kindly donated by Robert Gaudet Jr EU Competition Law Abuse of a Dominant Position (Art. 102 TFEU)

1. Competition Law: Art. 102 TFEU

2. Clarification on Art. 101:
 Clarification – ICI v Commission was case where ECJ held
there was an “oligopoly” or that producers of specialist
dyes tended to be oligopolistic in a market with 10
producers with 80% of the market share who raised prices
simultaneously in 5 different national markets. See page 967
of Craig & De Burca. There were no easy or ready
substitutes for specialist dyes. Found to be concerted
practice.

3. Wood Pulp decision by ECJ:
 40 producers of wood pulp who made “quarterly announcements”
of price increases which ECJ held (annulling Commission’s decision)
was not concerted practice in violation of Art. 101 but rather normal
market behavior.
 ECJ found it was a “group of oligopolies” for each kind of wood
pulp. However, the structure of the market and the high degree of
“transparency” of prices meant that it functioned as an ordinary
market. Producers knew that if they raised prices then they would
lose customers to competitors who did not raise prices. Groups
outside the cartel held 40% of the market (Para. 116).
 Parties purchasing wood pulp could turn to cheaper wood pulp or
alternative products (Brazilian pulp or recycled pulp) which diluted
impact of oligopoly (Para 104)

4. Wood Pulp decision:
 “Following that analysis, it must be stated that, in this case,
concertation is not the only plausible explanation for the parallel
conduct. To begin with, the system of price announcements may
be regarded as constituting a rational response to the fact that
the pulp market constituted a long-term market and to the need
felt by both buyers and sellers to limit commercial risks. Further, the
similarity in the dates of price announcements may be regarded
as a direct result of the high degree of market transparency,
which does not have to be described as artificial. Finally, the
parallelism of prices and the price trends may be satisfactorily
explained by the oligopolistic tendencies of the market and by
the specific circumstances prevailing in certain periods.
Accordingly, the parallel conduct established by the Commission
does not constitute evidence of concertation.” (Para. 126)

5. Article 102 TFEU

6. Purpose of Art.102 TFEU:
 ________________
 ________________
 ________________

7. Article 102 TFEU
 “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.”

8. “Such abuse may, in particular, consist in:
 (a) directly or indirectly imposing unfair purchase or selling
prices or other unfair trading conditions;
 (b) limiting production, markets or technical development to the
prejudice of consumers;
 (c) applying dissimilar conditions to equivalent transactions with
other trading parties, thereby placing them at a competitive
disadvantage;
 (d) making the conclusion of contracts subject to acceptance
by the other parties of supplementary obligations which, by their
nature or according to commercial usage, have no connection
with the subject of such contracts.”

9. Case Law

10. What is a “dominant
position”
 ___________________
 ___________________
 ___________________

11. Case 27/76 United Brands
Company and United
Brands Continentaal BV v
Commission [1978] ECR 207:
 “dominant position ... relates to a position of economic strength
enjoyed by an undertaking which enables it to prevent effective
competition being maintained on the relevant market by giving
it the power to behave to an appreciable extent independently
of its competitors, customers and ultimately of its consumers.”
 40 to 45% market share for bananas (plus consideration of other
factors) indicated dominance in this case

12. Case 85/76 Hoffman-La
Roche and Co AG v.
Commission [1979] ECR 461:
 “existence of a dominant position may derive from several
factors which, taken separately, are not necessarily
determinative but among these factors a highly important one
is the existence of very large market shares”
 ECJ held that, in this case, market share of 43% for B3 vitamins
did not indicate dominance but, generally, very large share
held for some time indicates dominance.
 Barriers to entry, developed sales network, technological lead,
no competitors indicate dominance

13. Akzo Chemie BV v
Commission [1991] ECR
I-3359:
 Market share of 50% was very large and
indicated dominance

14. Case C-497/99 P Irish Sugar
plc v Commission [2001]
ECR I-5333
 Irish Sugar had 95% of market for sugar in Ireland
 Press Release: “In the late 1980s Irish Sugar and its subsidiary Sugar
Distributors Limited (SDL) sought to restrict competition from imports
of sugar from France and Northern Ireland by offering selectively
low prices to customers of an importer of French sugar, swapping
Irish Sugar's own Siucra brand of packaged sugar for an imported
brand and offering selective "border" rebates to customers for
packaged sugar that were located close to the Northern Irish
border”
 Commission found violation of Art. 102 and imposed €8.8 million fine
in 1997. Irish Sugar appealed to CFI to annul Commission’s decision
but it affirmed decision. Appeal to ECJ which dismissed appeal.

15. Press Release [1997] on Irish
Sugar:
 “Through its infringements Irish Sugar has been able to maintain
a significantly higher price level for packaged retail sugar in
Ireland compared with that in other Member States, notably in
Northern Ireland, and has been able to keep its exfactory prices,
particularly for bulk sugar for "domestic" Irish consumption,
amongst the highest in the Community, to the detriment of both
industrial and final consumers in Ireland”

16. Cases T-68 and 77-78/89 Re
Italian Flat Glass: Societa
Italiana Vetro v Commission
[1992] ECR I-1403:
Facts:
 _________________
Procedural History:
 _________________
Holding:
 _________________
Rationale:
 _________________

17. Question:
 What is difference between collective dominance under
Article 102 and restriction of competition under Article 101?

18. Answer:
 Cannot simply “recycle” facts from Article 101 to prove
infringement of Article 102 (Italian Flat Glass; Compagnie
Maritime)
 Article 102 does not require existence of an “agreement” or
coordinated practices whereas Article 101 does
 Can prove collective dominance under Article 102 through
“other connecting factors” and an “economic assessment and,
in particular, an assessment of the structure of the market in
question” (Compagnie Maritime)
 Can prove collective dominance when companies “united by
such economic links” or have agreements or IP licenses (Italian
Flat Glass)

19. Question:
 Is dominance, by itself, illegal under Article 102?

20. Question:
What is “abuse” of a dominant position?
 _______________________
 _______________________

21.  Predatory pricing (Akzo – flour)
 Limiting production
 Price discrimination (United Brands - bananas)
 Tying (Microsoft)
 Certain mergers (Continental Can)
 Refusal to supply (Hugin – spare parts for cash registers;
Commercial Solvents – raw materials for tuberculosis drug)
 Refusal to share an essential facility (Sealink – port of Holyhead
ferry to Ireland; RTE – information on TV schedules)
 Other – list in Art. 102 is non-exhaustive

22. Question:
 Why is it important to define the relevant product
and geographic market?

23.  You go to the grocery store and see the price of bananas went
up 10 euros each. Would you be more likely to buy one of
these other fruits or nothing at all:
 Peaches: _____ (seasonal)
 Grapes: _____ (seasonal)
 Apples: _____
 Oranges: _____
Pretend you are either very young or very old. Would your answer
change at all?

24. Case 27/76 United Brands Company
and United Brands Continentaal BV
v Commission [1978] ECR 207:
Facts:
 ____________________
Procedural History:
 ____________________
Holding:
 ____________________
Rationale:
 _____________________

25. United Brands (continued):
What isthe relevance of peaches and
table grapes?
 ______________
 ______________
What is the relevance of apples and
oranges?
 ______________
 ______________

26. Question:
What was the product market in Case 322/81 Nederlandsche
Banden-Industries Michelin NV v Commission [1983] ECR
3461?
 ________________
 ________________

27. Product Market:
 Commission Notice on Relevant Market: “A
relevant product market comprises all those
products and/or services which are regarded as
interchangeable or substitutable by the
consumer, by reason of the products’
characteristics, their prices and their intended
use.”

28. Question:
What was the product market in Hugin?
 _________________
 _________________

29. Question:
What is the meaning of the term, relevant geographic market?
 ___________________
 ___________________

30. Geographic Market:
 Territory in which all traders operate in same conditions of
competition for the relevant product/service
 Hilti: entire EU unless other factors indicate otherwise
 United Brands: all 6 Member States at time except UK, France,
Italy which gave special treatment to imports from own
overseas territories so were not part of free market for bananas
 British Telecom: geographic market was UK where it had
monopoly on telecom services
 Napier Brown-British Sugar: market was UK due to high transport
costs and few imports

31. Question:
Why is it sometimes important to define the
temporal market?
 ___________________
 ___________________

32. Commission’s Notice on
Definition of Relevant Market
Guidelines on how to define the relevant market:
 Product market and geographic market
 Demand substitutability – SSNIP test
 Supply substitutability
 Potential competition

33. Commission’s Notice
(cont’d):
Commission considers:
 Views of customers and competitors
 Quantitative econometric tests
 Evidence of consumer preferences
 Barriers to entry and costs
 Distinct groups of consumers for product

34.  How do we know if there is an abuse of a
dominant position that violates Art. 102 TFEU?

35. Four steps in analysis:
 1. Define the relevant market – both the product market
and the geographic market over a certain period of time
 2. Decide whether the undertaking (or collection of
undertakings in collective dominance) is dominant within
that market
 3. Determine whether undertaking has abused its
dominant position
 4. Determine whether there are any available defenses,
i.e., objective justification that is proportionate

36. Case 6/72 Europemballage
Corporation and Continental
Can Co Inc v Commission
[1973] ECR 215
Facts:
 ______________________
Procedural History:
 ______________________
Holding:
 ______________________
Rationale:
 ______________________

37. Question:
 What is a “commitment decision”?

38. Answer:
 Remedy to enforce competition law; a voluntary offer by a
company subject to a Commission prosecution to make
changes. The terms of the offer are published in the Official
Journal and can be adopted.
 Two types: behavioural commitments (eg to provide a particular
good or service) and structural commitments (eg to divest)
 Aside from commitment decisions, the Commission can, as an
alternative, make a “prohibition decision” and issue a fine with its
decision against the infringing companies
 If a company does not comply with a “commitment decision” it
can be fined up to 10% of annual turnover or 5% periodic
payment penalties until it complies

39. Microsoft:
 Fined 731 million euros in March 2013 for not
abiding by its commitment decision regarding an
internet browser
 Fine was roughly 1% of annual turnover – bit more

40. Google:
 Subject to commitment decision notified in
March 2013 regarding web searches that put
competitors in disadvantageous position in
search results
 Notification published in Official Journal with
opportunity for anyone to submit comments
within one month, i.e., by April or May 2013