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A.
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Context
Article 102 TFEU
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prohibits undertakings from engaging in “abuse of a dominant position.” “Abuse” may be understood in several ways: exploitative abuse has a direct effect on consumers, for example through unfair prices charged to them, or through discrimination.[1] Exclusionary abuse, on the other hand, affects market structures and harms consumers indirectly. For instance, in predator pricing, very low prices charged to consumers are not abusive as such[2] but this practice may have an anticompetitive aim of foreclosing one or more competitors.[3] It is this exclusionary abuse which is the focus of this summary.
B. Analysis of anticompetitive effects
There are two ways to analyze exclusionary abuse: one may either automatically presume harm to competition arising from certain exclusionary conduct (for example, each instance of predatory pricing equals abuse), or one may require a finding of actual, or likely, harm from a specific conduct in specific circumstances.[4] In other words, the analysis of anticompetitive effects in establishing abuse may either be concrete and case-specific, or simply presumed/ proven in the abstract. Both the EU Commission and EU courts have dealt with the nature of this analysis.
C. Approach of the Commission
In 2009, the EU Commission published a Guidance Paper on its “enforcement priorities” in applying what is now article 102 TFEU.[5] This Paper is not a legal interpretation of the Treaty article (as that is an exclusive task of the European Court of Justice[6]), but is nevertheless important for enforcement predictability[7]. In the Paper, the Commission clearly states that it “will normally intervene under Article [102] where, on the basis of cogent and convincing evidence, the allegedly abusive conduct is likely to lead to anti-competitive foreclosure.”[8] (emphasis added).
As such, the Commission appears to require, as a prerequisite for abuse, an evidence-supported finding that a dominant undertaking’s conduct would foreclose “actual or potential competitors”[9]. Specifically for pricing-based conduct, such as rebates, the Commission sets out a cost/price test to determine whether suspected abuse would foreclose an equally efficient competitor, in addition to “taking into account other relevant quantitative and/or qualitative evidence.”[10] This implies a rejection of automatic inference of anticompetitive effects from the mere finding of conduct that is classified as exclusionary.[11]
D. Approach of the Courts
The jurisprudence of the EU courts, on the other hand, appears to be less clear or consistent in its analysis of anticompetitive effects. Certain judgments appear to infer anticompetitiveness of the conduct under consideration. For example, in British Airways v. Commission, which dealt with discriminatory treatment by the airline of its travel agent partners, the Court held that “in such a situation, it cannot be required … that proof be adduced of an actual quantifiable deterioration in the competitive position of the business partners taken individually” because such discrimination would “tend” to distort competition.[12] Similarly, in Solvay CA v. Commission, the Court found fidelity rebates to be in and of themselves harmful to competition, without any further proof required to that effect.[13]
On the other hand, Post Danmark AS v. Konkurrencerådet establishes that in the case of selective price reductions, “[i]n order to assess the existence of anticompetitive effects … it is necessary to consider whether that pricing policy … produces an actual or likely exclusionary effect, to the detriment of competition ….”[14] Likewise, in dealing with alleged abuse by margin squeezing in Deutsche Telekom v. European Commission, the Court required concrete evidence of anticompetitive effects of the conduct,[15] as it did in Konkurrensverket TeliaSonera Sverige AB.[16] As such, it appears that there is currently no consistent analysis of anticompetitive effects by the European courts across the types of exclusionary abuses.
[1] Hubert P ‘Exploitative abuse: The end of the Paradox?’ [2011] Concurrences, Revue des droits de la concurrence 1, p. 44
[2] Kadar M ‘The Meaning of “Anticompetitive Effects” Under Article 102 TFEU’ [2016] Competition Policy International, p. 4 (available online at https://www.competitionpolicyinternational.com/wp-content/uploads/2016/03/The-Meaning-of-Anticompetitive-Effects.pdf)
[3] European Commission, Guidance on the Commission's enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ C 45/7, 24 February 2009, para. 63
[4] Gormsen Lovdahl L, ‘Are Anti-competitive Effects Necessary for an Analysis under Article 102 TFEU?’ [2013] World Competition 36, p. 225
[5] Supra note 3
[6] Geradin D, ‘Is the Guidance Paper on the Commission’s Enforcement Priorities in Applying Article 102 TFEU to Abusive Exclusionary Conduct Useful?’ (March 12, 2010) p. 1 (available online at: https://ssrn.com/abstract=1569502 or http://dx.doi.org/10.2139/ssrn.1569502)
[7] Supra note 3, para. 2
[8] Supra note 3, para. 20
[9] Supra note 3., para. 19 and supra note 6, p. 5
[10] Supra note 3, paras. 23-27
[11] Supra note 4, p. 234
[12] Case C-95/04, British Airways v. Commission [2007], para. 145
[13] Case T-57/01, Solvay SA v. European Commission [2009], para. 316 and 354-355, 358
[14] Case C‑209/10, Post Danmark AS v. Konkurrencerådet [2012], para. 44
[15] Case C-280/08, Deutsche Telekom v. European Commission [2010] paras. 250 and 252
[16] Case C‑52/09, Konkurrensverket TeliaSonera Sverige AB [2011], para. 66-67
A discriminatory abuse occurs when a dominant firm is able to discriminate between its rivals (primary line injury) as well as between its costumers (secondary line injury). Discrimination is implicated in most abuses.
II. Types of discriminatory abuses
Abusive discrimination arises when a firm in dominant position applies “dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage”. It may refer to price, geographic territory or nationality.
Price discrimination occurs where different costumers are charged different prices for the same product“and also where identical prices are charged in circumstances in which a difference in the cost of supplying them would justify their differentiation”.
Geographic price discrimination entails charging different prices for the same commodities in different geographical territories.
Residence discrimination covers different charges for the same commodity depending on whether the recipient is situated within the national territory or other than it.
Predatory pricing may be defined as the practice whereby a firm sets its prices at a sufficiently low level with the purpose of eliminating a competitor or preventing the entry of a new one into the market. Predatory pricing usually involves discrimination by a dominant firm between its existing customers and actual or potential customers of rival firms. This may happen where a dominant firm cuts its prices selectively to costumers that might defect to a rival, whereas leaves higher prices to others costumers.
Margin squeeze encompasses practices whereby a vertically integrated firm with dominant position on the upstream market for an input, sets its prices at such a level that prevents the downstream rivals to compete with it. In such a situation, “the dominant firm applies a margin squeeze by setting a high price for the input, charging low prices on the downstream market, or by a combination of the two”.Margin squeeze cases involve price discrimination in the sense that a dominant firm discriminates in favour of its own downstream business, to the detriment of rivals.
Loyalty (or fidelity) rebates can be described as“pricing structures offering lower prices in return for a buyer’s agreed or de facto commitment to source a large and/or increasing share of his requirements with the discounter”. They grant a financial advantage so as to prevent costumers from obtaining their supplies from competitors.
Refusal to supply is in principle not forbidden under the EU competition law. Only in exceptional circumstances a dominant firm would be charged with a duty to supply goods or provide services where that is necessary for another firm to carry on its business.A firm endowed with dominant position may discriminate against its competitors, non-competitors and its customers. This would happen not only by refusing to supply but also by applying discriminatory conditions between its own downstream business and rivals, or deciding to supply one rival, but not another.
In particular, in United Brands case the Court found that the refusal of United Brands to supply bananas to Olesen, a long-standing distributor in Denmark, “would limit markets to the prejudice of consumers and would amount to discrimination which might in the end eliminate a trading party from the relevant market”.
Tying and bundling. There are different forms of tying and bundling.
Pure bundling is observed when two products (A and B) are sold as package.
Mixed bundling refers to situation where two products are sold separately, but they are offered at a lower price if bought together.
Tying can be described as a situation in which costumers that purchase a primary product are also required to purchase a secondary product.Pursuant to Art. 82 Guidance, “an undertaking which is dominant in one product market (or more) of a tie or bundle (referred to as the tying market) can harm consumers through tying or bundling by foreclosing the market for the other products that are part of the tie or bundle (referred to as the tied market) and, indirectly, the tying market”.The conduct in question may have also elements of price discrimination because of the consumer surplus that the dominant firm extracts from other competitors.
III. Conclusion
As has been seen, discrimination can arise in many cases under Article 102 TFEU, given the confusion that has been created by practice and case law.
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Responsible: Freie Universität Berlin, by its President |
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