Use of Presumptions

 The Use of Presumptions in European Union Competition Law

I. Introduction

In general, a presumption can be defined as a belief that something is true even though it has not been proven. To put it in a formal logic sense, think about it as “If A then B”, where ‘A’ is a given fact, and proof of ‘A’ leads to the proposition of ‘B’. When discussing the topic of presumptions, it is important to distinguish the difference between legal presumptions and factual presumptions. A legal presumption is accepting that something is true until it is proved not true. The most commonly known legal presumption, at least from a U.S. law point of view is that someone accused of a crime is presumed to be innocent until proven guilty. It is from this presumption that the legal standard “beyond a reasonable doubt” is deduced. Factual presumptions on the other hand, are not so clear cut. The best way to define a factual presumption is an inference drawn regarding an unknown fact based upon a known fact. To help understand this concept, I can use you, the reader to presume that you are interested in this subject matter (unknown fact), based on the known fact that you are currently reading this article. For the basis of the discussion on European Union competition law, factual presumptions are the type of presumptions at issue.

II. Why Presumptions are used

In European competition law, presumptions of proof are generally accepted for reasons of effectiveness and efficiency. Without using presumptions, it would likely be very difficult to prove an infringement. This is especially true in cases dealing with concerted practice issues. With agreement cases, it is much easier to examine the agreement itself and make a determination as to whether it is anti-competitive. This may be accomplished by an actual reading of the words that are written on paper or by somehow accessing the wording of an agreement made orally between parties. Concerted practices are much more abstract in that you don’t have this concrete language to go by.

In terms of efficiency, the CJEU uses presumptions to avoid the unduly costs of resources and time that it would take to thoroughly inspect every piece of evidence that is argued by the parties. A large number of cases have passed through the CJEU dealing with issues of competition law, making the courts well versed on this topic. It is likely that, having seen case after case dealing with very similar facts and circumstances, the Court is able to base its decision on vast knowledge and expertise. Therefore, if the court finds a violation in nine cases with similar facts, it is likely that they will also find a violation in a tenth case presented with analogous facts.

A third reason for using presumptions is to help promote market integration, which is the overarching goal of the European Union (EU). One of the main reasons behind the formation of the EU was to promote economic and social progress by creating free movement of goods, services, capital, and persons within an internal market. In order to protect these interests, the CJEU takes the position that they would rather identify a possible violation of Article 101 before the existence of potential harm to competition between competitors in different markets. To put this in practical terms, the CJEU is perfectly fine with the potential of convicting an innocent party if it results in continued protection of the integrity of the EU.

III. Presumption Standards

While it is clear that the use of presumptions in CJEU decision making is accepted, what is unclear is why there is no bright line standard that governs how presumptions may be used. The various standards used by the AG’s and the CJEU throughout cases where presumptions are present is often inconsistent, which begs the question of whether they should be used at all. While it is agreed that parallel conduct alone cannot furnish proof of concertation, the CJEU has used contradictory language stating that they may be used if concertation is the only plausible explanation for such conduct[1]. Here, we have what may be considered a bright line standard, that parallel conduct alone is not enough to prove an infringement, however, this standard contains a carve out allowing for the sole use parallel conduct to determine an infringement. Throughout the various cases focusing on concerted practices, language such as “firm, precise, consistent”[2], “strong, precise, relevant”[3], “sufficiently precise and coherent proof”[4] have all been used when discussing the amount of evidence needed for a presumption to be valid. It may be conceded that although this language differs, the overall goal of requiring some sort of requiring some sort of concrete evidence to support the presumption remains the same. However, if this is taken to be true, the problem remains that these words are not held to a defined standard (for example, beyond a reasonable doubt or a preponderance of the evidence). Not having a bright line standard for what kinds of evidence will produce a valid presumption ultimately leaves open the subjective opinion of the AG or CJEU.

The lack of a true standard ultimately leads to uncertainty, both for the companies involved and for the court. In terms of uncertainty for companies, not having a strict standard leads companies uncertain as to when a situation will arise where they will be deemed in violation. It is impossible for a company to know whether the violation occurs when they agree to attend a meeting; when they actually attend the meeting; once they listen to what is disclosed at the meeting; once they leave that meeting; or when they continue to operate on the market following the meeting.

For the court, the lack of a bright line standard creates uncertainty in applying the presumptions. There have been varying forms of language, as mentioned above, that the courts have used in applying presumptions; but how are they supposed to be properly applied when there is not a single set of rules? Additionally, this differing language is not governed by any statute and is ultimately up for interpretation depending on who is hearing the case. All these factors lead to the possibility of inconsistent results and inadvertently create what can be considered a legal standard of guilty until proven innocent.

IV. Relationship between Presumptions and Burden of Proof/Evidentiary Standards

In dealing with cases that involve a concerted practice, three elements must be present: collusion between undertakings, market conduct of these undertakings and a causal connection between those two former elements. The CJEU uses presumptions of proof as a way to link the element of causal connection. In European competition law, a general rule of proof is that the competition authorities bear the burden of proof, having to prove a fact, in order to find an infringement of Article 101. A presumption of proof, if expressed in terms of shifting the burden of proof between parties, generally shifts the burden of proving a certain fact directly to the other party. This may mean, for example, that if the Commission proves that one fact has happened, another fact is legally presumed to have been proven as well (if A then B). The CJEU seems to use the presumption of proof of causality in this exact manner. This type of presumption would mean that if the elements of collusion and market behavior have been proven by the Commission, the causal connection between these two elements is presumed to have been proven as well. The burden of proof which initially rests on the commission is then viewed to be fulfilled for each of the three elements. The burden then shifts to the other party to rebut any or all of these elements.

The facts in a concerted practice case usually involve issues of collusion and market activity which need to be proven to the required legal standard of proof in order for the presumption to hold true. The standard of proof generally relates to the level of certainty a judge has to be convinced of the facts so as to rely on them (example of the U.S. law presumption of innocent until proven guilty where the standard of proof is beyond a reasonable doubt). The AG in the T-Mobile case indicates that the presumption of proof of causal connection does not concern the burden of proof, but rather the standard of proof.[5] There is an obvious connection between the burden of proof and the standard of proof in that the burden may be heavier for a high standard of proof, and a lighter burden for a low standard of proof. These types of presumptions may be rebutted by a showing of evidence to the contrary as well as a showing of the intention of the parties.[6]

V. Substantive vs Procedural Law

An important issue when discussing European competition law is the distinction between substantive and procedural law. This difference is vital to understand because the CJEU is supposed to provide the final interpretation of substantive law, while procedural law issues are left for that of the member state courts. However, after the T-Mobile decision, it becomes unclear as to whether procedural law is still exclusive to the member state courts. Presumptions of proof are an evidentiary matter, which falls into the realm of procedural law. It is clear that, in general, procedural rules are directly related to substantive law, in that procedural laws must first be complied with before a decision can by made substantively. It is also clear that decisions based on substantive law are what create the ever-changing rules of proof and evidence. When thought about in this context, it seems apparent that the CJEU does have the authority to bind the member state courts on this issue, but the question still remains as to whether they are overstepping its boundary.

VI. The Problems with Presumptions

The use of presumptions raises complex issues with regards to their application. When the evidence proffered is heavily skewed in favor of an infringement, it is hard to argue that using a presumption to determine illegal conduct is not useful. However, the problem lies with circumstances in which presumptions are used even when there is minimal evidence that leads to a conclusion. Taking the T-Mobile case for an example, there was virtually no evidence to support that the companies were colluding in any way. A presumption of conduct that infringed Article 101 was based on the fact that they attended a meeting in which only one party announced pricing, and because they continued to operate on the market, were found to be infringing on Article 101.[7] In cases like this, it is virtually impossible for a company to prove that they were not engaging in a concerted practice by any way other than exiting the market. Giving a company an ultimatum of either exiting the market or continuing to operate, but being found in violation of Article 101 can be considered both unfair and unreasonable. Granted, there will be instances where presumptions lead to false results, but when the bar is set so low in presuming illegal conduct, companies are faced with the very difficult task in defending their actions.

Another problem with presumptions is the argument that they may serve as a deterrent to market integration, a contradiction of the goal of the EU. If presumptions are ultimately used to find companies to be in violation of Article 101, this may create, for example, skepticism when exploring new ventures. However, this can be viewed as a progressive step in protecting the treaty, as companies will be more careful when deciding whether to attend industry events, merging with an existing company, or entering new markets. Because the threat of such heavy fines will always be in the back of the mind of an undertaking, they may find it more beneficial to simply avoid what could potentially be a successful endeavor just to avoid any actions that may be construed the wrong way by the competition commission and subsequently the CJEU.

VII. Conclusion

In closing, the use of presumptions in European Union competition law plays an integral role in CJEU decision making. Presumptions are of particular importance in concerted practice by object cases, which continue to be a gray area in the law due to the lack of presence of an agreement and short of conduct that has an anti-competitive effect on the market. While the use of presumptions raises issues, as discussed above, they are a necessary function in ensuring that the market operates in a manner that is unimpeded by practices that create restrictions on competition or boundaries to entry. With that said, it also cannot go unnoticed that there are numerous issues with how and why presumptions are used by the court. After the T-mobile case and going forward, it will be interesting to follow how the Court applies presumptions in cases where the facts lead to little evidence of collusion in determining whether there has been a violation. One thing that is certain not to change however, is the fact that the goal of the court will continue be to protect the interest in promoting market integration by ensuring that goods and services continue to move freely across borders.