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Competition Law 2: Abuse of a dominant position (Abuse of a dominant…
Competition Law 2: Abuse of a dominant position
Article 102: "Any abuse of one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatiable with the internal market in so far as it may affect trade between MS"
Dominant position
United Brands - relates to...
Position of economic strength
Which enables it to prevent effective competition
On the relevant market
Steps
Identify relevant market
Determine whether undertaking has a dominant position
May affect trade between MS
Potential to affect trade is sufficient - British Leyland
Must be between MS - Hugin
Relevant market
Notice on the Definition of the Relevant Market - objective of defining the market = to identify actual competitors
Relevant Product Market (RPM)
All products or services which are interchangeable/substitutable
Demand substitution = from consumer's perspective
By reason of their...
Characteristics
Prices
Intended use
Basic form - which products would consumers pruchase if the original product they sought was not available?
More sophistocated
Cross elasticity of demand - analyses effect of price increases
Small but Significant Non-Transitory Increase in Price (SSNIP Test)
United Brands - bananas found to not be part of overall market for fruit
Hilti AG v Commission - nail guns found to not be part of overall market for industrial fasteners
Supply substitution = from supplier's perspective
Suppliers able to switch production to the relevant products and market them in the short term without incurring significant additional costs or risk in response to small and permanent changes in relevant prices
Continental Can - single market for light metal containers as manufacturers could easily switch
Michelin I - 2 markets found for replacement tyres - for heavy vehicles and light - no substitution
Microsoft - 3 kinds of software market
Relevant Geographical Market (RGM)
Art 102 - in internal market or substantial part of it
United Brands - clearly defined geographical area
In which the product is marketed and...
Where conditions of competition are sufficiently homogenous
Repeated in Notice on Relevant Market - also adds that area must be distinct from neighbouring areas in which conditions of competition are appreciably different
Examples
Hilti - whole of EU - reason = low transport costs
Michelin 1 - one MS only - reason = cistomer demand confined to that MS
Sealink - sea port - reason = volume of trade
Contrast Alsafel - French region not RGM - reason = same conditions of competition as rest of Europe
Relevant Temporal Market (RTM)
Can be part of RPM & RGM
E.g. ABG Oil - Opek oil crisis
Dominant position
United Brands - relates to...
Position of economic strength
Which enables it to prevent effective competition on the relevant market
By affording it the power to behave to an appreciable extent independently of...
Its competitors and customers...
Ultimately its consumers
Derives from a combination of factors
Market share
Azko Chemie - 50% = dominant unless exceptional circumstances
United Brands - 40-45% but fragmented market
Intellectual property rights
Hugin
Tetra Park
Microsoft
Superior technology
Hoffmann-La Roche
Michelin I
Wealth of capital and financial barriers
Azko Chemie
United Brands
Vertical integration
United Brands - involved in several stages of manufacture
Distribution systems
Hoffman-La Roche
Michelin I
Brand identification
United Brands
Abuse of a dominant position
102(2) - examples
a) Directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions
Predatory pricing - excessively low prices driving out competitors who do not have reserves to sustain over long periods
Azko Chemie
Tetra Park
Discounts and rebates
Hoffman-La Roche
Michelin I
Intel
Excessively high prices
United Brands
British Leyland
b) Limiting production, markets or technical development to the prejudice of consumers
Refusal to supply
Commercial solvents
Microsoft
United Brands
c) Applying dissimilar conditions to trading parties, placing them at a competitive disadvantage
Unfair conditions
BRT v SABAM
d) Making acceptance subject to supplemental obligations which have no connection with the subject of the contract
Tie-in agreements and bundling
Hilti
Microsoft
Exclusionary - drive out competitors
Exploitative - exploit consumers