Article 102

Question 1

Exclusionary abuse - commission guideline?

Answer 1

Commissions guidance on the commission’s enforcement priorities in applying article 82 of the EC treaty to abusive exclusionary conduct by dominant UTs 2009

Question 2

Commissions guidance on the commission’s enforcement priorities in applying article 82 of the EC treaty to abusive exclusionary conduct by dominant UTs

Answer 2

Forclose their competitors
Diverse effect on consumer welfare
- different approach taken by the courts

Question 3

Anti- competitive foreclosure

Answer 3

Being the situation where effective access of actual or potential competitors to supplies or markets is hampered or eliminated - para 19 of guidance

Question 4

Commission take into account what factors when considering foreclosure to competitors or reduction in consumer welfare

Answer 4

• position of the dominant undertaking
• conditions on the relevant market
• position of the dominant undertakings competitors m
• position of the customers or input suppliers
• extent of alleged abusive conduct
• evidence of actual foreclosure
• evidence of any exclusionary strategy

Question 5

Guidelines at para 28

Answer 5

Commission may not challenge behaviour which is objectively necessary or in a situation where substantial efficiencies that outweigh anti-competitive effects

Question 6

Exclusionary abuse -

Answer 6

majority of abuses under article 102

Question 7

Michelin case - exclusionary abuse

Answer 7

Article 102 covers practices which are likely to effect the structure of the market where as a direct result of the presence of a particular UT on the market the competition has already been weakened and have the effect of hindering the development or maintainence of level of competition existing on the market

Question 8

British Midland v Aer Lingus

Answer 8

Made aer lingus interline and allow BM to use their computer systems to sell tickets for the same route - uncommon to do this for new competitors

Question 9

Microsoft v commission 2007 - exclusionary abuse

Answer 9

Commission made Microsoft provide interoperable information available to its competitors to allow them to make technology that would work on microsoft’s servers so that the continuance of M’s strength would not continue and the risk of elimination of competition in a second market

Question 10

Exclusionary abuse - Pricing strategies

Answer 10

Most important cases concern discounting, rebates and predatory pricing

• discounts: Hoffman la Roche case: loyalty rebates - clause that allowed customers to receive discounted prices where they told HLR about the lower pricing allowing them to react and maintain their market share

Question 11

Michelin: discounts

Answer 11

Annual discounts awarded to Michelin on basis of sales targets for dealers amounted to abuse as the dealers couldn’t deal with another supplier without heavy fear of economic loss

Question 12

Discounts - Irish sugar case

Answer 12

Targeted discounts will always be unlawful as they’re aimed at tying customers closely to dominant company

Question 13

British airways v commission

Answer 13

The commissions fine of €6.8 million imposed on BA for offering commission bonuses to travel agents who exceeded BA sales targets was confirmed
- “performance reward scheme” was fidelity building because of its progressive nature

Question 14

Michelin 2 decision

Answer 14

Court of first instance held that one it is established that the dominant undertaking was taking part in loyalty inducing discounts, it was not necessary to show that the discounting practice actually created anti competitive effects

• supported by the CJEU in Tomra Systems = no need to show “negative prices” I.e prices below cost, as a prerequisite to finding abuse

Question 15

What does the commission’s guidance say on the discount or rebate

Answer 15

Paras 23-27 concentrate on whether the discount or rebate would hamper competition from an ‘as efficient’ competitor - whether they could still compete or the dominant UT is engaging in below costs pricing through the operation of the scheme

Question 16

Predatory pricing

Answer 16

Selective price reduction intended to harm competitor

• levels at or below cost of making
• because of dominant position undertaking will be able to sustain loss for a certain period of time but the weaker competitor with little resources will be driven from the market

Question 17

AKZO case - predatory pricing

Answer 17

Formula to calculate whether pricing is predatory

• if they fall below average variable costs (which vary according to quantity produced) predatory pricing is presumed
• if prices are between AVC and average total costs (variable costs + fixed costs) pricing will be predatory when part of a plan to eliminate competition
• difficult to apply but first case to apply a cost based approach to challenge illegitimate price competition by a dominating undertaking

Question 18

Tetra Park 2 - predatory pricing

Answer 18

• liquid food packaging - tetra was dominant UT in aseptic packaging and had been involved in non-aseptic packaging market which is was not dominant
• novel extension to the doctrine but seems only possible where there is a link between the dominant market and the non dominant market

Question 19

Irish sugar - predatory pricing

Answer 19

Different approach taken than in AKZO and tetra park = IR was cutting prices to Percy sugar market in Ireland from imports from Northern Ireland
- where price cuts are targeted at customers who might seek supplies from a competitor this may be enough to found a finding of predatory pricing unless all customers are offered favourable terms

Question 20

France Telecom v Commission

Answer 20

CFI made it clear that dominant undertakings had no right to align their prices with those of a competitor, especially where they are potentially abusive being below cost
- also rejected the argument that a price below cost would be predatory unless it was necessary for the undertaking to recoup its losses
= difficult to ascertain when a dominant UT crosses the line

Question 21

Predatory pricing - Commission guidance on

Answer 21

Commission doesn’t need to show that competitors have existed the market a dominant undertaking may well prefer to discipline an existing competitor so that it remains in the market but follows the dominant undertaking’s pricing and refrains from vigorous competition in the future (para 69)

Question 22

Margin squeeze - dutsche telekom and TeliaSonera

Answer 22

Court of Justice - the key to abuse within a margin squeeze is the spread between the wholesale and retail price

• court doesn’t need to establish that either is too high or low
• only that the margin has been squeezed
• if an effective competitor couldn’t compete or only at a loss or reduced profitability based on input price = may be abuse
• proof of an anti-competitive effect is not necessary for the finding of an infringement but margin squeeze can effect the entry into the market being more difficult or growth of products being stifled

Question 23

Tying or bundling

Answer 23

An undertaking can be dominant in one market and abuse its position in another

• extend or leverage its market power from the market its dominant in to another
• usually customers obtain secondary product when they buy the first

Question 24

Tying - Hilti v Commission

Answer 24

Manufacturer of nail guns refused to supply cartridge strips containing the charge which fired the nails and over which it had IP rights without customers needing to buy the nails too

Comm focused on 2 consequences of the abuse

• the extension of monopoly power into a new market m”
• foreclosure of competitors

Question 25

Microsoft case - tying

Answer 25

Dominant in PC client operating system offer an unbundled version of its operating system without Windows Media Player to PC manufacturer

Question 26

Commission guidance

Answer 26

Para 50: commission will only act when the tying and tied products are on separate markets and the tying practice is likely to cause foreclosure

Question 27

IP rights v competition law

Microsoft 3007

Answer 27

The dominant work group server operating system supplier Microsoft, to disclose complete and accurate interface documentation to allow non-Microsoft work group servers to be interoperable with Windows PCs and surfers

Question 28

Combined test of bronner, IMS and Microsoft cases highlighted in Microsoft

Answer 28

1) the refusal to give interoperable info relates to a product or service indispensable to the exercise of a particular activity on neighbouring market
2) the rufusal is of such a kind to exclude any effective competition on gay neighbouring market
3) the refusal prevents the appearance of a new product for which there is a potential consumer demand
4) the refusal is not objectively justified

Question 29

Microsoft continued

Answer 29

In relation to the second criteria it is only necessary to show that the refusal is liable to or is likely to eliminate all effective competition in the market
- those seeking supply must show that the refusal denied them the opportunity to supply a new product of market or to innovate

Question 30

Remember competition for the market and competition ON the market

Answer 30

Competition for the market = one product will in the market for one generation of the product cycle and assumes dominance

• competition on the market will then be limited until the next generation of products / UTs enter
• traditional competition is static ( competition on the market) and
• competition for the market process is dynamic