Key Takeaways

• In a potentially ground-breaking move, the European Commission recently announced its intention to use its powers to impose interim measures in an investigation targeting chipmaker Broadcom. If it does impose such measures, it would be the first use of these powers in 18 years.
• The Commission is investigating whether Broadcom’s practices in the supply of components for TV set-top boxes and modems amount to an abuse of dominance. The proposed interim measures are aimed at preventing Broadcom from causing harm to competition during the period of the Commission’s investigation.
• The Commission has, in the past, been reluctant to use interim measures largely due to the significant evidentiary and procedural hurdles it must overcome. However, recent statements by officials have pointed towards a renewed desire to make use of this tool.
• This development comes amid growing calls for the use of interim measures in antitrust investigations to prevent potentially irreversible competitive harm, in particular in fast-moving technology markets.

Background

The Commission’s power to award interim measures was initially drawn from the judgment of the EU Court of Justice in Camera Care in 1980. Although the Commission did not have express powers to impose interim measures at the time, the Court held that its powers under Regulation 17 to bring infringements of Articles 85 and 86 (now Articles 101 and 102 TFEU) to an end implicitly included the power to order interim measures. This power was subsequently codified in Article 8 of Regulation 1/2003, which provides that the Commission, acting on its own initiative, may order interim measures where the following conditions are satisfied: (i) a prima facie finding of an infringement; and (ii) urgency due to the risk of serious and irreparable damage to competition. These conditions broadly mirror those developed in the case law under Regulation 17. However, the current regime arguably narrowed the scope for the adoption of interim measures in two respects. First, the substantive test for the adoption of interim measures was no longer satisfied simply by damage to individual undertakings, but also requires wider harm to the competitive process. Second, the wording of Article 8 excludes applications for interim measures by complainants.

As to procedure, there are a number of safeguards that must be observed by the Commission. This includes the Commission’s obligation to issue a statement of objections and grant access to its file; and the right of the parties concerned to be heard and respond to the Commission’s objections in writing and in an oral hearing (if requested). In addition, the parties have a right of appeal to the General Court.

Commission Practice

Prior to the entry into force of Regulation 1/2003 the Commission used its power to adopt interim measures in only a limited number of cases. In particular, interim measures were ordered in just eight cases following Camera Care, out of a total of thirteen cases where they were considered. Since the entry into force of Regulation 1/2003, there have been, remarkably, no interim measures decisions at all.

Interim measures were most recently adopted in 2001 in the IMS Health case, but the Commission withdrew the decision following three separate judgments of the EU courts which resulted in the suspension of the interim measures. The standard of review established by the EU courts in IMS Health added to the Commission’s already significant evidentiary burden. In particular, the Court of First Instance (now the General Court) held that the scope of its power to order interim relief in judicial proceedings¹ did not fall to be interpreted differently in cases involving Commission interim measures decisions (as opposed to final decisions). In doing so, it found that the fact that a Commission interim measures decision is driven by an urgency to take protective measures confers no special status on such decisions. It also rejected the Commission’s plea that, since its decision was based on complex economic assessments, IMS Health would need to establish a “stateable case” that the Commission manifestly erred in its assessment; rather, an applicant only needs to demonstrate “a serious dispute” regarding the correct interpretation of competition rules. Moreover, interim measures, notwithstanding their temporary and conservatory nature, will in most situations require a change in behaviour that may lead to potentially irreversible market developments. In principle, this may lower the bar for applicants challenging interim measures to meet the requirement that action by the court is urgent.

Taken together, the high threshold for the adoption of interim measures and the risk that they will be set aside on appeal has had a chilling effect on the Commission’s willingness use its Article 8 powers.

Calls for Increased use of Interim Measures

In recent years, there have been growing calls for the increased use of interim measures, not just by the Commission but across EU Member States. These calls have largely been driven by the advent of the digital age: as the number and size of markets characterised by rapidly evolving technologies grows (in particular in markets that are prone to tipping), there is a greater risk that antitrust infringements will have on irreversible impact on competition and market structure. This has led to antitrust agencies increasingly questioning whether they are equipped with the right tools to effectively enforce competition rules. For instance, in 2017, the German Ministry for Economy published its White Paper on Digital Platforms, which recommends lowering the evidentiary threshold for interim measures. In the UK, the Furman Report on unlocking digital competition, published in March 2019, recommended streamlining the current procedures and administrative rules of the UK Competition & Markets Authority to facilitate the greater and quicker use of interim measures. The competition authorities in Belgium and France already regularly employ interim measures.

In Brussels, interim measures were recently brought back into the Commission’s focus partly in response to questions over the length of its investigation in the Google Shopping case, which took over six years. Statements by Commissioner Margrethe Vestager repeatedly underlined that the Commission would not shy away from using interim measures in appropriate cases, and that it was reviewing how the tool could be used more effectively. It is also known that the Commission has been looking for a suitable case in which to use its powers to test whether they can be operated successfully, or whether there is a need for legislative change.

The Present Case

According to its press release the Commission believes that Broadcom is likely to hold a dominant position in various markets for the supply of systems-on-a-chip for TV set-top boxes and modems; and that it may have abused its dominant position by entering into agreements with seven of its main customers that require those customers to purchase components exclusively (or almost exclusively) from Broadcom. The alleged practices may include, inter alia, imposing exclusive purchasing obligations as well granting rebates or other advantages that are subject to exclusive or minimum purchase requirements.²

Broadcom will have the opportunity to respond to the statement of objections, and as such it is not yet required to bring the alleged abusive conduct to an end. In a regulatory filing, Broadcom maintained that it complies with EU competition rules and that the Commission’s concerns are “without merit”, which suggests that it is primed to contest the charges levelled against its practices. If the Commission does adopt interim measures, Broadcom may well appeal. The outcome of an appeal will undoubtedly have significant ramifications for the future use of interim measures.