ABUSE OF A DOMINANT POSITION - Advocatennet

Brussels Bar, Flemish Section 

3rd International Competition Conference 

23 November 2007 

ABUSE OF A DOMINANT POSITION 

- The EC case law on Art 82 EC as it stands today - 

Luc Gyselen 

Partner 

Arnold & Porter LLP, Brussels

Overview 

• Art. 82 EC: general issues 

– Typology of abuses 

– Causality between abuse and dominance 

– Interaction with Art. 81 EC 

– Remedies 

• Exclusionary abuses: analytical framework for assessment 

– Hoffmann-La Roche (1979) 

– Commission’s Discussion Paper (2005) 

– British Airways and Microsoft (2007) 

• Exclusionary abuses: post-Discussion Paper pricing cases 

– Loyalty y rebates (Tomra) 

– Margin squeeze (Telefonica) 

2

• Continental Can 

I. Art. 82 EC: general issues (1) 

- typology of abuses - 

– 26. “The provision is not only aimed at practices which may cause damage to 

consumers directly, but also at those which are detrimental to them through their 

impact on an effective competition structure (…). Abuse may therefore occur if 

an undertaking in a dominant position strengthens th such position in such a way 

that the degree of dominance reached substantially fetters competition, i.e. that 

only undertakings remain in the market whose behavior depends on the 

dominant one.” 

– Typology 

• Exclusionary abuses: focus on distortion of competitive process 

• Exploitative abuses: focus on direct customer / consumer harm 

3


- Causality between abuse and dominance - 

• Continental Can 

– 27. “The question of the link of causality raised by the applicants which in their 

opinion has to question exist between the dominant position and its abuse, is of 

no consequence, for the strengthening of the position of an undertaking may be 

an abuse and prohibited under article 86 of the treaty, regardless of the means 

and procedure by which it is achieved, if it has the effects mentioned above.” 

– Causality 

• In most cases, the abuse implies the anti-competitive use of substantial market power 

• Other cases 

– Structural: e.g. Continental Can 

– Behavioral: e.g. AstraZeneca 

4


- interaction with Art. 81 EC - 

• If exemption Art. 81-3 EC, no abuse under Art. 82 EC – Atlantic Container 

1456. “Where the Commission grants an individual exemption pursuant to Article 81(3) of 

the Treaty in respect of agreements notified by undertakings holding a dominant position, it 

indirectly bars itself, in the absence of a change in the facts or the law, from considering that 

the same agreements I 

constitute t abuses contrary to Article 82 of the Treaty”. 

• Simultaneous application of Art. 81 EC and Art 82 EC prohibitions - CMB 

33. “It is clear from the very wording of Articles 81 (a), (b), (d) and (e) and 82 (a) to (d) of the 

Treaty that the same practice may give rise to an infringement of both provisions. 

Simultaneous application of Articles 81 and 82 of the Treaty cannot therefore be ruled out a 

priori.” 

i 5

• Antitrust remedies 


- remedies - 

– Art. 7 decisions: prohibition, cease-and-desist order, fines 

• fines inappropriate, except when conduct makes no economic sense but for 

an exclusionary strategy? 

– Art. 9 decisions: commitments 

• Cf. Coca Cola (2005), De Beers (2006) and Distrigaz i (2007) 

• Regulatory remedies 

– closure of Vodafone, O2 and T-Mobile 82 roaming cases (2007) 

6

II. Exclusionary abuses: analytical framework (1) 

- Hoffmann-La Roche - 

• Dominance 

– 38. “The dominant position (…) relates to 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, its customers and ultimately of the consumers.” 

• Abuse 

– 91. “The concept of abuse is an objective concept relating to the behavior 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 which, through recourse to methods different from those which condition 

normal competition in products or services on the basis of the transactions of commercial 

operators, has the effect of hindering the maintenance of the degree of competition still 

existing in the market or the growth of that competition.” 

7


- Hoffmann-La Roche - 

• Residual competition (“Restwettbewerb”) 

t ttb b”) 

• An in-built bias against dominance? 

• Methods different from those which condition normal competition 

(“Leistungswettbewerb”) 

ttb b”) 

• The smaller-but-equally-efficient equally efficient competitor as benchmark… but “it 

may sometimes be necessary in the consumers’ interest to also 

protect competitors that are not (yet) as efficient as the dominant 

company” (point 67 COM discussion paper). p 8


- Michelin I - 

• A dominant company’s “special responsibility” 

– 57. “ A finding that an undertaking has a dominant position is not in itself a recrimination but 

simply means that, irrespective of the reasons for which it has such a dominant position , the 

undertaking concerned has a special responsibility not to allow its conduct to impair genuine 

undistorted competition on the common market.” 

• Assessment a dominant company’s conduct in light of “all the 

circumstances” 

– 73. “In deciding whether Michelin abused its dominant position in applying its discount 

system it is therefore necessary to consider all the circumstances, particularly the criteria and 

rules for the grant of the discount, and to investigate whether, in providing an advantage not 

based on any economic service justifying it, the discount tends to remove or restrict the 

buyer's freedom to choose his sources of supply, to bar competitors from access to the 

market, to apply dissimilar conditions to equivalent transactions with other trading parties or 

to strengthen the dominant position by distorting competition. ” 

9


- Commission’s Discussion Paper - 

• A two-prong legality test 

– Foreclosure: market distorting effect (points 58-59 COM discussion paper) 

• Capability to foreclose (nature or form of conduct), 

• Incidence, i.e. market coverage of conduct, network effects 

• Degree of market power – very similar to Delimitis in Art. 81-1 

– Consumer harm: no defenses (points 77-79 COM discussion paper) 

• Objective justifications: objective necessity, meeting competition 

• Efficiencies: balancing anti-competitive and pro-competitive effects 

10


- Commission’s Discussion Paper - 

• Efficiencies: burden of proof 

– Art. 2 Regulation n°1/2003 

– but see Glaxo Wellcome 

• Efficiencies: standard of proof 

– Proportionality test (cf. § 90 discussion paper; cf. § 79COMnoticeonArt on Art. 813 81-3 

EC) 

– No substantial lessening of competition (cf. § 91 discussion paper; cf. § 105 

COM notice on Art. 81-3) 

– but see Glaxo Wellcome 

11


- British Airways - 

• Foreclosure: amalgamating “fidelity-building effect” and “exclusionary effect” 

– 90. “The Court of First Instance did not (…) make any error of law in holding that 

the bonus schemes at issue had a fidelity-building effect [and)] that they 

therefore produced an exclusionary effect (…)”. 

– 98. “ (…) The Court of First Instance was able to conclude, without committing 

any error of law, that the bonus schemes at issue had a fidelity-building effect. It 

follows that BA’s plea accusing the Court of not examining the probable effects of 

those schemes is unfounded.” 

– 145. “(…) There is nothing to prevent discrimination between business partners 

who are in a relationship of competition from being regarded as being abusive as 

soon as the behavior of the undertaking in a dominant position tends, having 

regard to the whole of the circumstances of the case, to lead to a distortion of 

competition between those business partners. In such a situation, it cannot be 

required in addition that proof be adduced of an actual quantifiable deterioration 

in the competitive position of the business partners taken individually.” 

12


- British Airways - 

• Justification 

– 69. “It then needs to be examined whether there is an objective economic 

justification for the discounts and bonuses granted. In accordance with the 

analysis carried out by the Court of First Instance (…), an undertaking is at liberty 

to demonstrate that its bonus system producing an exclusionary effect is 

economically justified.” 

– 86. “Assessment of the economic justification for a system of discounts or 

bonuses established by an undertaking in a dominant position is to be made on 

the basis of the whole of the circumstances of the case (…). It has to be 

determined whether the exclusionary effect arising from such a system, which is 

disadvantageous for competition, may be counterbalanced, or outweighed, by 

advantages in terms of efficiency which also benefit the consumer. If the 

exclusionary effect of that system bears no relation to advantages for the market 

and consumers, or if it goes beyond what is necessary in order to attain those 

advantages, that system must be regarded as an abuse.” 

13


- Microsoft - 

• Foreclosure: market distorting effect? 

– Refusal to deal: diluting the Magill and IMS conditions? 

• The degree of lessening competition 

• The degree of novelty of the products whose emergence is prevented 

– Tying: diluting the Hilti and Tetrapak conditions? 

• Foreclosure is not the primary issue 

• Foreclosure depends on behavior of third parties (content providers) 

14


- Microsoft - 

• Justifications: “special responsibility” of the dominant company 

– Refusal to deal: weighing the incentives for innovation (paragraphs 697 – 710) 

• those for Microsoft not chilled? 

• those for competitors taken for granted? 

– Tying: integrating new functionalities into existing product (paragraph 1150) 

• adding functionalities is fine, but tying product must also be offered on stand-alone basis, even if there 

is only limited demand for it. 

15

III. Exclusionary abuses: recent pricing cases 

-two post-Discussion Paper cases - 

• Loyalty rebates: Tomra (2006) 

– Fidelity-building: the so-called suction effect (challenged by Tomra) 

– Exclusionary effect: empirical evidence (e.g. stability of Tomra’s market share, no successful 

market entry, more sales during the period where more exclusionary practices were at play). 

• Margin squeeze: Telefonica (2007) 

– The benchmark: the smaller-but-equally-efficient competitor 

– Exclusionary effect: empirical evidence (e.g. Telefonica’s growth rates surpassing by far that 

of its competitors) and harm on consumers (e.g. Spanish broadband access costs 20% 

more than the EU-15 average. 

16

ABUSE OF A DOMINANT POSITION - Advocatennet

Create successful ePaper yourself

Delete template?

Save as template?