EU w4 Flashcards
Subject 1: introduction to art. 102 TFEU (the prohibition on abuse of a dominant position).
Art. 102 TFEU is also part of competition law. Therefore, the general principles of competition law discussed in the previous week on competition law in general also apply in the context of article 102 TFEU.
The essence of this article is the controlling of market power.
The article does not prohibit power on the market, but only prohibits the abuse of power on the market.
Whereas last week we learnt that two undertakings can make a deal that violates European law, this week is about just one undertaking. Include this big difference when studying the material. Throughout the roadmap, you will also see that for article 102 TFEU to be qualified, there only has to be one undertaking.
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.
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.
Subject 1: introduction to art. 102 TFEU (the prohibition on abuse of a dominant position).
Art. 102 TFEU does not prohibit power on the market, but it only prohibits the abuse of power on the market.
Art. 102 TFEU does not prohibit power on the market, but it only prohibits the abuse of power on the market.
Post Danmark case
Dit arrest gaat verder in op het leerstuk van art. 102 TFEU en het misbruik van machtspositie.
Relevante feiten:
Post Danmark is a big company when it comes to distribution of regional newspaper, directories, telephone yeasts, among others. It is established in the case that the market is that of direct mail of Danmark.
Post Danmark had an exclusive right to deliver certain letters/parcels within weight classes. Other companies including forburger-kontakt entered into a contract with Danmark entrusting the distribution of direct mail to Post Danmark. However, Post Danmark applied different prices in order to bind customers to Post Danmark. Forburger-Kontakt filed a complaint that Post Danmark had abused its dominant position.
Beoordeling:
The first paragraph of interest in this judgment is paragraph 38. Indeed, this judgment is concerned with the extent to which there is ‘fair competition’ and to what extent there is an abuse of dominance. This paragraph explains that when a company in a dominant position sets prices at which the main costs of marketing and delivering the product are covered, it should in principle be allowed to lower prices to compete with other companies.
should, according to paragraph 40, the court nevertheless assess that there is an abuse of dominance. But the company in question may then asses that there are justification for the conduct in question.
Paragraph 41 then states that such conduct must be objectively necessary or the negative market conduct must benefit the consumer in terms of efficiency.
In conclusion, para 44 states that there is no anti-competitive behavior merely on the basis that Post Danmark applied different prices in order to generate more customers. It will have to be actually investiged, without objective justification, whether the behaviour has negative competitive effects.
Post Danmark case
Subject 2: Roadmap - the application of art. 102 TFEU
Essentie van het leerstuk:
Belangrijk is dat je goed het verschil kunt onderscheiden tussen artikel 101 TFEU en art. 102 TFEU. Waar art. 101 TFEU betrekking heeft op een vorm van samenwerking tussen ondernemingen. Strekt art. 102 TFEU ertoe te voorkomen dat een enkele onderneming de grootte van zijn machtspositie misbruikt.
Tijdens het maken van casusvragen dien je jezelf dus af te vragen: gaat het hier om twee ondernemingen die samen de eerlijke competitie proberen te verslechteren, of is het een enkele onderneming met een dusdanige machtspositie dat deze misbruikt wordt? Verder lijken de stappenplannen op elkaar.
Ten slotte is het erg van belang dat je gedurende de stappen telkens een heldere tussenconclusie trekt. Voor iedere tussenconclusie ontvang je namelijk ook punten op het tentamen.
Step 1: Is there at least 1 undertaking involved?
The definition of an undertaking
The definition of an undertaking can not be found in the treaty. In the Höffner & Elser, Ambulanz Glockner and Pavlov rulings, we find the elaboration and meaning of an undertaking.
According to Hoffner and Elser, an undertaking is ‘any entity engaged in economic activity, regardless of the legal status of the entity and the way in which it is financed’.
Economic activity can be characterized based on Consten & Grundig as the offering of goods and services on the market.
That, according to the Pavlov case, could at least or in principle be carried on by a private undertaking for profit.
Tip:
Uit deze uitspraken kunnen we opmaken dat entiteiten die zich niet inlaten in een bepaalde economische activiteit ook geen ‘undertakings’ zijn op het gebied van Europees recht.
A parent and subsidiary and a principal and agent.
In two situations, art. 102 TFEU cannot be applied, which is in the context of a parent and subsidiary and a principal and agent.
In he context of a parent and subsidiary that form a single economic entity, art. 102 TFEU can not be invoked in that relationship. As to whether there is a single economic entity between a Parent and a Subsidiary, we look to the Akzo judgment. If the parent exercises ‘decisive influence’ over its subsidiary, then it can be said to be a relationship to which art. 102 TFEU does not apply. For the assessment you can look at how many shares the parent owns in the subsidiary. If the parent owns 100% of the shares, dominance is presumed.
There is also no applicability of art. 102 TFEU in the relationship between a principal and agent. An agent can sell certain products for its principal. If you can consider the principle and the agent as one undertaking, art. 102 TFEU is not applicable. If the agent bears some commercial risk while selling the products, then is can not be said that there is a relationship between a principle and agent to which art. 102 TFEU does not apply.
An association of undertakings.
According to the Wouters case, an association of undertakings consist of undertakings of the same general type. The association has the responsibility of representing the common interests of the undertakings to other economic operators, government bodies and even the public in general. Examples of associations of undertakings are trade associations of umbrella organisations.
Voorbeeld:
De UEFA is een voorbeeld van een association of undertakings. Ieder Europees land heeft zijn eigen voetbalbond (zoals de KNVB) op Europees niveau is het de UEFA die alle landen gezamenlijk vertegenwoordigd en wedstrijden organiseert.
Tip:
Voor dit gedeelte zie je dat het gehele juridische kader gebruikt is wat bij de toepassing van art. 101 TFEU ook is gebruikt. Het enige verschil met art. 101 TFEU is dat in het geval wij te maken krijgen met art. 102 TFEU er slechts van 1 undertaking sprake hoeft te zijn.. Let daar goed op tijdens de toepassing van de stap en trek ook de juiste conclusie
Step 3: Does the undertaking have a dominant position?
The definition of a dominant position can be found in the United Brands case. It is a position of economic strength enjoyed by an undertaking. It ensures that effective competition can be prevented by that undertaking because the undertaking has the power to behave independently of the competition, customers, and consumers in the market.
Tip:
Deze definitie is terug te vinden in de United Brands zaak, maar deze overweging staat niet in de reader. De United Brands zaak is een hele lange zaak, die de cursus niet volledig in de reader heeft weergegeven. Het is wel de bedoeling dat je deze definitie kent.
To establish dominance, two steps should be taken: market definition and market power assessment. Go through both steps 3 (a) and 3 (b)!
Step 3 (a): the market definition
To determine whether there is dominance, the market has to be determined. You determine the market in two steps.
The first step is that of determining the relevant product market (see Notice on the definition of the relevant market, para. 7).
the definition of the product market is as followed: ‘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’. (Notice on the definition of the relevant market para. 7). Within the relevant product market, two things are distinguished:
Demand substitutability: which products are considered as exchangeable
(substitutable) by consumers. For this part, one uses the SSNIP (Small but Significant and Non-transitory Increase in Price) test. Repeat the SSNIP test until consumers no longer switch products (see Notice on the definition of the relevant market para. 15 and 17).
Voorbeeld:
De SSNIP test houdt in dat je de volgende vraag beantwoord. Stel SPA verhoogt de prijzen met 10% zijn consumenten dan geneigd om Coca-Cola te kopen? Als het antwoord op deze vraag bevestigend is dan behoren beide tot dezelfde product market. deze test herhaal je totdat je een ontkennend antwoord op de vraag krijgt.
Supply substitutability:
The ability of producers to switch production to compete with someone else. Look at whether a supplier/producer can switch production in the short term without incurring significant additional costs or risks. If you are a producer of jeans and you can easily switch to the production of denim jackets you can more quickly assume that jeans and denim jackets belong to the same markets ( See Notice on the definition of the relevant market para. 20).
Tip:
In United Brands zie je dat de relevante market wordt bepaald aan de hand van de ‘product characteristics’ en niet aan de hand van de SSNIP test. Ten tijde van deze uitspraak bestond de SSNIP test nog niet. Tegenwoordig worden de ‘product characteristics’ gebruikt om de vraag van de SSNIP test te beantwoorden. De characteristics weeg je dus mee in de beantwoording van de vraag of consumenten ‘switchen’ naar een ander product.
De SSNIP test klinkt vaag en velen vinden het lastig om deze test toe te passen. Van belang is om uiteen te zetten waarom je wel/niet denkt dat een consument/producent gemakkelijk switcht in het kopen of produceren van een ander product. Kijk hierbij naar de ‘products characteristics. Als je een bakfiets van Cortina hebt en een bakfiets van Gazelle, dan kun je hoogst waarschijnlijk gemakkelijk beargumenteren dat wanneer de Cortina bakfietsen duurder worden gemaakt, consumenten overgaan tot het kopen van een Gazelle bakfiets.
Hetzelfde geldt voor bijv. de producent van leren broeken. Deze zou door de karakteristieken van een leren broek ook snel kunnen overstappen naar het produceren van leren jassen.
The second step is to define the relevant geographic market. (see Notice on the definition of the relevant market para. 8).
The definition of the relevant geographic market is as follows: ‘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 homogenous and which can be distinguished from neigbouring areas because the conditions of competition are appreciably different in those areas (Notice on the definition of the relevant market, para. 8)
The SSNIP test is also used for this component.
Voorbeeld: als je de prijzen van benzine in Amsterdam verhoogt, zijn de consumenten dan bereid te reizen naar Groningen voor benzine?
Step 3 (b) market power assessment
Once the market has been identified, the next step is to determine the power of an undertaking on the market. One examines this by taking a market power assessment with the following indicators:
Market shares:
Market shares give an indication of the state of competition in the market. According to the Akzo case, market shares of 50% give a rebuttable presumption of dominance on the market. Here you look at both absolute and relative market shares. In other words, you look at the market shares of the largest party in the market, but also those of the competitors.
Akzo para. 60:
‘With regard to market shares the Court has held that very large shares are in themselves and save in exceptional circumstances, evidence of the existence of a dominant position (judgment in Case 85/76 Hoffman-La Roche v Commission [1979] ECR 461, paragraph 41).
That is the situation where there is a market share of 50% such as that found to exist in this case’
Barriers to entry:
Anything that makes it difficult for a company to enter and compete in the relevant market is considered. The higher the barriers, the greater the likelihood of dominance in the market. High market shares indicate many barries to entry.
Voorbeeld: als je als beginnende ondernemer veel moet investeren om het product op de markt te brengen, dan is er hoge kans dat er sprake is van barriers to entry en dus een dominant position.
Countervailing buyer power:
A large buyer can put a lot of constraint on a dominant undertaking. For this reason a dominant undertaking can not act independently in the market.
Voorbeeld: Countervailing buyer power komt veelal voor bij supermarkten en leveranciers als bijv. spa. Dergelijke leveranciers zijn voor grote mate afhankelijk van de supermarkten die hun producten verkopen.
Step 4: Is the dominant position within the internal market or a substantial part of it?
For this criterion, the Suikerunie case is relevant. A substantial part is expressed not only in geographical terms but more in terms of the pattern and volume of the production and consumption or a product, but also in terms of the habits and economic opportunties of vendors and purchasers. A Member State, or even part of a Member State, may suffice for this criterion.
Step 5 Is the undertaking abusing its dominant position?
Three forms of abuse can be distinguished here:
Predatory pricing:
This is a phenomenon in which prices are set below cost pricing to eliminate competition. Once competition has been eliminated, the undertaking in question can raise its prices again, thereby generating lost sales.
The Akzo case is also relevant here in several respects:
(1) Prices below the AVC (average variable costs) are presumed to be predatory.
Akzo, para 71: ‘prices below average variable costs (that is to say, those which vary depending on the quantities produced) by means of which a dominant undertaking seeks to eliminate a competitor must be regarded as abusive’.
(2) Prices above the AVC but below the ATC (average total costs) are only predatory it they are part of a plan to eliminate competition. In this context, it must be proved that there is no other reason for such pricing than to eliminate competition.
Akzo, para 72 ‘morever, prices below average total costs, that is to say, fixed costs plus variable costs, but above average variable costs, must be regarded as abusive if they are determined as part of a plan for eliminating a competitor).
Nadere uitleg:
de AVC dat zijn ook wel de variabele kosten. deze veranderen mee met de productiehoeveelheid van een onderneming. Zij zijn dus verbonden aan de activiteit van een onderneming.
De ATC dat zijn de kosten die een onderneming maakt per product. voor de ATC geldt een makkelijke rekensom: kosten totaal: aantal geproduceerde producten = de ATC.
Refusal to supply:
According to Bronner para. 39 an undertaking has a duty to supply only in very exceptional circumstances.
According to Bronner para. 40 & 41 the following requirements must be met:
1 the access must be indispensable
2 the resufal must be incapable of objective justification
3 the resufal would have to be likely to eliminate effective competition on the market.
Tying and bundling
Tying and bundling is the phenomenon whereby an undertaking supplies one product ( the tying product) and adds the condition that the buyer must also buy another product (the tied product).
The following requirements must be met:
the tying and the tied products are two separate products
the undertaking is dominant in the tying market
the undertaking does not give customers a choice to buy the tying product alone
the practice forecloses competition
nadere uitleg:
Tying and bundling komt vaak voor bij ondernemingen die een dominante positie hebben in het ene product, maar totaal niet dominant zijn in een ander product. Op deze manier probeert de onderneming ook dominant te worden in het andere product.
Step 6: does the abuse affect trade between member states
next, there should be an appreciable effect on trade between member states. For that, it is important to conduct a pattern on trade test. You look at whether there is some impact in on the exchange of goods and services between member states. According to the STM case, this involves a direct, indirect, actual or potential impact on trade between member states.
Step 7 Justifications
There are three forms of justifications. These will be discussed with the requirements.
Step 7a: objective necessity defense.
the undertaking is allowd to show that the conduct in question is objectively necessary. The following requirements must be met:
there must be a legitimate public interest.
The conduct is based on objective factors that can apply in general for all undertakings on the market.
Without the conduct the products can not be produced or distributed. The conduct is necessary to produce the product.
Step 7b: meeting competition defense
This justification can only apply to pricing practices. Dominant undertakings have the right to align their prices in good faith with the prices charged by a competitor. This is also called ‘competition on the merits’. However, this right is not absolute and there is a proportionality test:
The conduct is suitable to achieve a legitimate aim.
The conduct is indispensable: no less anticompetitive measure can be used, but the conduct is also limited in time and kept to the absolute minimum.
The conduct is a proportionate response: it may not distort competition.
Step 7c: efficiency defense
the undertaking must prove that efficiency is realized or likely to be realized by the conduct. the following requirements must be met:
the efficiency gains counteract any likely negative effects on competition and consumer welfare.
the gains have been, or are likely to be brought because of the conduct
The conduct is necessary for the achievement of the efficiency gains
the conduct does not eliminate effective competition.
Subject 2: roadmap - the application of art. 102 TFEU
Akzo case
Relevantie: Deze zaak is relevant om te bepalen of een onderneming zijn dominante positie misbruikt
Relevante feiten:
This case concerns AKZO and competitor ECS. Akzo produces benzoyl peroxide in the plastics sector. However, ECS decided to expand production and caused AKZO to win one of its biggest customers. AKZO’s reaction to this was great. The latter decided to give extreme discounts to ECS’s customers. ECS filed an appeal on the grounds of abuse of AKZO’s dominant position.
beoordeling:
in para. 60 the court concludes that market shares of 50% give a rebuttable presumption of dominance on the market.
in para. 71 the conclusion is made that prices below the AVC (average variable costs) are presumed to be predatory.
In para. 72 it is stated that prices above the AVC but below the ATC (average total costs) are only predatory if they are part to a plan to eliminate competition. In this context, it must be proved that there is no other reason for such pricing than to eliminate competition.
Akzo case
Oscar Bronner case
Deze zaak gaat over de theorie van refusal to supply. In deze zaak wordt de theorie uiteengezet en wordt bepaald aan welke vereisten voldaan moet worden.
Relevante facts:
Oscar Bronner published a newspaper and had a market share of less than 4 cent in it. Mediaprint had rigged a nationwide system to distribute newspapers more easily. Mediaprint had also published two newspapers of its own, holding a market share of nearly 50 per cent. The newspapers were delivered to subscribers ‘homes. Oscar Bronner, who had published a newspaper himself, was not allowed to participate in the system set up by Mediaprint. He felt this violated art. 102 TFEU
Beoordeling:
- para 39 suggests that an undertaking has an obligation to supply only in exceptional circumstances.
- para. 40 and 41 then reveal the requirements to be met:
1 the access must be indispensable
2 the refusal must be incapable of objective justification
3 the refusal would have to be likely to eliminate effective competition on the market.
Oscar Bronner case
Press release Google and Alphabet v. Commission case
Essentie:
The General Court of the European Union largely dismissed Google’s appeal against the European Commission’s decision from June 27, 2017, which found Google to have abused its dominant position in the online search market across 13 European countries. Google was found to have favored its own comparison shopping service over competitors’ services on its general search results pages, manipulating the visibility and display of the results.
belangrijkste punten van de Press Release:
1 Fine upheld:
the general court upheld the hefty fine of €2.42 bilion imposed on Google for its anti-competitive practices.
2 Anti-competitive practices:
The court acknowledged that Google’s dominant position was not the issue, but rather its unfair favoring of its own comparison shopping service by manipulating the results displayed, thereby undermining competition on merit.
3 Impact on competition:
The court recognized the severe impact this had on competition, as Google’s practices diverted significant traffic away from competing comparison shopping services to its own service, potentially leading to reduced choice and innovation in the market.
4 Effect on market:
While Google argued that competition remained strong due to the presence of merchant platforms, the court confirmed that these platforms were not direct competitors to comparison shopping services and reiterated the anti-competitive effects of Google’s practices on the latter.
5 Rejection of Google’s justifications:
The court rejected Google’s claim that its actions were justified either by pro-competitive characteristics or by technical constraints. It did not find any efficiency gains that could offset the negative effects on competition.
6 Penalty Assessment: Despite Google’s objections, the court reaffirmed the necessity and the amount of the fine, nothing the severe nature of the infringement and the international, not negligent, nature of the conduct.
This ruling signifies a notable enforcement of anti-competitive regulation on major tech companies in Europe, making it a significant case in the broader context of regulatory scrutiny towards dominant tech firms’s operations in the region.
Tip:
The commission Notice leent zich niet voor samenvetting. zelf doorlezen
Press release Google and Alphabet v. Commission case
hc aant 1
old economy characteristics
- manufacturing of traditional goods
- characteristics: for example:
multi-plant and multi-firm production
heavy capital investment
stable markets
slow and infrequent entry and exit - competition in the market
New economy characteristics
- High tech industries (for example computer software and hardware, biotechnology)
- characteristics, for example:
high rate of innovation
first-mover advantage
network effects
switching costs - competition for the market
–
article 102 TFEU
Purpose of art. 102 TFEU
- competition: higher consumer welfare (lower prices, more choices, better quality)
- competition rules create and support (the process of competition in) the internal market.
- Fairness? protecting consumers & smaller firms
- contested: competition law protects also other public interests, such as media-plurality, democracy, personal autonomy?
art. 102 TFEU structure
prohibition
Case law: defences.
hc aant 1
knowledge clip
art. 102 TFEU prohibition of abuse of dominance
art. 102 TFEU prohibition
case law - defence
However it is open to a dominant undertaking to plead its conduct is objectively justified and beyond that Court of Justice has created defenses
knowledge clip
art. 102 TFEU prohibition of abuse of dominance
art. 102 TFEU prohibition
case law - defence
1 Discuss the purpose of art. 102 TFEU and reason whether this is in line with the goals of competition law as discussed last week
1 efficiency consumer welfare
2 single market
4 freedoms
3 protection consumers/small firms
4 public policy aims (non-economic)
Main purpose of art. 102 TFEU > one company/undertaking that has power that abuse it. Prevent to abuse the dominance. Being dominance is not prohibited. If you company is the best one it can be also good for consumers.
We do not want that the companies are abusive.
They can behave independently.
The can use their power to kick out the small firms (it against the 2 and 3 one)
lawbooks:
As a reminder of previous week, the three generally recognised objectives of EU competition are
1 The primary objective is to enhance efficiency, in the sense of maximising consumer welfare and achieving the optimal allocation of resources.
2 It facilitates the creation of a single European market and prevents this from being frustrated by private undertakings.
3 Another objective is to protect consumers and smaller firms from large aggregations of economic power (e.g., agreements between rival firms or monopolies).
The three above-mentioned objectives are focused on economic interests. This week’s lecture covered the discussion on non-economic objectives for competition law, i.e., the topic of public interests as objective of competition law. Note that these interests are under debate and the legal certainty is unclear. We could mention a fourth objective of competition law:
4 It could additionally be public interests / non-market interests, that are improved/regulated by regulation concerning competition law. E.g., sustainability goals, democracy, free press, free speech, individual autonomy of consumers etc.
Article 102 TFEU prohibits undertaking from committing an abuse of a dominant position held within the internal market or in a substantial part of it, where that abuse may have an effect on trade between Member States. The goal of Article 102 TFEU is mostly in line with the objectives of Article 101 TFEU, but Article 102 TFEU concerns abuse of dominant positions. Whether or not Article 102 TFEU also regulates non-market interests is open to discussion.
1 Discuss the purpose of art. 102 TFEU and reason whether this is in line with the goals of competition law as discussed last week
1 efficiency consumer welfare
2 single market
4 freedoms
3 protection consumers/small firms
4 public policy aims (non-economic)
Main purpose of art. 102 TFEU > one company/undertaking that has power that abuse it. Prevent to abuse the dominance. Being dominance is not prohibited. If you company is the best one it can be also good for consumers.
We do not want that the companies are abusive.
They can behave independently.
The can use their power to kick out the small firms (it against the 2 and 3 one)
lawbooks:
As a reminder of previous week, the three generally recognised objectives of EU competition are
1 The primary objective is to enhance efficiency, in the sense of maximising consumer welfare and achieving the optimal allocation of resources.
2 It facilitates the creation of a single European market and prevents this from being frustrated by private undertakings.
3 Another objective is to protect consumers and smaller firms from large aggregations of economic power (e.g., agreements between rival firms or monopolies).
Verkorte stappenplan art. 102 TFEU
Step 1: is there an undertaking? (same art. 101 TFEU)
Höfner & Elser case
Entity engaged in economic activity
(regardless of its legal status/form or the way in which it is financed)
Consten & Grundig case
Economic activity > offering of goods or services on the market
Pavlov case
Where that activity could, at least in principle, be carried on by a private undertaking for profit
Step 2: Do(es) the undertaking(s) have a dominant position on a given market?
The courts definition of dominance position:
‘Position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers (United Brands)
Degree of market power > dominance presumed >50% (Akzo case)
-
Dominance on a market > which market
1 Market definition = method to define a relevant market:
-1 relevant product market + -2 relevant geographic market (SSNIP test)
Relevant product market
Product market definition: 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 & Commission notice para 7)
How to define a relevant market: product market
Demand side: (Consumers)
- substitutability: will consumers switch when price goes up (SSNIP-test)?
SSNIP test (para. 15-17) : one way of making this determination /// in the products and areas being considered’.
Supply side (Producers)
- substitutability: will producers switch when consumer price goes up?
commission notice par. 20: ‘supply-side substitutability .. and permanent changes in relative prices’
if the easily can switch they have the same market.
both does not need to be positive. als een van de twee ja is dan is het zelfde market.
-
How to define a geographical market
Definition: The relevant geographical 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 (United Brands & Commission Notice para. 8)
- also a demand (rising price of milk to consumer in Belgium, would the get milk from the NL if yes then the geographic same market)
supply side (kan NL leverancier switchen naar Belgische)
(Repeat the SSNIP-test until consumers do not switch anymore: that is where the border of the relevant market is)
-
Determining dominance
Stage 2: Market power assessment on the relevant market > market power.
Market power assessment: establishing dominance
Dominance = being able to behave to an appreciable extent independently of competitors, customers and ultimately of consumers =
- market shares
- barriers to entry
- countervailing buyer power.
(We will focus mostly on market shares, you will need to asses, you need to be aware of the meaning of notions of barriers to entry and countervailing buyer power).
Market power assessment: market shares (akzo case para. 60)
- indicate the present state of competition. i.e. actual competition.
- Commonly the first indicator of market power (barriers to entry are also important)
- market shares of 50% or more create a (rebuttable) presumption of dominance (Akzo presumption)
- need to consider both absolute and relative market shares.
- Akzo case par. 60: ‘with regard to market shares the court… found to exist in this case’ > + 50 % market shares = presumption of dominance
Market power assessment: barriers to entry
Barriers to entry: things that make it difficult for an competitor to enter the market and to compete effectively.
Types of barriers to entry
- capital costs & - regulatory barriers & IP rights
- economies of scale and scope & - established distribution network
- vertical integration & - reputation, product differentiation
- network effects & - switching costs
Market power assessment: countervailing (buyer) power:
- a large buyer can exercise significant competitive constraint on a dominant undertaking.
waarin kopers (meestal grote bedrijven of retailers) over voldoende onderhandelingsmacht beschikken om de prijzen of voorwaarden die zij van leveranciers ontvangen te beïnvloeden. Dit kan een tegenwicht bieden aan de dominante positie van een leverancier op de markt.
Summary establishing dominance
First stage: relevant market
- product market
- demand side (substitutability)
- supply side (substitutability)
- geographical market
intermediate conclusion: ‘this is the relevant market’
Second stage: dominance (on that relevant market)?
- market shares
- barriers to entry (strengthen market power)
- countervailing market power (lessen market power)?
conclude: there is/is not a dominant position on the relevant market.
Step 3: Is this dominant position within the internal market or a substantial part of it?
Substantial part of internal market
- ‘substantial’ not simply in geographic terms but rather in terms of the pattern and volume of the production and consumption of a product as well as the habits and economic opportunities of vendors and purchasers. (Suiker Unie case)
- likely that each Member State or even parts of a Member State can be considered to be a substantial part of the internal market. (Suiker Unie case)
Step 4: Is this dominant position being abused?
Abuse
The concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened,
And ‘applies in particular, to the conduct of a dominant undertaking that, through recourse the methods different from those governing normal competition on the basis of the performance of commercial operators, has the effect, to the detriment of consumers, of hindering the maintenance of the degree of competition existing in the market or the growth of that competition’
(Post Danmark I para. 24) or Akzo case par. 69.
- voorbeelden in art. 102 TFEU
Dominant is not prohibited, but dominant undertakings have a ‘special responsibility’ not to engage in abusive practices.
Abuse: main types of abuse:
1 Exploitative abuse
against consumers / resellers (for example unfair purchase or selling prices or other unfair trading conditions).
2 Exclusionary abuse
against competitors (keep them out of the market. For example predatory pricing: refusal to supply; margin squeeze; rebates; exclusive dealing; tying & bundling; price discrimination.
predatory pricing in Akzo / Post Danmark
concept of predatory pricing is enough to know. so low price that ander niet kan concurreren. hoe bewijzen we dat er een predatory pricing the fixt cost en total cost. (aksu test?))
(it can be both abuses)
Abuse:
- self – preferencing (eigen resultaten bovenin zetten)
- anti – steering (spotify has obstacle with extra 30% it is difficult to sell on apple pay)
- refusal to supply
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Abuse: predatory pricing
Akzo test:
- prices below AVC are presumed predatory;
- prices above AVC but below ATC are only predatory if proven to be part of a plan to eliminate a competitor.
AVC = average of the additional costs for production of one extra unit
ATC = the total costs involved in the production of one unit, where total costs is fixed plus variable.
Abuse: tying
- an undertaking supplies a product (tying product) on condition that the consumer also obtains something else (tied product)
- concern: dominant undertaking leverages its market power to the tied product market.
Tying arrangements:
sale of one product (tying product) > purchase of another (tied product)
Abuse: tying:
1 the tying and the tied products are two separate products;
2 the undertaking concerned is dominant in the tying market;
3 customers no choice to obtain the tying product alone; and
4 the practice forecloses competition.
Example: Microsoft teams.
Abuse: Refusal to supply
- even a dominant undertaking has no absolute duty to supply.
- this duty does arise in very exceptional circumstances
- ‘essential facilities doctrine’ (Magili; Bronner)
Oscar Bronner v Mediaprint
1 Access is indispensable
2 There is no justification for refusal;
3 Refusal likely eliminate effective competition in the downstream market (here newspapers).
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Steps when considering abuse:
1 note the concept of abuse
2 note the facts of the case: what is happening here?
3 could be exploitative (unfairness against consumers or users)
4 could it be exclusionary (hindering access to the market)
5 can I fit it with the examples discusses in this course?
Step 5: Does this abuse affect trade between Member States? (same as 101 TFEU)
Consten & Grundig case / STM case > T-Mobile GRIJS
direct or indirect, actual or potential impact on trade between MS (Pattern on trade test)
Whether there is a sufficient degree of probability on the basis of a set of objective factors of law or fact.
Step 6: Can this abuse be justified?
Not under art. 102 TFEU, but under case law:
1 Akzo case efficiency defence
2 or consumer welfare
Objective justification/defences
- concept: sometimes what seems abusive behaviour has a good reason, for example, in safety requirements (tying) or in creating efficiencies (Post Danmark) or commercial reasons. In that case there is an objective justification for the behaviour and it is not abusive.
- three possible defences are discussed in knowledge clip: you should be aware of them, but we will not ask you to apply them in this course.
For example:
1 safety requirements
2 creating efficiencies
3 commercial reasons.
Kennisclip
1 objective necessity defence
- defendant may be able to show that the conduct concerned is objectively necessary
- legitimate public interests (for example health and safety)
- conduct is based on objective factors that apply in general for all undertakings in the market.
- without the conduct the products concerned can not be produced or distributed in that market.
2 Efficiency defence
- the following conditions must be fulfilled:
1 the likely efficiency gains counteract any likely negative effects on competition and consumer welfare;
2 the gains have been, or are likely to be, brought about as a result of the conduct;
3 the conduct is necessary for the achievement of the efficiency gains;
4 the conduct does not eliminate effective competition.
Meeting competition defence
- need to apply a proportionality test:
1 chosen conduct is suitable to achieve a legitimate aim
2 conduct is indispensebale
3 conduct is a proportionate response in view of the aim of art. 102 TFEU.
-
Verkorte stappenplan art. 102 TFEU
Step 1: is there an undertaking? (same art. 101 TFEU)
- Have a look at the Commission notice on the Definition of the Relevant Market for the Purposes of Community Competition Law.
a. Explain how the relevant market is defined in an Art. 102 TFEU assessment.
Why do we need the relevant market? you need to know where someone is dominant on. The dominant position. but if there is it, but where in what market.
relevant product market: Product market definition: 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 & Commission notice par 7)
relevant geographic market
Definition: relevant geographical 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 ( United Brands & Commission notice par. 8 )
interchangeability / substitutability (consumer demand)
supply side
-
Art. 102 TFEU – defining the market
- Product market – interchangeability / substitutability > meer belangrijk te begrijpen
commission notice par. 7: ‘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’.
- consumer / demand substitutability
- SSNIP test (para. 15-17) : one way of making this determination /// in the products and areas being considered’.
- Supply substitutability: will producers switch when consumer price goes up?
- commission notice par. 20: ‘supply-side substitutability .. and permanent changes in relative prices’
A – B and
producer X of a
producer Y of b
if the easily can switch they have the same market.
both does not need to be positive. als een van de twee ja is dan is het zelfde market.
- geographic market.
Definition: relevant geographical 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.. in those area ( United Brands & Commission notice par. 8 ) - SSNIP test also possible
- also a demand (rising price of milk to consumer in Belgium, would the get milk from the NL if yes then the geographic same market) /supply side (kan NL leverancier switchen naar Belgische)
(een van de twee positief is goed, allebei hoeft hier ook niet)
- Have a look at the Commission notice on the Definition of the Relevant Market for the Purposes of Community Competition Law.
a. Explain how the relevant market is defined in an Art. 102 TFEU assessment.
b. Explain which factors play a role in assessing whether an undertaking is dominant in the given market.
dominance ( in abstract)
- United Brands par. 65:
You need to look at the definition of dominance, which is in the case United Brands. It defined as a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers.
Dominant:
- market power assessment (market shares) (market power)
- Akzo case par. 60: ‘with regard to market shares the court… found to exist in this case’ > + 50 % market shares = presumption of dominance - can be different in new (i.e., digital) markets > notion of gatekeepers gatekeepers > companies that controls access to market or multiple market. through that search you have access to different markets. a company can abuse their power even in market they aren’t. they can benefit themselves. gatekeepers: undertaking that controls access to one or multiple market (digital a.. of market).
- Barriers to entry not that important
- Countervailing buyer power not that important
we have a manyfactoring of products that is dominance. but distributor has power want is all across Europe. The buyer has power. - Abusive practice (in abstract)
Akzo case par. 69 or Post Danmark par. 24 - par 24 Post Danmark: ‘conduct of a dominant undertaking that through recourse to methods different from those governing normal competition on the basis of the performance .. existing in the market or the growth of that competition.
- indicative list in art. 102 TFEU
(vaak een die niet in de lijst van art. 102 TFEU zit) dus examples of that.
- two sub-categories
1 Exploitative abuses (are against consumers)
Aimed at harming / eliminating competitors > e.g., predatory pricing in Akzo / Post Danmark
Such as unfair purchase or selling prices or other unfair trading conditions
2 Exclusionary abuses (are against competitors)
Harmful to consumers and small firms > e.g., excessive pricing or discriminatory prices.
For example exclusive dealing, refusal to supply, predatory pricing, margin squeeze, price discrimination
concept of predatory pricing is enough to know. so low price that ander niet kan concurreren. hoe bewijzen we dat er een predatory pricing the fixt cost en total cost. (aksu test?)
b. Explain which factors play a role in assessing whether an undertaking is dominant in the given market.
c. Explain what kind of practices are prohibited under Article 102 TFEU. In your answer, include references to the Akzo and Post Danmark I cases.
lawbooks:
Article 102(a)-(d) TFEU lists a non-exhaustive list of abuses. The two most important categories of abuses to distinguish:
- Exploitative abuses: conduct that is unfair to consumers/reseller, e.g.,
unfair purchase or selling prices or other unfair trading conditions.
- Exclusionary abuses: conduct that forecloses competitors (keep them
out of the market), e.g., predatory pricing, margin squeeze, price
discrimination, exclusive dealing, tying/bundling, refusal to supply.
The Akzo case is an example of predatory pricing. In §§ 71-72, the ECJ
concludes that prices below the AVC (average variable costs) are
presumed to be predatory and that prices above the AVC but below the
ATC (average total costs) are only predatory if they are part of a plan to
eliminate competition. In Post Danmark I, we again see an example of
predatory pricing, but the ECJ sets out a justification for an initial breach of
Article 102 TFEU. Especially look at §§ 40-41.
-
Akzo case > the court said that if the market shares is above the 50% the dominance position is presumed. par. 60.
The Post Danmark case is about the prohibition that if a other company entered into a contract with another company and entrust the distribution of direct mail and they applied different prices in order to bind customers if it has negative competitive effects.
paragraph 38. Indeed, this judgment is concerned with the extent to which there is ‘fair competition’ and to what extent there is an abuse of dominance. This paragraph explains that when a company in a dominant position sets prices at which the main costs of marketing and delivering the product are covered, it should in principle be allowed to lower prices to compete with other companies.
Should, according to paragraph 40, the court nevertheless assess that there is an abuse of dominance. But the company in question may then assess that there are justifications for the conduct in question. Paragraph 41 then states that such conduct must be objectively necessary or the negative market conduct must benefit the consumer in terms of efficiency.
In conclusion, paragraph 44 states that there is no anti-competitive behaviour merely on the basis that Post Danmark applied different prices in order to generate more customers. It will have to be actually investigated, without objective justification, whether the behaviour has negative competitive effects.
c. Explain what kind of practices are prohibited under Article 102 TFEU. In your answer, include references to the Akzo and Post Danmark I cases.
- Explain how this case can end up at the General Court. In your answer, mention the relevant Treaty provisions.
les: national judge and goes to Court of justice. most of cases.
competitions
Commission can decised. company can bring the case of the commission of court. General court can make an dission.
art. 102 TFEU and art. 103 TFEU
art 263 TFEU private undertaking?
-
Spotify and the Commission could both go to the court, which would be based on Article 263 TFEU. A second option is to have a preliminary ruling based on Article 267 TFEU. For a preliminary ruling, it would be necessary to bring the case before a national court.
- Explain how this case can end up at the General Court. In your answer, mention the relevant Treaty provisions.
