Chapter 8

Question 1

What Article? And what does it do

Answer 1

Article 102

Prohibition of any abuse of a dominant position that is capable of affecting trade between Member States

Question 2

What does Article 102 say ?

Answer 2

‘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.’
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.’

Question 3

What are the 3 Conditions of Article 102?

Answer 3

1. one or more undertakings are in a dominant position or a substantial part of it
2. the conduct must amount to an abuse of the dominant position of the undertaking
3. the abuse may affect trade between MS

Question 4

Relevant Market

Answer 4

Commission must determine the relevant market
Notice on the definition of relevant market
- market definition is a tool to identify and define the boundaries of competition between firms
- establishes the framework within which competition policy is applied by the commission
- The main purpose of market definition is to identify in a systematic way the competitive constraints that the undertakings involved face.

Must analyse….
relevant product market
relevant geographic market
(maybe) relevant temporal market

Question 5

Relevant Product Market

Answer 5

The products or services which are in competition

Contentious area
Hilti
- nail guns

Product Substitution
Products interchangeable with one another or substitutable

— > Demand Substitutability
Notice on Definition of Relevant Markets
- ‘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.’

United Brands
- sub market of bananas

Cross Elasticity + SSNIP
- If demand for the first product increases in response to a rise in the price of the second product, there is said to be high cross-elasticity of demand and the two are considered to be in competition with each other.
SSNIP test
- looks at the effect of a Small but Significant (between 5-10%) Non-Transitory (i.e. permanent) Increase in the Price.

• —- > Supply Substitution
• suppliers are able to switch production to the relevant products and market them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices.’

Continental Can
Michelin I
Microsoft

Question 6

What is the SSNIP test

Answer 6

looks at the effect of a Small but Significant (between 5-10%) Non-Transitory (i.e. permanent) Increase in the Price.
A sufficient enough number of consumers would switch to another product to make the price rise unprofitable, the identified relevant product market to which the test was applied will have been too narrowly defined.
The relevant product market will have to be widened to include more products and the test should be applied again. The process is repeated until the price rise is found to remain profitable.

Question 7

What happened in United Brands

Answer 7

Demand substitutability
- Bananas as a sub market

Relevant Geographic Market
- 6 member States
+ Transport Costs didn’t stand in the way

Dominance

definition: ‘position of economic strength enjoyed by an undertaking which enables it to prevent effective competition’
- Market Share: 40/45% share

Wealth of Capital
- Prohibitive financial barriers - entrenched their position

Vertical Integration
- Control over process

Brand Identfication
- Ppl associated bananas w it

Abuse
Refusal to Supply
- Ceased to supply a Danish distributor
- Not proportionate

Excessive Pricing
- Initially said it was charging an excessive price

Question 8

What happened in Hilti

Answer 8

Product Market
- Separate market
Hilti-compatible cartridges and Hilticompatible nails also had their own separate markets. Dominant position in each

Aftermarket
3 Sep Markets - nails & cartridges AMs

Geographic
No Transport costs

Abuse - tie in agreements
Cartridge strip conditional on buying the corresponding nail

Question 9

What is supply substitutability

Answer 9

Commission Notice
- ‘This means that suppliers are able to switch production to the relevant products and market them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices.’

Continental can

• 3 distinct markets
• commission said abuse
• CoJ - annulled. failed to prove that manufacturers of other forms of light metal containers, such as containers for fruit or condensed milk, were not in a position, by a simple adaptation of production, to enter these sectors in sufficient strength to act as a counterweight.

Michelin I

• CoJ rejected argument that there was a single market for replacement tyres
• two markets - one for heavy vehicles + one for light vehicles
• no demand substitution as the two types of tyre were used for different vehicles and so were not interchangeable. There was also no elasticity of supply. This was because the production plant would have to be modified in order to switch production between the two types of tyre which takes time and requires considerable investment.

Microsoft
- The Commission found that PC Operating Systems, the Work Server Operating Systems and the Streaming Media Players each constituted their own separate markets. This was because there was low supply substitutability between them.
- PC op system - the development and testing of them involved a substantial amount of time and expense and entailed substantial commercial risk.
- work server - same
streaming
- entry into the market required significant research and development investments, had to take account of the protection of existing media technologies by intellectual property rights and needed a significant amount of digital content to play back.
confirmed by Microsoft v Commission

Question 10

What happened in Continental Cans

Answer 10

Supply sub

Continental can

• 3 distinct markets
• commission said abuse
• CoJ - annulled. failed to prove that manufacturers of other forms of light metal containers, such as containers for fruit or condensed milk, were not in a position, by a simple adaptation of production, to enter these sectors in sufficient strength to act as a counterweight.

Question 11

What happened in Michelin I

Answer 11

Supply sub substitution

Michelin I

• two markets - one for heavy vehicles + one for light vehicles
• no demand substitution as the two types of tyre were used for different vehicles and so were not interchangeable.

Relevant Geographic Market
RGM in Netherlands
+ consumer behaviour

Superior Technology
Lead over competitors in investment + research

Sophisticated Distribution
Network of commercial representatives larger than competition

Abuse
Discounts and rebates
Financial rebates and bonuses – uncertainty for dealers

Question 12

What happened in Microsoft

Answer 12

Supply sub

Microsoft
- The Commission found that PC Operating Systems, the Work Server Operating Systems and the Streaming Media Players each constituted their own separate markets. This was because there was low supply substitutability between them.
- PC op system - the development and testing of them involved a substantial amount of time and expense and entailed substantial commercial risk.
- work server - same
streaming
- entry into the market required significant research and development investments, had to take account of the protection of existing media technologies by intellectual property rights and needed a significant amount of digital content to play back.
confirmed by Microsoft v Commission

Question 13

Aftermarkets

Answer 13

• When they purchase complementary products
• it is necessary to consider whether the complementary products form part of the main market (primary market) or are part of an aftermarket (secondary market)
• If there is an aftermarket, then an undertaking which is not dominant in the primary market may be dominant in the aftermarket.

Hilti

• One was the primary market in nail guns.
• But two more were aftermarkets. One was in Hilti-compatible nails which were fired by the nail guns and the other was in the cartridges which were needed to fire the nails.

Hugin
Cash registers
Liptons serviced the registers
Could not use any spare parts other than those produced by hugin
Hugin was able to prevent them using other spare parts through asserting its design rights.
held that there was a separate market for spare parts for Hugin cash registers, that Hugin was dominant in this market and that a refusal by Hugin to supply spare parts to firms who hired out and maintained cash registers could amount to an abuse of a dominant position.

Question 14

What happened in Hugin

Answer 14

Aftermarket
Could not use any spare parts other than those produced by Hugin
Prevent them using other spare parts through asserting its design rights.
Separate market for spare parts

IP Rights
Monopoly of spare parts

May Affect Inter-State Trade
Must be between MS

Question 15

Relevant Geographic Market definition

Answer 15

Defined
Notice:
The relevant geographic market comprises the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas.

United Brands
Clearly defined geographic area in which [the product] is marketed and where the conditions of competition are sufficiently homogeneous for the effect of the economic power of the undertaking concerned to be able to be evaluated’

Question 16

Relevant Geographic Market case law

Answer 16

United Brands
Definition
Area in which [the product] is marketed and where the conditions of competition are sufficiently homogeneous for the effect of the economic power of the undertaking concerned to be able to be evaluated’

6 MS as in those States the conditions of competition were effectively the same for all traders

Consumer Behaviour
Michelin
In Netherlands

Alsatel
CoJ - Conditions of competition were sufficiently homogenous throughout the whole of France, notwithstanding that Alsatel only operated in AlsaceLorraine.

‘substantial part’

Sealink
Volume of trade

United Brands
- transport costs did not stand in the way of the six Member States being considered a single market.

Hilti
- RGM was the Community as a whole as they could be transported throughout the Community without any excessive transport costs

Question 17

Temporal Market

Answer 17

Embodies the relevant market’s time dimension
Often treated as part of RGM + RPM
The notice did not treat time as a distinct dimension of the relevant market
Can be significant

ABG Oil
~ ‘OPEC’) increased the price of crude oil whilst reducing production.
the Arab members of OPEC had imposed an embargo on shipments to states which had supported Israel during the Yom Kippur War in the previous month
One of the states targeted by the embargo was the Netherlands.
By December, shipments of crude oil had dropped to 50% of their October level.
The Commission found that this sudden severe shortage transformed the market in petrol for the duration of the crisis as independent firms found that they could not buy petrol on the world market and so became completely dependent on a few large suppliers with oil refineries in the Netherlands.
The Commission decided that one of these large suppliers, BP, had abused its dominant position by cutting back supplies to ABG far more sharply than it had to other customers. The Court of Justice was prepared to accept the Commission’s analysis of the market conditions, although it held that BP had not abused its position.

Question 18

What happened in ABG Oil

Answer 18

‘OPEC’) increased the price of crude oil whilst reducing production.
the Arab members of OPEC had imposed an embargo on shipments to states which had supported Israel during the Yom Kippur War in the previous month
One of the states targeted by the embargo was the Netherlands.
By December, shipments of crude oil had dropped to 50% of their October level.
The Commission found that this sudden severe shortage transformed the market in petrol for the duration of the crisis as independent firms found that they could not buy petrol on the world market and so became completely dependent on a few large suppliers with oil refineries in the Netherlands.
The Commission decided that one of these large suppliers, BP, had abused its dominant position by cutting back supplies to ABG far more sharply than it had to other customers. The Court of Justice was prepared to accept the Commission’s analysis of the market conditions, although it held that BP had not abused its position.

Question 19

Establishing dominance definition

Answer 19

Once market determined, the com must determine if an undertaking is dominant in market
United Brands
‘[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

Question 20

Collective Dominance

Answer 20

There can also be joint dominance in a market by different undertakings acting together.

Italian Flat Glass
maintained that three Italian undertakings operating in the flat glass industry had aggregate market shares of 79% and 95% in the non-automotive and automotive markets respectively and presented themselves on the market as a single economic entity
considered this to be sufficient evidence of collective dominance
The General Court accepted that, in principle, it was possible for two or more undertakings to have collective dominance in the relevant market:
’There is nothing, in principle, to prevent two or more independent economic entities from being, on a specific market, united by such economic links that, by virtue of that fact, together they hold a dominant position vis-à-vis the other operators on the same market. This could be the case, for example, where two or more independent undertakings jointly have, through agreements or licences, a technological lead affording them the power to behave to an appreciable extent independently of their competitors, their customers and ultimately of their consumers’
But it rejected the Commission’s approach and annulled the decision. The Court held that collective dominance could not be established solely by the existence of economic links. Additional evidence was necessary in order to prove that the undertakings in question were ‘presented on the market as a single entity’.

Question 21

What happened in Italian Flat Glass

Answer 21

Italian Flat Glass
maintained that three Italian undertakings operating in the flat glass industry had aggregate market shares of 79% and 95% in the non-automotive and automotive markets respectively and presented themselves on the market as a single economic entity
considered this to be sufficient evidence of collective dominance
The General Court accepted that, in principle, it was possible for two or more undertakings to have collective dominance in the relevant market:
’There is nothing, in principle, to prevent two or more independent economic entities from being, on a specific market, united by such economic links that, by virtue of that fact, together they hold a dominant position vis-à-vis the other operators on the same market. This could be the case, for example, where two or more independent undertakings jointly have, through agreements or licences, a technological lead affording them the power to behave to an appreciable extent independently of their competitors, their customers and ultimately of their consumers’
But it rejected the Commission’s approach and annulled the decision. The Court held that collective dominance could not be established solely by the existence of economic links. Additional evidence was necessary in order to prove that the undertakings in question were ‘presented on the market as a single entity’.

Question 22

Factors for Establishing Dominance

Answer 22

Market Share
IP Rights
Superior Technology 
Wealth of capital 
Vertical Integration 
Sophisticated Distribution 
Brand Identification

Question 23

Market Share

Answer 23

A Factor for Establishing Dominance
Tetra Pak - 91.8%
Intel - 70%
Akzo Chemie - ‘50% such as that found to exist in this case.’
United Brands - 40-45% share BUT market was a fragmented market with the next nearest competitor having only a 17% share and the next nearest after that having only 9% of the market

Question 24

IP Rights

Answer 24

Hugin
Monopoly over the manufacture of spare parts for Hugin cash registers because it exclusively owned the design and tools used to produce them

Tetra Pak I
Exclusive patent licence for its UHT milk packaging process
Tetra Pak II
Extensive patents policy under which it had patented all its basic technology and all modifications.

Microsoft
Refusing to give competitors access to the software protocols they needed to enable their work group server operating systems to integrate seamlessly with its PC operating system.
Penalty - break its intellectual protection over the relevant protocols which had to be supplied to a rival software manufacturer

Question 25

Superior Technology

Answer 25

The superiority of the undertaking’s technology can also contribute towards dominance in the relevant market.

Hoffman
Highly developed technical service it provided to advise and assist its customers

Michelin I
Lead it had in investment + research

Question 26

Wealth of Capital

Answer 26

AKZO Chemie
Superior financial resources to its competitors and that it was part of a multinational group that had a structure that enabled the losses in one division to be offset by the profits in another division in a way that the competitors could not. Absorb losses

United Brands case,
Prohibitive financial barriers

Question 27

Vertical Integration

Answer 27

Vertical integration means the control over the process of bringing a product into the market from production to distribution to the ultimate sale to consumers.

United Brands
As bananas are highly perishable products with a short shelf life, the strong vertical integration of United Brands’ business gave it an advantage in being able to get its bananas across the world and in the hands of its customers in Europe more quickly and more efficiently that its competitors. This contributed towards its dominance.

Question 28

Sophisticated distribution and sales networks

Answer 28

Hoffman
company had a highly developed sales and distribution network which enabled the regular and rapid supply of products.

Michelin I
Developed network of commercial representatives which was considerably larger than those of its competitors

Question 29

Brand Identification

Answer 29

Brand identification may contribute to an undertaking having a dominant position. Over time, consumers may come to associate a brand name with a product and often become unwilling to try alternative products.

United Brands
the Commission established that consumers had come to associate bananas with the United Brands’ Chiquita trademark as a result of heavy marketing by United Brands

Question 30

What is Abuse of a Dominant position (list)

Answer 30

Refusal to Supply
Essential Facility Doctrine
Predatory Pricing 
Excessive Pricing
Tie In Agreements
Unfair Terms

Question 31

Refusal to Supply

Answer 31

CSC
Monopoly in the EEC over the supply of a chemical called Aminobutanol.
Used in the manufacture of an antibiotic called Ethambutol. Italian subsidiary of CSC had begun to manufacture Ethambutol itself.
Ceasex the supply of Aminobutanol to other manufacturers of Ethambutol

Microsoft
Only necessary to establish that the refusal to supply is liable to or is likely to eliminate all effective competition on that market.

Refusing to provide other software producers, including the complainant, with information that would enable them to design work group server operating systems which could seamlessly integrate with Microsoft’s PC operating system

United Brands
- had ceased to supply a Danish distributor with bananas after the distributor had become the exclusive representative in Denmark of a competitor of United Brands and had participated in an advertising campaign by that competitor

Must proportionate

Question 32

Essential Facility Doctrine

Answer 32

Sealink
- A dominant undertaking which both owns or controls and itself uses an essential facility, i.e. a facility or infrastructure without access to which competitors cannot provide services to their customers, and which refuses its competitors access to that facility or grants access to competitors only on terms less favourable than those which is gives its own services, thereby placing the competitors at a competitive disadvantage, infringes Article [102], if the other conditions of that article are met.’
Sealink
concerned the port of Holyhead in North Wales.
Sealink owned the port. It also ran two ferries between the port and Dublin in Ireland. B&I ran the other ferry along the same route. Its berth was located near to the entrance to the harbour. It had to stop loading its ferry every time one of Sealink’s ferries sailed past.
Sealink used its control of the port to introduce a new sailing schedule which suited the commercial interests of its ferries but caused considerable disruption to the loading and unloading of B&I’s ferry, particularly at peak times.
The Commission found that Sealink had a dominant position as a provider of port facilities at Holyhead and that it had abused that dominant position.

Question 33

Predatory Pricing

Answer 33

Charging excessively low prices in order to drive rivals out of the market

Two situations which amounted to predatory pricing:

1. Where the price has been reduced below the average variable costs. This was held to be an abuse in principle as it serves no economic purpose other than to eliminate competitors.
2. Where the price has been reduced below average total costs (fixed costs plus variable costs) but is still above average variable costs. This situation was held to be an abuse where an intention to eliminate competition is shown

Tetra Pak II
Predatory pricing of its cartons and of the machines used to fill the cartons.
Between 1976 and 1981, the cartons were sold at prices considerably lower than the average variable costs.
~ In 1982, the cartons were sold at prices below average total costs but above average variable costs.
~ Also an abuse as there was sufficient evidence that it was intended to eliminate a competitor

AKZO

• a type of chemical that could be used in both the manufacture of flour and in the plastics industry.
• A rival undertaking called ECS started to sell its product to the plastics industry.
• AKZO reduced the price it charged for the chemical to the flour industry to below the cost of producing the chemical for a prolonged period.
• AKZO made a loss on each of these sales as a result but its intention was to drive ECS out of the market.

Question 34

Excessive prices

Answer 34

United Brands

• the Commission found that United Brands had charged its customers in certain Member States prices which were excessive in relation to the economic value of the product supplied
• Though this was annulled by CoJ
• the Court accepted the principle that ‘charging a price which is excessive because it has no reasonable relation to the economic value of the product supplied would be such an abuse’

British Leyland

• Under the system of vehicle registration in the United Kingdom, a manufacturer had to obtain national type approval for each model of vehicle which it manufactured.
• Once this had been obtained, anyone seeking to register the vehicle for use on the road had to produce a certificate of conformity with the approved type which was issued by the manufacturer.
• British Leyland produced various models of car including the Metro.
• The prices of left hand drive models of the Metro marketed in continental Europe were cheaper than the prices charged by its network of dealers in the United Kingdom for right hand drive models of the Metro. This resulted in a market developing in left hand drive Metros being reimported into the United Kingdom.
• In July 1981, following a meeting with its British dealers, British Leyland raised the charge to distributors for issuing a certificate of conformity for left hand drive Metros from £25 to £150. The charge for the certificate for right hand drive Metros remained at £25.
• The Court of Justice accepted the Commission’s decision that this was an abuse of a dominant position as the charge for left hand vehicles was excessive. The issuing of the certificate for both left hand drive models and right drive models merely required a simple administrative check. The only difference for left hand drive vehicles lay in the need to verify that they had undergone four essential alterations.
• The Commission was entitled to conclude that the fee was disproportionate to the economic value of the service being provided. It had been fixed solely to make the importation of left hand drive vehicles less attractive

Question 35

Tie in and Bundling

Answer 35

Specifically prohibited by article 102(d) TFEU.

Hilti
- making the purchase of the cartridge strips used in its nail guns conditional on the buyer also purchasing the corresponding complement of nails.

Bundling
- where two or more products are sold together as a single package

Microsoft
Including its Windows Media Player with its Windows PC operating system.

Microsoft Established the Criteria
~ (i) The tying and tied goods must not be within the same product market;
(ii) The undertaking must be dominant in the tying product market;
(iii) Customers get no choice whether to accept the tied product with the tying product; and
(iv) The tying closes out any competition.

Question 36

Unfair Terms

Answer 36

The imposition of unfair terms by an undertaking in a dominant position can constitute an abuse of that dominant position
BRT // SABAM

• SABAM was a cooperative association of authors, composers and publishers which administered, managed and commercially exploited all of the copyrights and other kindred rights of its members. It had a de facto monopoly over this.
• Its standard contracts required members to assign all such rights over their current and future works to the association without drawing any distinction between different categories of these rights.
• Would retain those rights for five years after withdrawal from the association.
• The Court of Justice held that SABAM had abused its dominant position by imposing unfair conditions.
  went beyond what was absolutely necessary to attain this objective, especially as the assignment continued for an extended period after the member’s withdrawal.

Question 37

Affect Inter-state Trade

Answer 37

AFFECT such trade
Leyland - no need to establish that the abuse has had an effect on trade between Member States at the relevant time
~ CoJ - held that this was irrelevant as it was sufficient under Article 102 that British Leyland was acting in a way that was liable to affect trade between Member States

Hugin
Must be between MS
- if these undertakings could not obtain a spare part from Hugin’s subsidiary in the United Kingdom, they would be likely to try to obtain it from Hugin itself which was based in Sweden.
- At that time, Sweden was not a member of the EEC.

Question 38

Fines & Damages

Answer 38

The powers to impose fines under Regulation 1/2003 which were discussed in Section 10.10 of the previous chapter apply equally to infringements of Article 102 TFEU.

Record
Google Android - 4.34 billion
Users of mobile devices which had Google’s Android operating system expected
Google’s app store (called ‘Google Play’) to be pre-installed. However, Google only
offered its mobile apps and services as a bundle to manufacturers of such mobile
devices. As a result, these manufacturers had to install its search app and browser
app on their mobile devices in order to be able to license Google’s app store. This
had the effect of excluding other search and browser apps from the market.
Google made significant payments to manufacturers and mobile networks on
condition that they exclusively pre-installed its search app on all their Android devices.
Google required any manufacturer who wished to pre-install Google apps on their
mobile devices to commit to using only versions of the Android operating system that had been approved by Google. This prevented the manufacturers from using alternative versions of Android and from pre-installing apps which had been designed for use on those alternative versions.

Google Search (Shopping)

2. 42 billion
   - Google had developed algorithms which systematically gave prominence to its own comparison shopping service at the top of the results produced by its search engine while demoting rival comparison shopping services on average no higher than the fourth page of results.

Google Search (AdSearch)
1.49 billion
- clauses in its contracts which prevented
effective competition from Google’s competitors. The clauses were contained in
contracts with website owners for the provision of online search advertising services.
They initially prohibited the website owners from placing any search adverts from
competitors of Google on their search results pages.
These clauses were later replaced with clauses that reserved to Google the most profitable positions on search results pages for its adverts and which enabled Google to control how attractively the search adverts from competitors were displayed.

The record fine before the Google cases had been the €1.06 billion imposed in Intel Corporation

Damages the same

Question 39

What happened in Tetra

Answer 39

Market Share - 91.8%

IP Rights
patent license for milk packaging
patents policy

Predatory Pricing
1) lower than variable pricing
2) lower than fixed
Both PP

Question 40

What happened in Alsatel?

Answer 40

Geographic Market
Market was France as a whole not Alsace-Lorraine
Conditions homogenous

Question 41

What happened in Sealink

Answer 41

Geographic Market
Volume of Trade

Abuse - Essential Facility Doctrine
Owned the port

Question 42

What happened in Microsoft

Answer 42

Supply Substitution
3 Markets

IP Rights
Refused to give competitors access to software protocols

Abuse
Refusal to Supply
Not necessary to demonstrate that ALL competition would be eliminated - just effective competition

Tie In Agreements
Abused by including Windows Media Player
CRITERIA
a) tying and tied goods not in same market
b) undertaking must be dominant
c) consumers get no choice
d) tying closes out any competition

Question 43

What happened in Intel

Answer 43

Abusive behaviour
Rebates conditional
Big fine

Question 44

What happened in CSC

Answer 44

Abusive
Refusal to supply
- supply of chemical
- ceased to supply competitors

Question 45

What happened in AKZO Chemie

Answer 45

Wealth of Capital
Superior financial resources and good structure

Predatory Pricing 
Chemical used in flour and plastics
Reduced its price to drive out competitor
two ways
1) below variable cost