Abuse of Dominance: Article 102 TFEU
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.
- Four constituent elements:
- Undertaking(s)
- ‘Dominant position within (a substantial part of) the internal market’
- ‘Abuse’
- ‘May affect trade between Member States (cf. last week)
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
- Behavior, which may be lawful when practiced by a non-dominant company, may be unlawful
when carried out by a company in a dominant position →
- the undertaking must have a dominant position within the internal market or in a
substantial part of it;
- which it must have abused, AND the abuse must be capable of affecting trade
between member states.
- Three essential elements in establishing a breach of Art. 102 and therefore necessary to
show that the abuse has affected trade within the Union:
1. Determination of what the relevant market is
2. Establishing that the company is dominant in that market, a process in which market
share is an important but not only factor
3. Proving that there has been an abuse of that position
Commission’s Guidance on Article 102 Enforcement Priorities
- Art.102 is directed towards unilateral conduct by dominant firms which act in an abusive
manner
- Common complaint about the Commission is that it is more concerned with protecting
competitors instead of maintaining the competitive process (e.g. Microsoft; Intel)
- Intel: however clearly established that it is not the role of Article 102 to protect
, less efficient competitors [133]
- The Guidelines are not a restatement of the law, it is simply helpful in understanding the
Commission’s priorities by the case law is still the gold standard [para 3]
- AG Mazak (TeliaSonera (C-52/89): ‘useful point of reference’ [21]
Undertaking
- Refer back to Art.101 TFEU
- Regarding State Monopolies: the monopolistic powers of the Spanish
Health Service and the Standard-setting power of Eurocontrol were not
held to be acting as an undertaking → competition rules did not apply
to them (FENIN v Commission (C-205/03)
- Hofner [8] → interpreted widely and includes any legal or natural person engaged in
some form of economic or commercial activity
Art. 102 TFEU and the Public Sector, four points to make:
- The fact that an undertaking has a legal monopoly by statute does not, in itself,
remove it from the ambit of Art.102 (Centre Belge d’Etudes de Marche
Telemarketing v CLT)
- MS’s have a duty under Art.4(3) TEU not to do anything to jeopardise the
attainment of the union’s objectives, of which, the internal market, which includes
competition is not distorted
- This means that MS’s can’t grant an entity immunity except for limited
circumstances under 106(2) TFEU (INNO (13/77).
- Derogations under Art.106(2) TFEU have been consistently interpreted narrowly.
- Art.37 TFEU, which prevents MS’s from discriminating in favour of their own
Monopolies.
- An alternative weapon for the Commission to deal with some monopolies
in the public sector.
The Effect on Inter-State Trade
- Commercial Solvents v Commission
- ‘the requirement of an effect on trade between Member States would be satisfied
where conduct brought about an alteration in the structure of competition in the
common market.’ [33]
- Soda-Ash/ Solvay (C-286/95 and C-109/10)
- The Commission held that rebates offered by ICI and Solvay in their respective
markets had the effect of reinforcing the structural rigidity of the EU market as a
whole and its division along national lines.
, - In these decisions it was US exporters who were excluded from the EU, but the
Commission still held that there was an effect on inter-state trade: imports would
have helped to undermine the dominant positions of ICI and Solvay in their
respective markets.
- Art. 102 TFEU can only be applied where there is already a dominant position and
substantial market power (i.e. not for hypotheticals)
- Regulation 1/2003: National courts and national Competition Authorities (NCAs) have
an obligation to apply Art. 102 where an abuse of a dominant position has an effect on
trade between Member States but can enforce stricter sanctions within their own territory
- STM v Maschinebau
- In Art. 101 → the effect must be “direct or indirect, actual or potential”
DOMINANT POSITION
- The legal expression of a dominant position is a binary term in Competition law →
a firm is either dominant or it is not.
- United Brands (27/76)
- Laid down the test of a dominant position:
- “ The dominant position thus referred to by Art. 102 TFEU 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” [65]
1. Identifies the fact that the position of dominance may enable the undertaking to affect
competition (could be done by using short-term price cuts, leading to competitors
losing business and being forced out of business)
2. It identifies the fact that a dominant position may enable an undertaking to exploit
customers (could be done by linked sales or by charging unfair prices)
3. Makes it clear that dominance is assessed in relation to the relevant market (to simply
talk of dominance in abstract is meaningless, but by looking first for the relevant
market, a true picture of the dominance of otherwise of an undertaking can be found).
- The finding of dominance involves a Two Stage Test (Continental Can [32]):
1. A proper definition of the relevant market
2. Whether the undertaking has a dominant position within that market
-
- In the finding of a dominant position it is necessary to examine at least three issues (see
Guidance [12]):
- The market position of the dominant undertaking and its competitors
- Potential expansion and entry
- Countervailing buyer power.
, ACTUAL COMPETITORS
- Hoffmann-La Roche v Commission
- The 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 a very large market share.
- Several factors may combine to indicate dominance, but market share is the primary
indicator.
- Other are: market structure, duration of market share, financial and technological
resources, vertical integration, intellectual property rights, and conduct.
Market Share
- Calculated within the relevant market (product market, geographic market, temporal
elements, cf. Commission Notice 1997)
- The Commission Guidance on Art. 102 specifies that market shares are only a ‘useful
first indication’ of the market structure and of the relative importance of the undertakings
active on it. [13]
- A market share of 100% is rare although some firms have been found to have very large
market shares.
- Tetra Pak: market share in the market for machines capable of filling cartons by
an aseptic process was 91.8%.
- Court has rejected the argument that because a monopoly is conferred by statute
it is immune from Art. 102 TFEU → where an undertaking has a statutory
monopoly it must comply with Art. 101, it's only special privileges are
conferred by Article 106(2).
- Hoffman La Roche:
- The position must have been held for a period of time
- An undertaking which has a very large market share and holds it for some time.. is by
virtue of that share in a position of strength which makes it an unavoidable trading
partner and which, already because of this secures for it, at the very least during
relatively long periods, that freedom of action which is the special feature of dominant
position. [41]
Findings of Dominance (>50%)
- AKZO v Commission
- A market share of 50% could be considered to be large enough so that, in the
absence of exceptional circumstances, an undertaking will be presumed
dominant [60] → AKZO presumption (upheld in AstraZeneca, Solvay and
France Télécom).
- Guidance on Art. 102 Enforcement Priorities does not refer to the AZKO presumption
