Abuse of a Dominant Position

Question 1

What constitutes abuse of a dominant position?

Answer 1

Neither EU nor UK law prohibits dominance; it is no ‘recrimination’ (reproche) for an undertaking to be dominant (Case 322/101 Michelin v Commission [1983] ECR 3461). Rather, what is prohibited is abuse of dominance or, in other language versions, abusive exploitation of a dominant position. This will be an infringement of Article 102 and/or section 18.

Question 2

What is required to infringe Article 102 or section 18?

Answer 2

So to infringe Article 102 and/or section 18, there must be, first, dominance and, second, abuse.

Question 3

When is an undertaking in a dominant position?

Answer 3

⁃ The definition of the relevant ‘market’ is of clinical importance with Article 102 / s 18 since one must be dominant in a particular market.
⁃ Once the relevant market has been defined, dominance must be considered.
⁃ In this context, dominance relates to an undertaking which can carry out its affairs irrespective of competitive forces.
⁃ Generally speaking an undertaking with >40/50% of the market is dominant except in exceptional circumstances. [The lowest market share in which a firm is held to have been dominant is 37.5%.] This was when the competition was highly fragmented. It is unlikely to go below this.

Question 4

What is the general rule if an undertaking is in a dominant position?

Answer 4

They must not abuse this position. The dominant firm thus has a special obligation to do nothing which would weaken the competition which exists in the market or would prevent the emergence of a new player in the market.

Question 5

How has ‘abuse’ been defined?

Answer 5

Abuse has been defined as:
⁃ “an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of the market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened and which, through recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.” - Hoffman-La Roche v Commission [1979]

Question 6

What are the two main types of abuse?

Answer 6

There are two main types of abuse: exploitative and exclusionary.

1. Exploitative: using your market power to the disadvantage of the buyer.
2. Exclusionary: using your market power to distort the market itself (i.e. to do things which exclude entry by competitors into the market)
   - Or you could have a dominant undertaking which covers both.

Question 7

What do the types of abuse include?

Answer 7

Types of abuse include:
⁃ Pricing
⁃ High pricing, or exceptional low price (predatory pricing[ this is usually only a short term benefit ]) etc.
⁃ Loyalty, fidelity rebates
⁃ E.g. if you buy only from us then we’ll give you 20% off - this is an exclusionary abuse if you are in a dominant position.
⁃ Tying, bundling
⁃ E.g. f you tie the purchase of certain goods /services to the purchase of other goods/services so that the hands of the buyer are tied, this is frequently an infringement of Art 102/s 18. [e.g. Microsoft Windows Media Player was preventing other music players from entering the market].
⁃ Refusal to deal or supply
⁃ Others?

Question 8

*van den Bergh Foods v Commission [2003]

Answer 8

This case is an example of exclusionary abuse:

⁃ In relation to the impulse ice-cream market in Ireland there was a dominant firm with ~86% of the market (“HB ice-cream”, owned by van den Bergh Foods). They said to every Irish shopkeeper that they’d give them a freezer chest if they stocked only their ice-cream.
⁃ Was this abuse of the dominant position? Yes. This was held to be an exclusionary abuse since no shopkeeper in Ireland would take another freezer to stock other competing ice cream.

Question 9

Look up Coca-Cola case:

Answer 9

They offered universities free vending machines (???)

Question 10

What is the key difference between Article 102 and Section 18?

Answer 10

⁃ Article 102 applies to abuse of a dominant position “within the internal market or in a substantial part of it” (so it only applies to pretty big operations).
⁃ Section 18 of Competition Act can apply to any identifiable market (much more narrow) (even e.g. a village, city, bus services in Leeds and Cardiff etc).

And the abuse is prohibited insofar as it may affect trade between Member States or trade within the United Kingdom.