Competition - Dominant Position - Art 102 Flashcards
1
Q
Art 102 TFEU
Key Elements
A
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.
2
Q
Relevant Product Market
A
- Setermines all products or services which are interchangeable / substitutable (i.e. in competition) from 2 perspectives:
- Demand substitution = From consumer’s perspective by reason of characteristics, price, and intended use
- Supply substitution = From supplier’s perspective
- Products considered to be part of same market if there is EITHER demand substitution OR supply substitution. No need for both.
3
Q
Demand Substitution
A
Basic - Which products would consumers purchase if the original product they sought was not available?
Sophisticated - Cross-elasticity of Demand
4
Q
Cross Elasticity of Demand
A
Degree to which demand for 1 product changes in response to a change in price of another product.
- If demand increases in response to a rise in price of the other product, high cross-elasticity of demand and 2 products are considered to be in competition.
5
Q
Small but Significant Non-Transitory Increase In Price (‘SSNIP’) test
A
- How do consumers respond to a permanent increase of 5-10% in a product?
- Would enough consumers move to another product to make the price rise unprofitable?
- If so, products will be part of same relevant product market.
6
Q
United Brands v Commission
Demand Substitution
A
- Dispute over whether bananas constituted a separate market of their own (Commission) or part of an overall market of fruit (United Brands). COJ agreed with Commission because bananas had distinct features, which from perspective of consumers meant they were not substitutable with other fruit.
- Available for whole year
- Soft
- Seedless
- Easy to handle
- Could satisfy constant needs of very young, very old, and sick, and such consumers were unlikely to be enticed away by other fruits.
7
Q
Hilti AG v Commission
A
Commission, General Court and CoJ rejected Hilti’s arguments that nail guns were part of a general market for industrial fasteners.
They found that nail guns were sufficiently unique to have own product market. Hilti-compatible cartridges and Hilti-compatible nails also found to have own separate markets.
8
Q
Supply Substitution
A
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.
9
Q
Continental Can [1973]
Supply Substitution
A
- 3 separate markets in metal containers –
- light containers for preserved meat,
- light containers for preserved fish,
- jar tops
- COJ disagreed and stated it was 1 market because manufacturers could easily switch production between these containers.
10
Q
Michelin I [1983]
Supply Substitution
A
COJ rejected Michelin argument that there was a single market for replacement tyres. There were 2 distinct tyre markets – heavy vehicles and light vehicles. No supply substitution between them because production plant would have to be modified to switch production between 2 types of tyre, which takes time and significant investment.
11
Q
Microsoft [2007]
Supply Substitution
A
Distinction drawn between markets in 3 different types of software – PC operating systems, work server operating systems, streaming media players. No supply substitution between different types of software because substantial amount of time, investment, and risk involved in developing each type of software
12
Q
Art 102 TFEU
Relevant Geographical Market
A
Relevant geographical market must be in the internal market or in a substantial part of it
13
Q
United Brands [1978]
Relevant Geographical Market
A
-
United Brands [1978] - Relevant geographical market is a clearly defined geographical area
- in which the product is marketed and
- where conditions of competition are sufficiently homogeneous
- Relevant geographical market held to be 6 out of 9 EEC MS at the time – France, Italy, and UK were outside of this area because had special arrangements in relation to banana trade with other countries.
14
Q
Notice on the Relevant Market
RGM
A
- United Brand conditions + Geographical area must be distinguished from neighbouring areas in which the conditions of competition are appreciably different.
15
Q
Hilti [1990]
RGM
A
- Relevant geographical market held to be whole of the EU because nail guns could be transported throughout community without excessive transport costs
16
Q
Michelin 1 [1983]
RGM
A
- Relevant geographical market held to be one Member State, Netherlands, because customer demand confined to that Member State (Dutch dealers only bought from Dutch suppliers)
17
Q
Alsatel [1988]
RGM
A
-
Harder for a region of a MS to constitute a relevant geographic market. Conditions of competition in the region will often be same in rest of MS in question.
- Relevant geographical market for rental and installation of telephones was whole of French region, not just Alsace-Lorraine region where they operated. Reason = Same conditions of competition as rest of France
18
Q
Sealink [1992]
RGM
A
-
Sea port and airports geographic markets in own right where a large volume of inter-state trade passes through them.
- Holyhead was relevant geographic market because was only port serving relevant product market on the UK side. Constituted a substantial part of the common market. Provided one of the main links between Member States.
19
Q
Relevant Temporal market
A
- Temporal market refers to relevant market’s time dimensions.
- Can be part of RPM and RGM.
20
Q
ABG Oil [1978]
RTM
A
OPEC oil crisis saw shipments of crude oil to Netherlands drop by 50% which radically transformed petrol market for DURATION of crisis.
21
Q
United Brands [1978]
Dominant Position in the Market
A
-
United Brands defined dominant position as relating to:
- a position of economic strength
- which enables it to prevent effective competition on the relevant market
- by affording it the power to behave to an appreciable extent independently of
- its competitors,
- customers and
- ultimately its consumers
- Ultimately, undertaking is so strong in the relevant market that it is able to restrict competition, irrespective of what its competitors, customers, and consumers do.
22
Q
Akzo Chemie [1991]
Dominance in a Market
Market Share
A
50%+ market share = Dominant position unless exceptional circumstances
23
Q
United Brands [1978]
Dominance in a Market
Market Share
A
- 40-45% determined a dominant position in banana market. Fragmented market which meant nearest competitor only had 17% of market. Consequently, market share of United Brands was much higher than competitors.
24
Q
Hugin [1979]
Dominance in Market
Intellectual Property Rights
A
Ability of an undertaking to enforce Intellectual Property Rights, such as a copyright or trademark may prevent competitors manufacturing and marketing rival products
Had a monopoly over the manufacture of spare parts of Hugin cash registers because it exclusively owned the design and tools to produce them.
25
Tetra Pak 1 [1988]
Dominance in Market
Intellectual Property Rights
Acquisition of an **exclusive patent licence** for its UHT milk packaging process was held to be **abuse of its dominant position**.
26
Tetra Pak 2 [1992]
Dominance in Market
Intellectual Property Rights
**Patenting all its basic technology and modifications** made it **difficult for other undertakings to enter the markets** so was an **abuse of dominant position**.
27
Microsoft [2007]
Dominance in Market
Intellectual Property Rights
**Refusing competitors** **access** to **software protocols** they required **to enable their work group server operating systems to integrate seamlessly with its PC operating system** allowed it to **achieve a dominant market position**. One of the penalties was to break its intellectual protection.
28
Hoffmann-La Roche [1979]
Dominance in Market
Superior Technology
* **Technological lead** over competitors in relation to vitamins it **produced** and **technical service used to advise and assist customers** gave it a **commercial advantage** making it difficult for competitors to compete
29
Michelin I [1983]
Dominance in Market
Superior Technology
**Lead in investment and research**, and therefore, **ability to innovate**, considered when assessing economic strength.
30
Akzo Chemie [1991]
Dominance in Market
Wealth of Capital and Financial Barriers
* **Access to Capital** may place undertaking in a position of economic strength compared to financially weaker competitors. Can use this to **prevent competition** **by driving competitors out of the market**, through **predatory pricing**. Able to **absorb losses until competitors have left the market**.
31
United Brands [1978]
Dominance in Market
Wealth of Capital and Financial Barriers
**C****osts and risks of establishing banana plantations**and to**break into banana market**were held to be**barriers to any potential competitors** which led them to them maintaining dominant position
32
United Brands [1978]
Dominance in Market
Vertical Integration
* **Vertical integration**, and therefore, **control of the supply chain** held as one of the reasons they **maintained a dominant position** as **could get bananas, a perishable product, into hands of customers more efficiently than competitors**.
33
Hoffman-La Roche [1979]
Dominance in Market
Sophisticated Sales and Distribution Network
**Highly developed sales and distribution network** which **enabled the regular and rapid supply of products** held to be a factor in establishing dominance.
34
United Brands [1978]
Dominance in Market
Brand Identification
Brand identification with Chiquita trademark held to be a contributing factor to a dominant economic position.
35
Art 102(2) TFEU
Abuse of a Dominant Position
* Nothing wrong with having a dominant position but **can’t abuse it**.
* The list above is not exhaustive.
36
Exclusionary Abuses
**Exclusionary** seek to **take advantage** of a **dominant position** to **drive competitors out of the market or stop from entering**
37
Exploitative Abuses
**Exploitative abuses** seek to **take advantage** of a **dominant position** to **exploit customers**
38
Akzo Chemie [1991]
Exclusionary Abuses
Predatory Pricing
**Reducing price** to **below average variable costs** OR to **below** **average total costs** where the **intention is to eliminate competition** is an **abuse of dominant position** because competitors don't have the financial reserves to withstand the price drop.
39
Tetra Pak 2 [1996]
Exclusionary Abuses
Predatory Pricing
* Confirmed decision in Azko.
* Between 1976 and 1981 Tetra were selling cartons and machines used to fill them below average variable costs and in 1982 below average total costs. Both were abuses.
40
Hoffmann-La Roche [1979]
Exclusionary Abuses
Discounts & Rebates
**Discounts** held to be **an abuse** because they were to **ensure consumers solely bought from the dominant undertaking**, which **excluded other suppliers** from the market
41
Michelin I [1983]
Exclusionary Abuses
Discounts & Rebates
**R****ebates and bonuses**held to be an abuse because**prevented dealers from taking advantage of offers from other suppliers**
42
Intel [2009]
Exclusionary Abuses
Discounts & Rebates
**System of rebates to manufacturers who bought all/nearly all their chips from Intel to the exclusion of their competitors**. So generous that it was enough for a consumer to reject an offer of a million free chips from a competitor. Found to be an abuse.
43
Commercial Solvents [1974]
Exclusionary Abuses
Refusal to Supply
**Refusal to supply** **anyone apart from own subsidiary** with a chemical found to be an **abuse** because **eliminated competition between subsidiary and other manufacturers**
44
Microsoft [2007]
Exclusionary Abuses
Refusal to Supply
**No need to demonstrate that absolutely *all* competition would be eliminated by refusal to supply.** Have to establish **all *effective* competition** is likely to be eliminated.
45
United Brands [1978]
Exclusionary Abuses
Refusal to Supply
* It will be an **abuse to refuse without objective justification to supply a long-term existing customer who abides by regular commercial practice.**
* A distributor had assisted in the advertising of a competitor so United Brands refused to supply them.
* Should be noted that a refusal by a dominant undertaking to supply will **not be an abuse** if **legitimate objective reason for it, which justifies refusal**
46
Sealink [1992]
Exclusionary Abuses
Essential Facility
**Refusing or restricting access to a competitor to an essential facility is an abuse of a dominant position**.
Sealink changing commercial schedule to impact B&I’s ability to load their ferries was an abuse.
47
Hilti [1990]
Exclusionary Abuses
Tie-In Agreements
Only **selling clips if bought the corresponding number of nails from Haiti** had the effect of **excluding other manufacturers of those nails** from the market as they **could not supply cartridge strips at same time as nails**.
48
Microsoft [2007]
Exclusionary Abuses
Bundling
* Established criteria for bundling to be an abuse:
* Tying and tied goods **must not be within same product market**
* **Undertaking must be dominant in market**
* **Customers have no choice** whether to accept the tied product with the tying product
* Tying **closes out competition**
* Supplying Windows Media player free with Windows PC operating system **induced users to rely solely on the Windows Media Player** and **deterred them from buying competitors’ media players**. Therefore, excluded competition in market.
49
United Brands [1978]
Exploitative Abuses
Excessively High Prices
* Established rule - **charging a price which is excessive because it has no reasonable relation to the economic value of the product supplied would be an abuse**.
50
British Leyland [1986]
Exploitative Abuses
Excessively High Prices
Metro could not be registered in UK without certificate of conformity and only British Leyland could issue it. Charged £25 for right-hand drive cars, but £150 for left-hand drive cars. CoJ held that the charge for left hand drive cars was **excessive** and the fee was **disproportionate** to economic value of car.
51
B.R.T v S.A.B.A.M [1974]
Exploitative Abuses
Unfair Conditions
Co-operative association of publishers, authors and composers had a ***de facto* monopoly over management of intellectual property rights** of such artists in Belgium. Required to sign all rights over to association for duration of membership and 5 years after membership had ceased. CoJ held that these terms were so unfair it amounted to **abuse of dominant position**.
52
British Leyland [1986]
Affect Trade Between Member States
Will suffice for the **abuse** to have the **potential to affect trade**. **No need** for there to **have been any actual effect** on it.
53
Hugin [1979]
Affect Trade Between Member States
**Trade affected** **by the abuse must be between** **Member States**. **No breach if with states outside of EU.**
Undertakings were seeking to obtain spare parts from Hugin in Sweden (who were not part of EEC at the time). Therefore, abuse did not have effect on trade between MS.
