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Moreover, as we have previously stated, dominance implies the possibility of acting independently of your customers. Countervailing buyer power might lead to the finding of lack of dominance, for example, where the buying side is highly concentrated (few buyers with high shares).
II. Distinct products
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The products to be tied or bundled should be distinct. Two products are distinct if, in the absence of tying or bundling, a substantial number of customers would purchase or would have purchased the tying product without also buying the tied product from the same supplier, thereby allowing stand-alone production for both the tying and the tied product.
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Sometimes, it may be hard to determine if there are indeed two tied products. For example, in Microsoft, the undertaking claimed that you could not speak of separate products since there would be no demand for an operating system without a streaming media player. The Court rejected the argument, stating that just because two products are complimentary it does not mean that the practice is not an abuse.
III. Coercion
As As mentioned above, coercion to purchase two products was one of the relevant elements used in Microsoft case in order to establish abusive tying
. Coercion may take several forms:
. (a) contractual coercion - when the requirement to buy product B is a condition for the sale of product A, i.e .a refusal to supply the tying product separately;
(b) Technical technical coercion is preventing the user from using the dominant product without the tied product; and
.. (c) Financial financial coercion, on the other hand, is a package discount making it meaningless to buy the tied product separately. This may be explicit in an agreement (for e.g. Tetra Pack II case) or de facto (for e.g. Hilti case).
IV. Anticompetitive effects
Regarding the condition of “anti-competitive foreclosure” is used to describe a situation where effective access of actual or potential competitors to supplies or markets is hampered or eliminated as a result of the conduct of the dominant undertaking whereby the dominant undertaking is likely to be in a position to profitably increase prices to the detriment of consumers.
According to the British Sugar case
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, the Commission took the view that depriving the consumer of the choice of buying the tied products from separate suppliers was in itself abusive exploitation.
With respect to the method used for analyzing the anticompetitive effects (possible foreclosure on the market of the tied product) the assessment of the foreclosure effect on the tied market can be considered to consist of two parts.:
(a) Firstfirst, to establish which customers are “tied” in the sense that competitors to the dominant company cannot compete for their business; and
. (b) Secondsecond, to establish whether these customers “add up” to a sufficient part of the market being tied.
V. Objective and Proportionate Justification
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As per the Discussion Paper’s
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tying and bundling may be justified on a legitimate and proportionate basis.
A dominant undertaking may justify its behavior either by demonstrating that its conduct is objectively necessary or by demonstrating that its conduct produces substantial efficiencies which outweigh any anticompetitive effects on consumers. In this context, the Commission will assess whether the conduct in question is indispensable and proportionate to the goal allegedly pursued by the dominant undertaking.
The question of whether conduct is objectively necessary and proportionate must be determined on the basis of factors external to the dominant undertaking.
Exclusionary conduct may, for example, be considered objectively necessary (a) for health or safety reasons related to the nature of the product in question; or (b) on the ground of efficiencies that are sufficient to guarantee that no net harm to consumers is likely to arise.
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Therefore, if the European Commission manages to prove the existence of the first four requirements, the burden of proof for objective justification for the practice of tying and bundling shifts to the defendant. This is also expressly stated in Case T201/04, Microsoft v Commission “although the burden of proof of the existence of the circumstances that constitute an infringement of Article [102] is borne by the Commission, it is for the dominant undertaking concerned, and not for the Commission, before the end of the administrative procedure, to raise any plea of objective justification and to support it with arguments and evidence.
Legitimate objectives put forward for practicing tying and bundling must be genuine.
A legitimate objective is when tying and bundling enhances efficiency because it is more costly to produce, or distribute the tied products separately, or there might be a need to ensure the quality or safety of the products.
In the Commission Guidelines, the Commission noted that tying and bundling may give rise to an objective justification by producing savings in production, distribution and transaction costs and that. In addition the Commission may also examine whether combining two independent products into anew, single product might enhance the ability to bring such a product to the market to the benefit of customers.
