practice which results in preventing access to an advantage or facility to be abusive (on the substance, a margin squeeze by a dominant telecom company which raised the wholesale prices for access to its local loop above its own retail prices so equally efficient competing retailers would not be able to profitably provide retail telecom services). However, the Court of Justice was careful enough not to enshrine a general principle but rather coined a raised margin squeeze to standalone abuse category.
Then, ten years later, in March 2021, came Slovak Telekom[3] (also on deteriorated access to the local loop by a dominant telecom company but this time by non-pricing means) to reveal the aletheia that had been there since TeliaSonera, or even since the very birth of the essential doctrine in Europe (it was imported from the United States) twenty seven years ago in Magill:[4] the criterion to decide whether the essential facilities doctrine or the generic exclusionary abuse test are applicable is the quasi-ethical (I like the parallel with the Latin ne fas) concept of “competition on the merits”, that is, any refusal by a dominant company to share their advantages that is not “competition on the merits” (i.e. artificial or abnormal in that the dominant company has not any interest in engaging in such conduct other than excluding competitors[5]) is assessed under the laxer generic exclusionary abuse test instead of the essential facilities doctrine and, thus, the advantage does not have to be indispensable for the refusal to be abusive. This is what I called the “unified theory of exclusionary abuses”.
However, the Court of Justice’s shying away in Slovak Telekom from making a general statement that transcend the clear case of artificiality at stake (i.e. deteriorating access by rival retailers to the local loop)[6] left us with the problem of defining the boundaries of “competition not on the merits” with the legitimate exercise of the right not to share some advantage with rivals that is inherent in the freedom to conduct a business and the right to property enshrined in Articles 16 and 17 of the Charter of Fundamental Rights of the European Union. And authorities may feel tempted to stretch the concept to avoid demonstrating indispensability, especially in digital markets where indispensability is nowhere to be found.
This is so especially after the General Court extended in Google[7] the concept of artificiality-abnormality-competition not on the merits to the self-preferencing of a business in a related market (price comparison services) by using a (non-indispensable) advantage or facility in the dominated market (general internet search) in a borderline case: Google supposedly devised its general internet search services in a way that systematically relegated rival comparison service results on result pages and they could never make it to the most prominent display area, which was reserved to Google’s own comparison service results (Google Shopping). This drift can result in conferring a dangerously discretionary power on competition authorities to double-think dominant company’s decisions regarding the free use of their own advantages, the lawfulness of which would depend on an inherently subjective assessment of the “artificiality” or “normality” of such decision by watchdogs. One could imagine a competition finding fault with Apple’s decision not to licence its operating system to rival device manufacturers because they view it as “abnormal,” and thus not based on the merits.
Finally, in Servizio Elettrico Nazionale,[8] the Court of Justice raised the “as efficient competitor” benchmark (whether competitors that are as efficient as the dominant company may outlive the dominant company’s practice) from Deutsche Telekom[9] and TeliaSonera[10] to the category of general principle allowing to reconcile the essential facilities doctrine with the generic exclusionary abuse test. To achieve this, the Court of Justice equated the as efficient competitor test to “competition on the merits” (i.e. if equally efficient competitors cannot viably compete through the dominant company’s practice such practice is artificial-abnormal-not competition on the merits and the generic exclusionary abuse test applies), which allows indispensability to be construed as a scenario of artificiality-abnormality-competition not on the merits (i.e. a conduct, for the rest not artificial-normal-competition on the merits – e.g. not breaching regulation, becomes artificial-abnormal-competition not on the merits where there is an indispensable advantage that the dominant company refuses to share because as efficient competitors would be excluded in that scenario).
3. Acts
3.1. Market definition
Regarding market definition (conveniently, one might think), the CNMC delineates both the product and the geographic markets as node-specific. The stated reasons are, from the demand perspective, that the viability of a power plant development project is chiefly contingent upon the proximity to the node due to technical and administrative considerations (e.g. need to deploy infrastructure, buy land and get permits) and, therefore, developers’ decision to build a plat is driven by distance to, and access availability of, a specific node. Consequently, the node is seen as delimitating the playground where developers compete.
From the supply perspective, the CNMC limits itself to listing the physical and regulatory hurdles that REE would face if it were to make more nodes available to keep up with demand. In particular, one would have missed more in depth discussion on the bigger picture of the dynamics of competition between the companies that usually develop power plants: are they large companies competing on a national or even broader scale e.g. when they are considering where to set up a site? This would not be so hare-brained when a similar rationale lies behind the definition of electricity generation markets[11] which the CNMC recognised in the Decision as related to IUN markets.[12]
Also, on the product side, one would have appreciated a better explanation of the trade relationship that underpins the definition of a market for access to the node and how it is susceptible of qualifying as a market at all, which the CNMC appears to take for granted despite of its decisiveness for the ensuing appraisal of dominance. In this regard, the cart-before-the-horse enforcement policy stance that markets should be defined in function of the competition concerns (theories of harm) to be raised, which was given seal of approval in the 2019 report on competition policy for the digital era,[13] springs to my mind.
3.2. Dominance
Even more remarkable is the appraisal of dominance, where the Commission turns on its head the contestability theory in case T‑79/12 Cisco/Messagenet[14] (which downplayed the importance of market shares for market power gauging). Indeed, the CNMC finds that Enel’s capacity as IUN afforded it enough independence of behaviour as to make its not particularly high market shares (20.7 % for one node and 41.9 % for the other) not decisive in gainsaying its dominance.[15] Leaving that argument aside, as it is perfectly valid (albeit unusual) because the 40 % market share threshold for dominance operates just as rebuttable presumption, what really comes across as convoluted is the reasoning that infers dominance also from the fact that Enel was in a position to exert with discretion its regulatory powers in processing access applications (although that discretion is admittedly limited).[16]
Therefore, the seemingly preconceived criticism that Enel’s allegedly discriminatory conduct comes in for seems to take precedence over a thorough analysis of its actual ability to behave independently and the causal link with the exclusionary effects of its conduct. This completes a somehow circular reasoning with the competition concern-driven market definition. Here the CNMC seems to go further than the case law referred to above in that the “objectively unlawful” (as the Spanish Supreme Court puts it[17]) or quasi-ethically wrong nature of the conduct exceeds the boundaries of “competition on the merits” for the purposes of finding an abuse (where it belongs) and taints the earlier phases of market definition and dominance finding.
3.3. Abuse
Leaving aside the creativity unfolded in market definition and dominance assessment, it is of course the analysis of the conduct that draws the intellectual curiosity of competition law enthusiasts. In this regard, what is most striking is the legal basis chosen by the CNMC: abusive discrimination under Article 2(d) of Law 15/2007, of 3 Julio, on the Protection of Competition, which is the counterpart to Article 102(c) of the Treaty on the Functioning of the European Union. This category of abuse has been traditionally limited to discrimination against commercial partners or “second- line injury” (e.g. supplier favouring some customers over others or customers favouring some suppliers over others), while its application to self-preferencing or “first-line injury” (i.e. one company favouring its own business in a related market over competitors) is highly controversial, especially in Spain (where the Supreme Court has been firm in asserting the right of self-preferencing or “group privilege”[18]).
Also in the European Union (EU), except for some outlying cases of “super-dominance”,[19] the debate about self-preferencing, which gained frenetic pace in digital economy and some authors (including myself) discussed at length[20] before the Google saga and the Slovak Telekom judgement, was settled after these rulings in favour of a much simpler (albeit dangerous) solution: the generic exclusionary test applies so long as the conduct is not competition on the merits or, as I like to call it, the “unified theory of exclusionary abuses” (as explained in Section 2 above).
Eloquently, the cases cited by the CNMC in support of the abusive discrimination either refer to an instance of second-line injury[21] or concern already the application of the “unified theory of exclusionary abuse” in Servizio Elettrico Nazionale,[22] where discrimination is invoked to demonstrate the artificiality or abnormality of the conduct rather than to present it as abusive in its own right.[23]
Why would the CNMC choose a fairly debatable (even plainly wrong) legal basis (abusive discrimination) which entails a more stringent test (the advantage derived from discrimination needs to be significant,[24] which is questionable in this case) when a much easier tool (generic exclusionary abuse) was available and equally not requiring proof of indispensability, since Enel’s conduct is easily depictable as artificial-abnormal-not competition on the merits precisely because of its discriminatory nature?
In other words, it would have been easier for the CNMC to apply strictly the Google and Slovak Telekom doctrine and use the discrimination in Enel’s conduct to demonstrate its artificiality (and hence its abusive character just by showing the potential anticompetitive effect, which is indeed proven as actual in the Decision)[25] than invoking discrimination as a standalone abuse which is arguably not applicable to self-preferencing (especially in the absence of “superdominance” and under Spanish case-law) and would require evidence of the qualified disadvantage at which competitors are placed.
Two possible explanations come to mind: either the CNMC does not trust (or maybe fears) how far the “unified theory of exclusionary abuses” will get to spare the proof of indispensability by racking the concept of competition on the merits, or the CNMC has heard of the possibility of avoiding indispensability but it is still unsure of how to do it. Which of those explanations is the optimistic and the pessimistic one the reader should decide in conscience.
4. Denouement
In conclusion, the naturalness with which the CNMC finds Enel’s self-preferencing abusive without showing whether the “equal” allocation of capacity in the node was indispensable for third-party developers to compete speaks, in my view, quite expressively of how the still recent change in the test for exclusionary abuses has put down roots in the aftermath of the Google saga and the Slovak Telekom judgement. However, trustbusters seem to still be hesitant about how to pick the right legal basis, which has massive implications because the legal standard may be completely different (and not met on the facts) and make decisions an easy target for defendants on appeal. Besides, we are witnessing how little difficulty competition authorities find in defining markets and stretching the assessment of dominance the way it is more convenient for the competition concern they have in mind from the outset, under the aegis of the Commission’s fearmongering around digital markets, and at the risk of turning the whole edifice of abuse od dominance upside down.
[1] Cases CFT/DE/028/18 [2018], CFT/DE/002/19 [2019] and CFT/DE/013/19 [2019].
[2] Appeal 72/2019 [2022, ES:AN:2022:1400].
[3] Case C-165/19 P Slovak Telekom v Commission [2021, EU:C:2021:239].
[4] Joined cases C-241/91 P and C-242/91 P RTE and ITP v Commission [1995, EU:C:1995:98].
[5] Case C‑377/20 Servizio Elettrico Nazionale v AGCM [2022, EU:C:2022:379], para. 77
[6] The same goes for case T-814/17 Lietuvos geležinkeliai AB v Commission [2020, EU:T:2020:545], where obviously the General Court considered that a railway operator’s failure to fix a stretch of railway to exclude rival rail freight transport companies was not competition on the merits.
[7] Case T‑612/17 Google v Commission [2021, EU:T:2021:763].
[8] Case C‑377/20 Servizio Elettrico Nazionale v AGCM [2022, EU:C:2022:379].
[9] Case C-280/08 P Deutsche Telekom v Commission [2010, EU:C:2010:603], 234.
[10] Case C-52/09 Konkurrensverket v TeliaSonera [2011, EU:C:2011:83], para. 70.
[11] Among others, Case M.8871 RWE/E.On assets [2019], para. 17 and sq.
[12] Case S/0022/20 Enel Green Power España [2022], para. 35.
[13] Jacques Crémer, Yves-Alexandre de Montjoye, Heike Schweitzer, Competition policy for the digital era [2019], p. 3.
[14] Case T‑79/12 Cisco/Messagenet [2013, EU:T:2013:635], para. 69.
[15] Decision, paras. 168 and 178.
[16] Ibid., paras. 178 to 183.
[17] Appeal 9174/2003 [2006, ES:TS:2006:3887], point 8.
[18] Appeal 7151/2003 [2006, ES:TS:2006:3240], point 12.
[19] Case T-228/97 Irish Sugar v Commission [1999, EU:T:1999:246] or joined cases C-395/96 P and C-396/96 P Compagnie maritime belge v Commission [2000, EU:C:2000:132].
[20] Bo Vesterdorf, Theories of Self-preferencing and Duty to Deal two Sides of the Same Coin?, Competition Law & Policy Debate 4, vol. 1, no. 1 (2015); Nicolas Petit, Theories of Self-preferencing and the Wishful Prerequisite of the Essential Facilities Doctrine: A Reply to Bo Vesterdof?, Competition Law & Policy Debate 4, vol. 1, no. 1 (2015); Pablo Solano, EU Competition Law Needs to Install a Plug-in, World Competition 40, no. 3 (2017).
[21] Decision, paras. 171 to 173.
[22] Case C‑377/20 Servizio Elettrico Nazionale v AGCM [2022, EU:C:2022:379], paras. 88 to 91.
[23] Ibid., para. 96.
[24] Case C-525/16 MEO v Autoridade da Concorrência [2018, EU:C:2018:270], para. 34.
[25] Decision, paras. 220 to 225.
