Final Report - World Trade Organization

dominance’ investigations, focusing the investigations
on a specific segment of firms. The World Bank-
OECD model law suggests a threshold of 35 percent
while the UNCTAD Model Law is silent in this
regard.
Abuse
After determining that an enterprise has a dominant
position of market power, the question is whether or
not this enterprise is ‘abusing’ that position. This
second step is necessary to do justice to the concept
that ‘big isn’t necessarily bad’ 109 , but that it is certain
behaviour in combination with a dominant position
that should be prevented.
Apart from the fact that dominant firms have to
refrain from restrictive trade practices that are
prohibited for any enterprise, the Tanzanian law
prohibits those concentrations of economic power
that are ‘unwarranted’ because they are ‘prejudicial
to the public interest’. For this purpose the detrimental
effect on the economy must outweigh the efficiency
advantages of economies of scale. This is the case
when the effect of the concentration of economic
power would be to:
(i)
(ii)
increase the costs of production or distribution;
increase the price at which goods or services
are sold;
(iii) reduce or limit competition; or
(iv) result in the deterioration of the quality of any
good or in the performance of any service. 110
Kenya uses a similar approach 111 and as already
stated above the same broad ‘public interest’ test as
is applied to RTPs, is required in Sri Lanka.
The South African Competition Act of 1998 prohibits
dominant firms from:
(i) charging excessive prices;
(ii) refusing access to an essential facility;
(iii) exclusionary acts (unless pro-competitive,
technological or efficiency gains that outweigh
the negative effects can be demonstrated); and
(iv) price discrimination. 112
The new Indian Competition Act states that the
abuse of a dominant position is prohibited and then
gives a number of practices that are deemed to be
an abuse, which is similar to the South African law. 113
One of these is the use of a dominant position in one
relevant market to enter into, or protect, another
relevant market. While using a dominant position in
one market to protect a position in another market is
undoubtedly anti-competitive, the use of a dominant
position to enter into another market is not necessarily
anti-competitive, especially if this is done only
temporarily. The other relevant market could also be
highly concentrated and it might be necessary to
temporarily cross-subsidise in order to enter that
market. An extra competitor would in that case only
increase the level of competition.
The Zambian law prohibits dominant firms from
predatory behaviour, price discrimination, tied sales
and quantitative restrictions. But apart from these
practices, all decisions that have as their object: the
prevention, restriction or distortion of competition to
an appreciable extent in Zambia are also prohibited.
Thus, the Zambia Competition Commission does not
have to limit itself to the enumerated practices. 114
109 The 7-Up countries have adopted this concept. The opposing so-called ‘structuralist’ view argues that it is inevitable that a
monopolist will act in an economically inefficient way; it will raise prices and restrict output and this allocative inefficiency is
reason enough to condemn them. In the US the courts came close to adopting this approach completely in the Alcoa-case (see supra
note 103, at p.427) when it determined that the Sherman Act did not condone ‘good trusts’ and condemn ‘bad ones’, but forbade
all. Later the courts gave more latitude and in the IBM case (Transamerica Computer Co. v. International Business Machines
Corporation, 481 F.Supp. 965, 1022 [N.D. Cal. 1979]) it allowed a monopolist to restrict competition as long as it did not do so
‘unreasonably’. The ‘structuralist’ view seems to have lost out all over the world and therefore the 7-Up countries are in line with
international practice in taking this ‘behavioural’ approach.
110 CUTS, 2002, Competition Law & Policy - A Tool for Development in Tanzania, section 5.1.7.
111 CUTS, 2002, Promoting Competitiveness & Efficiency in Kenya - The Role of Competition Policy & Law, section 4.4
112 CA 1998, Sections 8 and 9. Also see CUTS, 2002, Competition Policy & Law in South Africa- A Key Component in New
Economic Governance, section 4.3.
113 CA, 2003, Section 4.
114 CFTA Section 7.
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