20/10/2015

Abusesofdominance
Generalities
DrPabloIbanezColomo
LL300CompetitionLaw

Competitionlawanddominantfirms
Article102TFEU[exArticle82EC,exArticle
86EEC]reads:
Anyabusebyoneormoreundertakingsofa
dominantpositionwithintheinternalmarketorina
substantialpartofitshallbeprohibitedas
incompatiblewiththeinternalmarketinsofarasit
mayaffecttradebetweenMemberStates[]

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Competitionlawanddominantfirms
Article102TFEUandSection2applyto
dominantfirms
Examplesoffirmsthathavebeenfoundtobe
dominantinclude:
Microsoft (+90%marketshareonthemarketfor
operatingsystemsforPCs)
Intel (+80%marketshareonthemarket(s)forx86
CPUs)
TetraPak(+90%marketshareonthemarketfor
asepticpackingmachines)

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Competitionlawanddominantfirms
Operatingsystem

Quasimonopoly

Mediaplayer

Webbrowser

Tiedproducts

Isitunlawfultotietheseproducts?

Competitionlawanddominantfirms
Thebroadconsensusthatexistsaroundcartels
doesnotextendtounilateralconduct
Controversiesexistwithinandacrossregions
(greatcontroversieswithinUSandEU)
Itisinherentlydifficulttodefinestandardsinthis
area
Whatistheappropriatethresholdofmarketpower
thattriggersintervention?
Howtodistinguisheffectivelypro and
anticompetitiveconduct?

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Explainingthetermsofthe
controversy
Thecontroversyrevolvesaroundthecriteriaused
toestablishanabuseinpractice:
Oneperspectiveonthecontroversy:formbased
(rules)vseffectsbased (standard)approaches:
Aretherewaysofcompetingthatareinherentlygoodor
bad?(competitiononthemerits/abuse)
DoesArticle102TFEUapplyevenintheabsenceof
significanteffectsoncompetition?

Asecondperspective:objective vs subjective
considerations:
Istheintentofthedominantfirmrelevant?
Orshouldtheabuseestablishedonlybyreferencetoits
objectiveimpactonthemarket?

Explainingthetermsofthe
controversy
Legalapproach

Economic
approach

Formbased

Effectsbased

Subjective

Objective

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Explainingthetermsofthe
controversy
EUCourtsapplyArticle102TFEUinconsistently:
Insomecases,theyfollowaformbasedapproach,in
others,theyrequireevidenceofnegativeeffects
Similarly,theintentofthedominantfirmisacrucial
factorinsomecases,butanirrelevantoneinothers

Thisinconsistencycreateslegaluncertainty
Article102TFEUisatoddswithotherprovisions
(Article101TFEU,mergers)
Article102TFEUwithoutboundaries?

ExclusivedealingunderArticle101
TFEU
Brewers

Exclusivedealing

Publichouses
CaseC234/89,Delimitis

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ExclusivedealingunderArticle101
TFEU
11.

[A]s a result of his exclusive purchasing obligation and

the prohibition on competition, the reseller concentrates
his sales efforts on the distribution of the contract goods.
The supply agreements, moreover, [allow] the supplier to
plan his sales over the duration of the agreement and to
organize production and distribution effectively.
12. Beer supply agreements also have advantages for the
reseller, inasmuch as they enable him to gain access under
favourable conditions. [] The resellers and suppliers
shared interest in promoting sales of the contract goods
likewise secures for the reseller the benefit of the supplier's
assistance in guaranteeing product quality and customer
service.
CaseC234/89,Delimitis

ExclusivedealingunderArticle102
TFEU
89. An undertaking which is in a dominant position on a market

and ties purchasers . . . by an obligation or promise on their part

to obtain all or most of their requirements exclusively from the
said undertaking abuses its dominant position within the
meaning of article [102] of the Treaty []
90. Obligations of this kind [] are incompatible with the
objective of undistorted competition within the common
market, because [] they are not based on an economic
transaction which justifies this burden or benefit but are
designed to deprive the purchaser of or restrict his possible
choices of sources of supply and to deny other producers access
to the market
Case85/76,HoffmannLaRoche

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Reactionstothecontroversy
StrongreactionsaftertheGCjudgmentsin
MichelinII andBritishAirways(2003)
TheEuropeanCommissionissuedaDiscussion
Paper (draftguidelines)inDecember2005
Theeffortsledtotheadoptionofamoremodest
Guidance (December2008)

TheGuidanceendorseaneffectsbased
approachbasedonobjectiveconsiderations

ElementsofArticle102TFEU
Substantiveaspects:
Undertaking:samemeaningandscopeasin
Article101TFEU
Dominance
Abuse

Jurisdictionalaspects:
Substantialpartoftheinternalmarket
EffectontradebetweenMemberStates [see
Article101TFEU]

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Article102TFEU
Any abuse by one or more undertakings of a
dominant position within the internal market or
in a substantial part of it shall be prohibited as
incompatible with the internal market in so far
as it may affect trade between Member States
[]

Singlefirmdominance
In HoffmannLa Roche, the notion of singlefirm
dominance was defined as:
a position of economic strength enjoyed by an
undertaking which enables it to prevent effective
competition being maintained on the relevant
market by affording it the power to behave to an
appreciable extent independently of its competitors,
its customers and ultimately of the consumers

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Singlefirmdominance
TheOECDonsubstantialmarketpower:
Substantial market power can be said to
exist when competitive constraints imposed
by other firms are relatively ineffective on the
dominant firm. In this situation, the dominant
firms decision about its own output and price
can influence market outcomes

Singlefirmdominance
Marketsharesprovideafirstindicatorof
marketdominance:
verylargesharesareinthemselvesevidence...
oftheexistenceofadominantposition
(HoffmannLaRoche)
x<40%:unlikelytobefound(Guidance2008)
X>50%:rebuttablepresumptionofdominance
(AKZO)

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Singlefirmdominance
Otherfactorsmayalterthefinding:
Barrierstoentryandexpansion(lato sensu):
economiesofscale,sunkcosts,networkeffects
Firmcharacteristics:deeppocket,vertical
integration,sparecapacity,productrange
Countervailingbuyerpower(acceptedinIrish
Sugar)
Firmbehaviour?

Collectivedominance
Adominantpositionmaybeenjoyedbyone
ormoreundertakingsunderArticle102TFEU
Whatislessclearistheexactscopeofthe
notionofcollectivedominance
ItwouldseemthatthedraftersoftheTreaty
soughttocapturequasigroupsofcompanies
InItalianFlatGlass,theGeneralCourt(CFI)acceptedan
expansionofthenotionofcollectivedominance
TheEuropeanCommissionmustestablishtheexistenceof
economiclinksbetweentheundertakings
InAlmelo,theECJrequiredthattheundertakingsadoptthesame
conductonthemarket

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Collectivedominance
Complementarypatents

Anexampleofeconomiclinksin
ItalianFlatGlass:theundertakings
mayshareatechnology

Jointlicensing
(patentpool)

Collectivedominance
InCompagnie MaritimeBelge,theECJfound
thattheeconomiclinksmayresultfromthe
marketstructure
Themembersofanoligopolymaybefoundto
holdacollectivedominantposition
Thisprinciplehadbeenacceptedinmerger
controllaw(Kali&Salz andGencor cases)

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Collectivedominance
Theboundariesofthenotionofcollective
dominanceremainedunclearuntilAirtours
Thelegalnotioninlinewiththeeconomicconcept
oftacitcollusion
TheconditionssetoutbytheGeneralCourtare
thefollowing:
Markettransparency
Retaliationmechanisms
Absenceofcountervailingpower

Exclusionaryabuses

Tiein

Potentiallyexcluded
rivals

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Exclusionaryabuses

Exclusivedealing(orloyaltyrebates)

Publichouses

Exploitativeabuses

Excessiveprices
Endconsumers

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Exploitativeabuses

Discriminatory
treatment

Aneffectsbasedapproach

Box 1: Exploitative abuses

Why is it potentially counterproductive to take
action against excessive prices charged by
dominant firms?

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Thesubstantivechallengein
competitionlaw
Howarelegalprincipleselaboratedin
competitionlaw?
Step1:Understandthenatureofthebehaviour
underexamination
Step2:Decidebetweentheapplicationofrulesor
standards
Step3:Refinerulesandstandards

Definingtherelevantvariables
Step2
Rules
(formbased)

vs.

Standards
(effectsbased)
Refine
standards

Step3
Efficiencies?

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Aformbasedapproach
Fromaformbased perspective, some
practicesareseenasanticompetitiveperse
Rules: Therewouldthusbeunfairorimproper
methodsofcompetition
Exclusionaryeffectsbecomeirrelevant(as,for
instance,withcartels)
Ifexclusionaryeffectsarenotrelevant,thenintent
becomes(implicitlyorexplicitly)acrucialfactor

Aformbasedapproach
Aformbasedapproachisproblematicfor
severalreasons:
For most practices, anticompetitive intent is
difficult to establish unequivocally
In some cases, exclusionary intent seems to be
beyond reproach (e.g. low prices)
A formbased approach leads to Type I errors
(false positives)
A formbased approach deters efficient behaviour
(harm for consumers and society)

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Aneffectsbasedapproach
Effectsbasedapproach:onlyconducthaving
exclusionaryeffects shouldberegardedasabusive
Standard: Interventiondependsonacasebycase
assessmentoftherelevantmarket
Interventionmaytakeplacefollowingexclusion,butmay
beprospective (asinmergercontrol)
Iftheauthorityintendstointerveneatanearlierstage,it
mustputforwardacredibletheoryofharm
Intent couldplayamarginalroleunderaneffectsbased
approach(e.g.modulatethesubstantivestandard)

Case85/76,HoffmannLaRochev
Commission
The concept of abuse is an objective concept
relating to the behaviour . . . which is such as to
influence the structure of a market where . . . the
degree of competition is weakened and which,
through recourse to methods different from those
which condition normal competition in products or
services . . . , has the effect of hindering the
maintenance of the degree of competition still
existing in the market or the growth of that
competition

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EUCourtsapproachtoabuses
ThedefinitionofabuseprovidedinHoffmann
LaRoche suggeststhat:
The notionofabuseisanobjective one(norole
forintent?)
Dominantundertakingsareabletooutperform
theirrivalsonthemerits
Itisnecessarytoassesstheeffects ofpotentially
abusiveconduct

TheactualimplementationofArticle102TFEU
isverydifferent

EUCourtsapproachtoabuses
Inessence,EUCourtsendorseaformbased
approach(legalisticpigeonholing)
Foranypractice,therelevantquestioniswhether
itisaformofcompetitiononthemerits
Intent considerationsseemtoplayafundamental
roleinthisregard
Forconductdepartingfromcompetitiononthe
merits,theassessmentofeffects isnotnecessary

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EUCourtsapproachtoabuses

Abusiveconduct

Competitiononthemerits

Exclusivedealing
Loyaltyrebates
Belowcostpricing
Tying/Bundling

Quantityrebates?
Abovecostpricing?
Refusaltosupply?

EUCourtsapproachtoabuses
Itmaywellbethatconductdeemedabusiveis
acommonbusinesspractice(e.g.rebates)
InMichelinI,theECJintroducedtheideaofa
specialresponsibility
Thisseemstomeanthatsomebusinesspractices
arenotopentodominantundertakings
Thismayalsomeanthatstandardsmaynotbe
consistentacrosstheboard

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EUCourtsapproachtoabuses
Asalreadymentioned,theassessmentof
effects inconcreto isnotdeemednecessary
Itissufficientthatthepracticecould,inthe
abstract,haveexclusionaryeffects
Thefactthatthepracticedidnotyield
anticompetitiveeffectsisirrelevant

EUCourtsapproachtoabuses
Box4:ObjectandeffectinArticle102TFEU
InMichelinII,theCFIheldthefollowing:
241. [F]or the purposes of applying Article [102
TFEU], establishing the anticompetitive object and
the anticompetitive effect are one and the same
thing [] If it is shown that the object pursued by
the conduct of an undertaking in a dominant
position is to limit competition, that conduct will
also be liable to have such an effect []

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EUCourtsapproachtoabuses
245. The applicant cannot base an argument on
the fact that its market shares and prices fell
during the period in question. When an
undertaking [] implements practices with the
aim of restricting competition, the fact that the
result sought is not achieved is not enough to
avoid the application of Article [102 TFEU] [] In
any event, it is very probable that the fall in the
applicant's market shares [] and in its sales
prices [] would have been greater []

EUCourtsapproachtoabuses

Box4:ObjectandeffectinArticle102TFEU
Why are these passages problematic from a legal
perspective? And from an economic perspective?
What is the idea underlying these excerpts?

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