Will the CJEU's Decision in MEO Change FRAND Disputes Globally?
In April 2018, the Court of Justice of the European Union (CJEU) issued a decision in MEO v. Autoridade da Concorrência that clarified the circumstances in which price discrimination would trigger liability under Article 102(c) TFEU. The decision in MEO has so far received sparse attention from lawyers, academics, and competition law commentators. Yet, it represents an important addition to the analysis of price discrimination under EU competition law. The CJEU emphasized that Article 102(c) TFEU does not categorically prohibit a dominant firm from engaging in price discrimination, but instead prohibits only price discrimination that “tends to distort competition on the downstream market.” The CJEU also said that one cannot assume that price discrimination will have that prohibited effect, but rather one must examine the circumstances of each case to determine whether the challenged practice has a prohibited effect on the downstream market and thus violates Article 102(c) TFEU.
Although MEO concerned the licensing of copyrights, for two reasons it has important implications for disputes concerning standard-essential patents (SEPs) that are subject to the owner’s commitment to offer to license them on fair, reasonable, and nondiscriminatory (FRAND) terms. First, MEO clarifies that an SEP holder’s differential offers to its licensees are discriminatory within the meaning of Article 102(c) TFEU only when that differential treatment is so substantial as to be capable of distorting competition in the market in which the licensees compete. Thus, after MEO, scrutiny of an SEP holder’s licensing practices under Article 102(c) TFEU turns on the potential effects of the differential treatment. Second, to the extent that the prohibition against discrimination in the FRAND contract is equivalent to the prohibition against discrimination contained in Article 102(c) TFEU, MEO will require an effects-based analysis in cases alleging a breach of the FRAND contract. In those cases, MEO provides guidance for scrutinizing an SEP holder’s discharge of its duties under the FRAND contract, not only in the European Union, but also in foreign jurisdictions where a court must construe and enforce the nondiscrimination requirement of an SEP holder’s FRAND contract.