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Competition Law 2017, Question 2 (Relevant cases (Hoffmann-La Roche (Drew…

- - - - "A dominant undertaking which both owns or controls and itself uses an essential facility... and which refuses its competitors access to that facility or grants access to competitors only on terms less favourable than those which it gives its own services, thereby placing the competitor at a competitive disadvantage infringes Art 102... where a competitive disadvantage is imposed... without objective justification."
      - "The owner of the essential facility which also uses the essential facility may not impose a competitive disadvantage on its competitor... by altering its own schedule to the detriment of the competitor's service."
      - "...there is a duty to the dominant undertaking not to take any action which will result in further disruption. That is so even if the latter's actions make, or are primarily intended to make its operations more efficient."
  - - - Commission found that the terms of the Michelin Friends Club were abusive as they were loyalty inducing and left the dealers completely dependent on Michelin.
  - - - Concrete effects on the market did not have to be proved.
- - - - Criticism includes...
        
        distinguishing between different types of discounts and rebates in a way that makes no economic sense.
        
        Assuming that an exclusionary effect on competition means consumer harm.
        
        Not taking account of the reasons why undertakings adopt certain discounting and rebating practices and the fact that these might be pro-competitive.
  - - - Adopted the 'as efficient as competitor' (AEC) test to determine whether a rebate could lead to anti-competitive foreclosure.
        
        This test has not been followed in subsequent case law.
  - - - linked solely to the quantity of purchases made from the dominant undertaking.
      - Fixed objectively an applicable to all possible purchasers.
      - A simple quantity rebate must not be discriminatory, not just on paper but also in fact.
      - In Post Danmark II the CJ confirmed that it is settled case law that quantity discounts linked solely to the volume of purchases from the manufacturer concerned are not, in principle, liable to infringe Art 102 (case law stemming from Hoffmann-La Roche)
        
        In Hoffmann-La Roche, the CJ drew a sharp distinction between quantity rebates and exclusionary/loyalty/fidelity rebates.
      - Presumptively lawful because they are deemed to reflect gains in efficiency and economies of scale made by the undertaking in the dominant position.
        
        But not presumptively legal if the price charges was predatory according to the normal predatory pricing principles.
    - - Described in Intel by reference to what they are not.
        
        They are not simple quantity rebates but are not directly linked to exclusivity conditions (but may have a loyalty inducing effect)
        
        Such as target rebates, which are described in Intel as 'rebate systems depending on the attainment of individual sales objectives which do not constitute exclusivity rebates, since these systems do not contain any obligation to obtain all or a given proportion of supplies from the dominant undertaking.
        
        Are not expressly rewarding exclusivity but do strongly encourage the customer to stay with the supplier.
        
        First case on target rebates was Michelin I
        
        CJ held that the rebates were an abuse as they removed or restricted the buyer's freedom to choose his source of supply (in line with Hoffmann-La Roche in relation to loyalty rebates).
        
        CJ said that it is necessary to consider all the circumstances in judging whether the discount tends to remove buyers freedom to choose or bar competition from the market.
        
        Considered rules of the scheme rather than demonstrable effects on the market.
        
        1 more item...
  - - - Sets a new methodology for determining when rebates are abusive.
        
        Conditional rebating
        
        Rebates granted to customers to reward them for a particular form of purchasing behaviour.
        
        Accepted that conditional rebates may stimulate demand and benefit consumers.
        
        However, they can also have foreclosure effects.
- - - - Para 25 of the judgement: factors leading to the finding of abuse include...
        
        CSC was using its dominance on the raw material market to affect competition on the derivative market.
        
        CSC was refusing to supply an existing customer because it wanted to compete with it on the downstream market.
        
        The refusal risked eliminating the customer from the downstream market.
      - Principle was applied to a deliberate move to remove a competitor from the downstream market in Napier Brown/British Sugar.
  - - - the refusal relates to a product or service that is objectively necessary for the undertaking to compete on a downstream market
      - the refusal is likely to lead to the elimination of competition on the downstream market.
      - the refusal is likely to lead to consumer harm
  - - - ...with existing customers, it is generally accepted that the dominant undertaking bears the burden of proving that the refusal was objectively justified.
      - ...with new customers, the position is more complicated and may depend on whether they have refused to supply a product or facilities.
- - - - Should be given a narrow interpretation since a finding that an undertakings resources or assets fall within that category may result in that undertaking being forced to share with its competitors.
        
        An over enthusiastic approach may result in an undertaking having to share with competitors assets which they have developed over many years at great expense.
    - - refusal likely to eliminate all competition in the downstream market from the person requesting access.
        
        The refusal could not merely make it harder for the undertaking to compete.
        
        In subsequent decisions, the Commission appears to have relaxed the requirement for elimination of competition.
      - the refusal must be incapable of objective justification
      - access must be indispensable to carrying on the other person's business
      - there must be no actual or potential substitute
      - Key issues: indispensability and non-substitutability
- - - - This continues to be the position under Art 7 of Regulation 1/2003