lecture 5 - competition law theory

Question 1

• Demand-side substitutability

Answer 1

• View of customers on substitutability of products
• Small but Significant Non-transitory Increase in Price (SSNIP) test
• Do customers switch to purchase medicine Y, if the price of medicine X raises by 5-10%?
• If yes: products may be considered to be within one relevant product market

Question 2

• Supply-side substitutability

Answer 2

• Suppliers are able to switch production to other products and market them in the short term (one year), without incurring significant additional costs or risks in response to small and permanent changes in relative prices
• Production of different types of paper: similar materials and production process
• Production of mobile phones and tablets: similar microchips and production process
• Production of different types of medicines: difference in R&D and production process

Question 3

cartel prohibition

Answer 3

all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market

Question 4

two forms of abusive behaviour

Answer 4

exploitative abuse: at the expense of the consumer

exclusionary abuse: harming competitive process, with indirect adverse effects for consumers

Question 5

exploitative abuse

Answer 5

• Excessive pricing:
  o Price is excessive if it has no reasonable relation to the economic value of the product
  o Two-step analysis:
  § Difference between (i) costs-plus-margin and/or benchmark price and (ii) selling price is excessive
  § Price is unfair (i) in itself, or (ii) compared to competing products

Exploitative abuse: costumer is the one getting exploited. Charging high prices, because you are able to ask high prices is an example

Question 6

exclusionary abuse: two forms

Answer 6

1. refusal to supply
2. tying

Question 7

refusal to supply

Answer 7

• Dominant firm in upstream market is active on downstream market and owns an indispensable product or service (essential facility)
• Refusal to competitor on the downstream market to grant access to the essential facility may amount to abuse

Question 8

tying

Answer 8

• Dominant firm makes the sale of a product conditional upon the purchase of another product
• Example: vertically integrated general practitioner (huisarts) practice and pharmacy in a small town
• Tying: you can only buy the dominant product if you buy another product from the same producer.

Question 9

relevance of market defintion

Answer 9

• An analytical tool to identify market power of an undertaking
• Other relevant factors to determine market power: potential entry, buyer power, etc.
• Crucial in abuse of dominance and merger control cases, also important in cartel cases (especially in effect cases)

Question 10

four cumulative criteria

Answer 10

o Improvement to production of goods or to promoting technical or economic progress
o Pass-on of a ‘fair share’ to consumers
o The agreement must be indispensable (there are no other means to obtain the aforementioned efficiencies)
o No elimination of a substantial part of competition

Question 11

definition of control

Answer 11

• Possibility to exercise decisive influence over strategic decisions of an undertaking:
  o Appointing/firing the board, budget, important business plans
• Sole control: single undertaking capable of making strategic decisions
• Sole negative control: single undertaking capable of vetoing strategic decisions
• Joint control: two or more undertakings capable of vetoing strategic decision