UNIT 2: MARKET DEFINITION
United Brands Continental B.V v The Commission of the European Communities
Facts
The Commission decided, to initiate a procedure for infringement of Article 86 of the EEC Treaty against
UBCBV following complaints made to it by the Th. Olesen undertaking, Valby (Denmark) and by the Tropical
Fruit Co. and Jack Dolan Ltd. undertakings, Dublin and the Banana Importers undertaking, Dundalk
(IrelandR). On 11 April 1975 the Commission notified UBCBV that in its opinion it was engaging in an abuse
of a dominant position in that it:
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required its distributor/ripeners not to sell bananas while still green;
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charged its distributor/ripeners in the various Member States prices which differed considerably,
without any objective justification, for bananas of the same quality, even though the conditions of
the market were to all intent and purposes the same;
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applied to its distributor/ripeners differing prices, the difference sometimes amounting to 138%;
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refused to supply the Danish firm Olesen with bananas of the Chiquita brand on the ground that
this undertaking had taken part in an advertising campaign for bananas of a competing brand. In
1969 Olesen became the exclusive distributor for "Dole" bananas in Denmark sold by the Castle
and Cooke group and since that date UBC has consistently reduced the orders placed
UBC sought review of the Commission's decision in the Court of Justice of the European Union. UBC
argued that it did not maintain a dominant position, because the product market was not simply the banana
market but the fresh-fruit market, as a whole.
Principle
In order to determine whether UBC has a dominant position on the banana market it is necessary to define
this market both from the standpoint of the product and from the geographic point of view.
The opportunities for competition under Article 86 of the Treaty must be considered having regard to the
particular features of the product in question and with reference to a clearly defined geographic area in
which it is marketed and where the conditions of competition are sufficiently homogeneous for the effect of
the economic power of the undertaking concerned to be able to be evaluated.
Paragraph 1. The Product Market
As far as the product market is concerned it is first of all necessary to ascertain whether, as the applicant
maintains, bananas are an integral part of the fresh fruit market, because they are reasonably
interchangeable by consumers with other kinds of fresh fruit such as apples, oranges, grapes, peaches,
strawberries, etc. or whether the relevant market consists solely of the banana market which includes both
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branded bananas and unlabelled bananas and is a market sufficiently homogeneous and distinct from the
market of other fresh fruit. The applicant submits in support of its argument that bananas compete with
other fresh fruit in the same shops, on the same shelves, at prices which can be compared, satisfying the
same needs: consumption as a dessert or between meals. The statistics produced show that consumer
expenditure on the purchase of bananas is at its lowest between June and December when there is a
plentiful supply of domestic fresh fruit on the market. Studies carried out by the Food and Agriculture
Organization (FAO) (especially in 1975) confirm that banana prices are relatively weak during the summer
months and that the price of apples for example has a statistically appreciable impact on the consumption
of bananas in the Federal Republic of Germany. Again according to these studies some easing of prices is
noticeable at the end of the year during the "orange season". The seasonal peak periods when there is a
plentiful supply of other fresh fruit exert an influence not only on the prices but also on the volume of sales
of bananas and consequently on the volume of imports thereof. The applicant concludes from these findings
that bananas and other fresh fruit form only one market and that UBC's operations should have been
examined in this context for the purpose of any application of Article 86 of the Treaty.
The Commission maintains that there is a demand for bananas which is distinct from the demand for other
fresh fruit especially as the banana is a very important part of the diet of certain sections of the community.
The specific qualities of the banana influence customer preference and induce him not to readily accept
other fruits as a substitute. The Commission draws the conclusion from the studies quoted by the applicant
that the influence of the prices and availabilities of other types of fruit on the prices and availabilities of
bananas on the relevant market is very ineffective and that these effects are too brief and too spasmodic
for such other fruit to be regarded as forming part of the same market as bananas or as a substitute therefor.
For the banana to be regarded as forming a market which is sufficiently differentiated from other fruit
markets it must be possible for it to be singled out by such special features distinguishing it from other fruits
that it is only to a limited extent interchangeable with them and is only exposed to their competition in a way
that is hardly perceptible.
The ripening of bananas takes place the whole year round without any season having to be taken into
account. Throughout the year production exceeds demand and can satisfy it at any time. Owing to this
particular feature the banana is a privileged fruit and its production and marketing can be adapted to the
seasonal fluctuations of other fresh fruit which are known and can be computed. There is no unavoidable
seasonal substitution since the consumer can obtain this fruit all the year round. Since the banana is a fruit
which is always available in sufficient quantities the question whether it can be replaced by other fruits must
be determined over the whole of the year for the purpose of ascertaining the degree of competition between
it and other fresh fruit. The studies of the banana market on the Court's file show that on the latter market
there is no significant long term cross-elasticity anymore than — as has been mentioned — there is any
seasonal substitutability in general between the banana and all the seasonal fruits, as this only exists
between the banana and two fruits (peaches and table grapes) in one of the countries (West Germany) of
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the relevant geographic market. As far as concerns the two fruits available throughout the year (oranges
and apples) the first are not interchangeable and in the case of the second there is only a relative degree
of substitutability. This small degree of substitutability is accounted for by the specific features of the banana
and all the factors which influence consumer choice.
The banana has certain characteristics, appearance, taste, softness, seedlessness, easy handling, a
constant level of production which enable it to satisfy the constant needs of an important section of the
population consisting of the very young, the old and the sick.
As far as prices are concerned two FAO studies show that the banana is only affected by the prices —
falling prices — of other fruits (and only of peaches and table grapes) during the summer months and mainly
in July and then by an amount not exceeding 20%. 33 Although it cannot be denied that during these
months and some weeks at the end of the year this product is exposed to competition from other fruits, the
flexible way in which the volume of imports and their marketing on the relevant geographic market is
adjusted means that the conditions of competition are extremely limited and that its price adapts without
any serious difficulties to this situation where supplies of fruit are plentiful. It follows from all these
considerations that a very large number of consumers having a constant need for bananas are not
noticeably or even appreciably enticed away from the consumption of this product by the arrival of other
fresh fruit on the market and that even the personal peak periods only affect it for a limited period of time
and to a very limited extent from the point of view of substitutability. Consequently, the banana market is a
market which is sufficiently distinct from the other fresh fruit markets.
UNIT 3: ANTI- COMPETITIVE AGREEMENTS
Article 85 (1) of the EEC Treaty= Article 101 (1) of the TFEU= Section 8 of the CCPA
Bayer AG v Commission Case T- 41/96 [2000] ECR II- 3383
The General Court reviewed the case law on the meaning of agreement and stated that the concept: centres
around the existence of a concurrence of wills between at least two parties, the form in which it is manifested
being unimportant so long as it constitutes the faithful expression of the parties’ intention.
ACF Chemiefarma NV v EU Commission, [1970] ECR -00661
FACTS
NV Nederlandse Combinatie voor Chemische Industrie, Amsterdam, (hereinafter referred to as 'Nedchem')
of which the applicant is the successor, together with five other Netherlands undertakings which were
subsequently always represented by it, entered into an agreement in 1958 with the undertakings C. F.
Boehringer & Söhne, Mannheim, and Vereinigte Chininefabriken Zimmer & Co., GmbH, Mannheim
(hereinafter referred to as 'Boehringer') and Buchler & Co., Brunswick, whereby those undertakings retained
their respective domestic markets and provided for the fixing of the prices and quotas for the export of
quinine and quinidine to other countries. Buchler withdrew from this agreement of 28 February 1959. In
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July 1959, following the intervention of the Bundeskartellamt (Competition authority in Germany) to which
the agreement had been notified, Boehringer and Nedchem amended that agreement in such a way as to
exclude deliveries to the Member States of the EEC. In 1960 a new cartel was established between
Nedchem and the two abovementioned undertakings and shortly afterwards it was extended to certain
French and British undertakings. This cartel was based in the first place on an agreement relating to trade
with third countries (hereinafter referred to as the 'export agreement') and providing inter alia for the fixing
by agreement of prices and rebates relating to exports of quinine and quinidine and the allocation of export
quotas supported by a system of compensation depending on whether the export quotas were exceeded
or not fulfilled. Parallel with the export agreement two gentlemen's agreements containing substantially
identical provisions were concluded on 9 April 1960 and recorded in writing although they were not signed;
one was between the French group, Boehringer, Buchler, Nedchem and Carnegies and the other was
between the French group, Boehringer, Buchler, Nedchem and Lake & Cruickshank. Those two
gentlemen's agreements extended the provisions laid down in the export agreement with regard to price,
quotas and compensation for quantities, for both quinine and quinidine, to all sales on domestic markets
and abroad, and in particular to all sales within the Common Market. Furthermore, they laid down the
principle of protection of domestic markets for each of the producers. The two British undertakings agreed
not to manufacture quinidine without the approval of the German and Netherlands parties and to purchase
this product exclusively from the German and Netherlands parties and to maintain the agreed prices on
resale. The French undertakings entered into the same obligation with regard to synthetic quinidine.
Derogations from the gentlemen' agreements could take place only with the agreement of all the parties
and disputes were to be settled exclusively by arbitration. It was further decided that failure to comply with
or termination of the gentlemen's agreements would automatically be regarded as failure to comply with or
termination of the formal export agreements relating to quinine and quinidine, and vice versa. The
gentlemen's agreements were kept secret. Since the Commission considered that the restrictions on
competition therein provided for were capable of affecting trade between Member States, it imposed on the
applicant a fine of 210,000 units of account by a decision of 16 July 1969. By an application lodged at the
Court Registry on 13 September 1969 the undertaking Chemiefarma NV initiated proceedings against this
decision.
ISSUE
For now, the issue we consider is did the gentleman's agreement amount to the definition of an agreement
under Article 85 (1) of the EEC (Which has similarity to Article 101 (1) TFEU and Section 8 of the
Competition and Consumer Protection Act)
HOLDING
The applicant states that the gentlemen's agreement, unlike the export agreement, did not constitute an
agreement within the meaning of Article 85 (1) of the EEC and in any event it definitively ceased to exist
from the end of October 1962. The commission held that the gentlemen's agreement, which the applicant
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admits existed until the end of October 1962, had as its object the restriction of competition within the
Common Market. The parties to the export agreement mutually declared themselves willing to abide by the
gentlemen's agreement and conceded that they did so until the end of October 1962. This document thus
amounted to the faithful expression of the joint intention of the parties to the agreement with regard to their
conduct in the Common Market. Furthermore, it contained a provision to the effect that infringement of the
gentlemen's agreement would ipso facto constitute an infringement of the export agreement. In those
circumstances account must be taken of this connexion in assessing the effects of the gentlemen's
agreement with regard to the categories of acts prohibited by Article 85 (1). This case demonstrates that a
gentleman's agreement has been held to be an agreement for the purposes of competition law though not
legally binding. A gentlemen's agreement, or gentleman's agreement, is an informal and legally nonbinding agreement between two or more parties. It is typically oral, but it may be written or simply
understood as part of an unspoken agreement by convention or through mutually-beneficial etiquette. The
essence of a gentlemen's agreement is that it relies upon the honour of the parties for its fulfilment, rather
than being in any way enforceable. It is distinct from a legal agreement or contract.
SA Hercules Chemicals NV v EU Commission, [1991] ECR II-1711
FACTS
In this case, heavy fines were imposed by the Commission on fifteen undertakings in the chemical industry
for having participated for several years in an agreement and concerted practice, whereby they formed a
price cartel and introduced quota arrangements and other measures supporting the price cartel on the
polypropylene market. Fourteen of the fifteen undertakings thereupon brought proceedings before the CFI,
claiming that the decision should be annulled or, in the alternative, that the fines should either be cancelled
or reduced. As for the substance, this case raised several salient questions, the most important being the
interpretation of the term, "concerted practice," in the Treaty establishing the European Community ("EC
Treaty" or "Treaty"), the extent to which the much debated "framework agreement" could constitute a single
agreement within the meaning of Article 85 of the Treaty,' and the collective responsibility or collective
infringement of the undertakings.
HOLDING
In order for there to be an agreement within the meaning of Article 85(1) of the EEC Treaty it is sufficient
that the undertakings in question should have expressed their joint intention to conduct themselves on the
market in a specific way. Such is the case where there existed between undertakings common intentions
to achieve price and sales volume targets. Article 85 of the Treaty is applicable to agreements which are
no longer in force but which continue to produce their effects after they have formally ceased to be in force.
Thus an agreement which has expired by effluxion of time but the effects of which continue to be felt can
be caught by Article 101(1) TFEU and by implication Section 8 of the CCPA.
Sandoz Prodotti Farmaceutici Spa v EC Commission [1990] ECR I-00045
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The systematic dispatching by a supplier to his customers of invoices bearing the words "Export prohibited"
constitutes an agreement prohibited by Article 85(1 ) of the Treaty, and not unilateral conduct, when it forms
part of a set of continuous business relations governed by a general agreement drawn up in advance,
based on the consent of the supplier to the establishment of business relations with each customer prior to
any delivery and the tacit acceptance by the customers of the conduct adopted by the supplier in their
regard, which is attested by renewed orders placed without protest on the same conditions .In order to
constitute an agreement within the meaning of Article 85 of the Treaty it is sufficient that a provision is the
expression of the intention of the parties without its being necessary for it to constitute a valid and binding
contract under national law . The Commission will treat the contractual terms and conditions in a standard
form contract as an agreement within Article 101(1) 1. For the purpose of the application of Article 85(1)
there is no need to take account of the concrete effects of an agreement when it has as its object the
prevention, restriction or distortion of competition within the common market. In such a case the absence
in the Commission' s decision of any analysis of the effects of the agreement from the point of view of
competition does not constitute a defect capable of justifying a declaration that it is void. In the same way,
the fact that a supplier may not have taken steps to ensure the observance by his customers of a contractual
clause intended to restrict competition is not sufficient to remove that clause from the prohibition of Article
85(1).
Vereeniging van Cementhandelaren (Cement Dealers' Association) v The Commission (1972)
FACTS
The cement dealer's association used to set 'imported prices' for its Dutch members. The applicant
maintained that after the abolition of the system of 'imported prices', which was applied only to a small
proportion of transactions, there remained only a system of 'target prices'. According to the applicant these
target prices were rarely adhered to in practice and were far from constituting a constraint on members, in
fact only represent a basis of calculation which leaves largely untouched the freedom for each of the
members of the association to calculate its prices in accordance with the facts of each individual transaction.
In any case since the variations in production prices are slight in the sector in question, competition is said
to be exerted mainly over other factors of the transactions, such as product quality and services to the
customer.
HOLDING
Article 85(1) of the Treaty expressly identifies agreements which 'directly or indirectly fix ... selling prices or
any other trading conditions' as incompatible with the Common Market. If a system of imposed selling prices
is clearly in conflict with that provision, the system of target prices' is equally so. It cannot in fact be
supposed that the clauses of the agreement concerning the determination of "target prices' are
meaningless. In fact, the fixing of a price, even one which merely constitutes a target, affects competition
because it enables all the participants to predict with a reasonable degree of certainty what the pricing
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policy pursued by their competitors will be. This prediction is all the more reliable because the obligation to
make a demonstrable profit in every case is limited to the provisions concerning 'target prices' and those
provisions must in addition be considered within the framework of the internal rules of the applicant
association as a whole which are characterized by strict discipline in conjunction with inspections and
penalties. The EU commission concluded that the decision of fixing target prices amounted to an agreement
within the meaning of article 101(1) TFEU.
NV IAZ International Belgium v Commission, [1983] ECR -03369
In European Union (EU) countries, it was common for dishwasher and washing-machine manufacturers to
select one exclusive distributor for each European nation, called the sole distributor.
EU law allowed vertical agreements barring sole distributors from marketing their products outside their
assigned countries but banned agreements barring those same distributors from simply responding to
purchase requests from outside their countries.
As a result, parallel importers cropped up in many EU countries. They would request and buy machines
from sole distributors in lower-price countries and then resell them at a profit in higher-price countries,
competing with those countries' sole distributors for sales.
Belgium, a higher-price country, required appliances to meet certain standards to get hooked up to the
water supply. A water-supply trade association called ANSEAU oversaw compliance, initially permitting
installations of any appliances that complied with a checklist of standards and requirements. Eventually,
ANSEAU reached an agreement with manufacturers and sole distributors to issue conformity labels,
replacing the checklist system. This included NV IAZ International Belgium (NV IAZ) (plaintiff). These
parties collectively had 90 percent of the market. Under the terms of their agreement, appliances without
conformity labels could not be used in Belgium, and the parties refused to let parallel importers join the
agreement or obtain labels for appliances they wished to sell. While drafting the agreement, certain
participants confirmed among themselves that its purpose was to prevent or at least slow parallel imports.
NV IAZ argued before the European Commission (the commission) (defendant) that the agreement was
intended to increase compliance-check efficiency and that it had no restrictive effect on competition. The
commission disagreed and found that the agreement was a horizontal restraint in violation of Article 101 of
the Treaty on the Functioning of the European Union (TFEU). NV IAZ appealed.
HOLDING
Article 85 (1) of the Treaty applies also to associations of undertakings in so far as their own activities or
those of the undertakings affiliated to them are calculated to produce the results which it aims to suppress.
A recommendation of an association of undertakings, even if it has no binding effect, cannot escape that
article where compliance with the recommendation by the undertakings to which it is addressed has an
appreciable influence on competition in the market in question.
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Price Waterhouse, [2002] ECR I-1577
A dispute has been brought before the Nederlandse Raad van State (Netherlands Council of State)
concerning the legality of a regulation adopted by the Netherlands Bar Association. The regulation in issue
prohibits lawyers practising in the Netherlands from entering into multi-disciplinary partnerships with
members of the professional category of accountants. It is for the Court to decide whether the Treaty
provisions on competition are applicable and, if necessary, whether they preclude such a prohibition of
cooperation.
The Raad van State asks whether, on a proper construction of Article 85(1) of the Treaty, the definition of
an association of undertakings applies to a professional association of lawyers, such as the Association,
when it adopts, pursuant to regulatory powers conferred by statute, binding measures which forbid lawyers
to enter into multi-disciplinary partnerships with accountants in order to protect the independence of lawyers
and their loyalty to their clients. It was held to be an association of undertakings.
The International Olympic Committee; Meca-Medina
The factual background to the dispute was that the applicants are two professional athletes who compete
in long-distance swimming, the aquatic equivalent of the marathon. In an anti-doping test carried out on 31
January 1999 during the World Cup in that discipline at Salvador de Bahia (Brazil), where they had finished
first and second respectively, the applicants tested positive for Nandrolone. The level found for Mr D. MecaMedina was 9.7 ng/ml and that for Mr I. Majcen 3.9 ng/ml. On 8 August 1999, FINA's Doping Panel
suspended the applicants for a period of four years. On the applicants' appeal, the CAS, by arbitration
award of 29 February 2000, confirmed the suspension. In January 2000, certain scientific experiments
showed that Nandrolone's metabolites can be produced endogenously by the human body at a level which
may exceed the accepted limit when certain foods, such as boar meat, have been consumed. In view of
that development, FINA and the applicants consented, by an arbitration agreement of 20 April 2000, to refer
the case anew to the CAS for reconsideration. By arbitration award of 23 May 2001, the CAS reduced the
penalty to two years' suspension. The applicants did not appeal against that award to the Swiss Federal
Court.
By letter of 30 May 2001, the applicants filed a complaint with the Commission, under Article 3 of Council
Regulation No 17 of 6 February 1962: First Regulation Implementing Articles [81] and [82] of the Treaty
(OJ, English Special Edition 1959-1962, p. 87), alleging a breach of Article 81 EC and/or Article 82 EC. In
their complaint, the applicants challenged the compatibility of certain regulations adopted by the IOC and
implemented by FINA and certain practices relating to doping control with the Community rules on
competition and freedom to provide services. First of all, the fixing of the limit at 2 ng/ml is a concerted
practice between the IOC and the 27 laboratories accredited by it. That limit is scientifically unfounded and
can lead to the exclusion of innocent or merely negligent athletes. In the applicants' case, the excesses
could have been the result of the consumption of a dish containing boar meat. Also, the IOC's adoption of
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a mechanism of strict liability and the establishment of tribunals responsible for the settlement of sports
disputes by arbitration (the CAS and the ICAS) which are insufficiently independent of the IOC strengthens
the anti-competitive nature of that limit. According to that complaint, the application of those rules
(hereinafter "the anti-doping rules at issue") leads to the infringement of the athletes' economic freedoms,
guaranteed inter alia by Article 49 EC and, from the point of view of competition law, to the infringement of
the rights which the athletes can assert under Articles 81 EC and 82 EC.
HELD
The compatibility of rules with the Community rules on competition cannot be assessed in the abstract. Not
every agreement between undertakings or every decision of an association of undertakings which restricts
the freedom of action of the parties or of one of them necessarily falls within the prohibition laid down in
Article 81(1) EC. For the purposes of application of that provision to a particular case, account must first of
all be taken of the overall context in which the decision of the association of undertakings was taken or
produces its effects and, more specifically, of its objectives. It has then to be considered whether the
consequential effects restrictive of competition are inherent in the pursuit of those objectives and are
proportionate to them.
The general objective of anti-doping rules relating to sport is to combat doping in order for competitive sport
to be conducted fairly and includes the need to safeguard equal chances for athletes, athletes' health, the
integrity and objectivity of competitive sport and ethical values in sport. In addition, given that penalties are
necessary to ensure enforcement of the doping ban, their effect on athletes' freedom of action must be
considered to be, in principle, inherent itself in the anti-doping rules.
Therefore, even if anti-doping rules are to be regarded as a decision of an association of undertakings
limiting the freedom of action of the persons whom they cover, they do not, for all that, necessarily constitute
a restriction of competition incompatible with the common market, within the meaning of Article 81 EC,
inasmuch as they are justified by a legitimate objective. Such a limitation is inherent in the organization and
proper conduct of competitive sport and its very purpose is to ensure healthy rivalry between athletes
Imperial Chemical Industries Ltd v EC Commission, [1972] ECR – 00619
The Commission had fined several producers of dyestuffs which it found had been guilty of price fixing
through concerted practice. The Commission's decision relied upon various pieces of evidence including
the similarity of the rate and the timing of price increases and of instructions sent out by parent companies
to their subsidiaries and the fact that there had been informal contact between the firms concerned. The
Court of Justice upheld the Commission's decision. It said that the object of bringing concerted practices
within Article 101 was to prohibit:
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"a form of coordination between undertakings which without having reached the stage where an agreement
properly so called has been concluded, knowingly substitutes practical cooperation between them for the
risks of competition"
Viho v Commission Case C-73/95P (1996) ECR 1-5467
Parker Pen had established an integrated distribution system for Germany, France, Belgium, Spain and the
Netherlands where it used subsidiary companies for the distribution of its products. The Commission
concluded that Article 101 had no application to the allocation of tasks within the Parker Pen group. The
finding was challenged by a third party, Viho, which had been trying to obtain supplies of Parker Pen's
products and which considered that the agreements between Parker Pen and its subsidiaries infringed
Article 101. The Court of Justice noted that Parker Pen held 100 percent of the shares in the subsidiary
companies, it directed their sales and marketing activities and it controlled sales, targets, gross margins,
cash flow and stocks:
Parker and its subsidiaries thus form a single economic unit within which the subsidiaries do not enjoy real
autonomy in determining their course of action in the market, but carry out instructions issued to them by
the parent company controlling them.
UNIT 4: ABUSE OF A DOMINANT POSITION
United States v Aluminium Co. of America 148 F.2d 416 (2nd Cir 1945) as per Judge Learned Hand"Dominance resulting from 'superior foresight, skill and industry' is not the target of competition law."
United Brands V. Commission [1978] ECR 207
"A position of economic strength enjoyed by an undertaking which enables it to prevent effective competition
being maintained on the relevant market by affording it the power to behave to an appreciable extent
independently of its competitors, its customers and ultimately of the consumers'
Hoffmann-La Roche & Co AG v. Commission [1979] ECR 461
Hoffmann-La Roche (Roche) (defendant) entered into agreements with 22 wholesale purchasers of its
vitamins, paying a rebate to purchasers who bought all or most of their requirements from Roche, known
as a fidelity rebate. The rebate amount varied by wholesaler. Some purchase agreements provided for a
fixed-rate fidelity rebate, regardless of the number of products purchased, as long as the purchasers met
most or all of their annual requirements from Roche. Other agreements provided for progressive-rate
rebates, increasing the discount as purchasers bought higher percentages of their annual requirements
from Roche. The European Commission (the commission) (plaintiff) found that Roche had abused its
dominance in violation of Article 102 of the Treaty on the Functioning of the European Union (TFEU)
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because both types of fidelity rebates restricted purchasers' abilities to buy from other suppliers and
prevented other suppliers from working with Roche's customers. Roche appealed, arguing that the
discounts were akin to permissible quantity rebates.
In discussing whether Hoffman La Roche was abusing its dominant position the court had to first define
what dominance entails and it stated “The dominant position referred to in Article 86 of the Treaty relates
to a position of economic strength enjoyed by an undertaking which enables it to prevent effective
competition being maintained on the relevant market by affording it the power to behave to an appreciable
extent independently of its competitors, its customers and ultimately its consumers. Such a position does
not preclude some competition, which it does where there is a monopoly or a quasi-monopoly but enables
the undertaking which profits by it if not to determine, at least to have an appreciable influence on the
conditions under which that competition will develop and in any case to act largely in disregard of it so long
as such conduct does not operate to its detriment.”
Hoffmann-La Roche & Co AG v. Commission [1979] ECR 461
“Furthermore, although the importance of the market shares may vary from one market to another the view
may legitimately be taken that very large shares are in themselves, and save in exceptional circumstances,
evidence of the existence of a dominant position. An undertaking which has a very large market share and
holds it for some time is by virtue of that share in a position of strength…….”
Akzo Chemie BV v. Commission [1991] ECR II-3359
The Court of Justice referred to the passage from Hoffmann- La Roche quoted above and continued that a
market shares of 50 per cent could be considered to be very large so that, in the absence of exceptional
circumstances pointing the other way, an undertaking with such a market share will be presumed dominant;
that undertaking will bear the evidential burden of establishing that it is not dominant.
Commercial Solvents v Commission (1974)
It was established in this case that a refusal to supply a downstream customer could amount to an abuse
of a dominant position.
Zoja was an Italian producer of a drug used in the treatment of tuberculosis; it was dependent on supplies
of a raw material, amino-butanol, the dominant supplier of which was Commercial Solvents. When the latter
refused to make amino-butanol available to Zoja the Commission found that it had abused its dominant
position and ordered it to resume supplies. The Commission’s decision was upheld on appeal to the Court
of Justice. Commercial solvents were not only a dominant supplier of amino-butanol in the upstream market
for the raw material; its refusal to supply Zoja coincided with the emergence of Commercial Solvents own
subsidiary, ICI, on to the downstream market for the anti-tuberculosis drug on which Zoja was operating:
the refusal to supply would eliminate Zoja from the downstream market. The Court of Justice said:
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“an undertaking which has a dominant position in the market in raw materials and which, with the object of
reserving such raw material for manufacturing its own derivatives, refuses to supply a customer, which is
itself a manufacturer of these derivatives and therefore risks eliminating all competition on the part of the
customer, is abusing its dominant position.”
United Brands v Commission (1978)
The Commission held that the UBC had abused its dominant position by refusing to continue supplying to
its Danish distributor, Olesen. The ECJ upheld the Commission’s decisions by saying that there was no
objective justification to the refusal. In fact, the Court stated in that a dominant undertaking could not stop
supplying a regular customer who ‘abides by regular commercial practice’.
Magill: RTE & ITP v. Commission, [1995] 4 CMLR 718
Mr Magill wished to publish the listings of three television companies broadcasting in the UK and Ireland in
a single weekly publication. At the time there was no publication which contained the details of all three
companies’ programmes for a week in advance; this information was available only in daily newspapers for
the day in question, or on a Saturday for the weekend. There was an obvious public demand for listings
magazines, which were widely available in continental countries. Copyright protection was available for TV
listings under UK and Irish law, which is why Magill required a licence. The Commission concluded that the
three television companies had abused their individual dominant positions in relation to their own TV listings
by refusing to make them available to Magill and required that advance information be supplied in order to
enable comprehensive weekly TV guides to be published. The Commission’s decision was appealed to the
General Court and the Court of Justice, each of which upheld it. The Court of Justice stated that the abuse
consisted of the refusal to provide basic information by relying on national copyright provisions, thereby
preventing the appearance of a new product, a comprehensive guide to television programmes, which the
television companies did not offer and for which there was a potential consumer demand; the Court also
noted that there was no objective justification for the refusal and that the result of the refusal was to reserve
to the television companies the downstream market for television guides.
The court identified a three step test of circumstances that must be considered in the event that there is an
allegation of abuse of dominance through the refusal to grant access to IP rights
-
In the first place the refusal relates to a product or service indispensable to the exercise of a
particular activity on a neighbouring market;
-
In the second place, the refusal is of such a kind to exclude effective competition on that
neighbouring market;
-
In the third place, the refusal prevents the appearance of a new product for which there is potential
consumer demand.
Microsoft v Commission OJ [2007] L 32/23
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The Commission held that Microsoft was dominant in two markets, one for personal computer operating
systems and the other for work group server operating systems. The Commission held that Microsoft had
abused its dominant position by refusing to supply competitors with interoperability information to enable
them to develop and distribute products that would compete with Microsoft ’s on the market for servers.
Italian Republic v EC Commission [1963] ECR 165
Soda Ash – ICI [2003]
From about 1983 until about the end of 1990 ICI abused the dominant position which it held in the market
for soda-ash in the United Kingdom by applying to its major customers a system of loyalty rebates and
discounts by reference to marginal tonnage (top-slice rebates), contractual arrangements tending to ensure
an effective exclusivity of supply for ICI and other devices which had the object and effect of tying the said
customers to ICI for the whole of their requirements and of excluding competitors.
“It is clearly established in law that where a dominant undertaking ties customers even at their request by
an obligation or promise to obtain the whole or substantially the whole of their requirements exclusively
from that undertaking, this will constitute an infringement of Article 82 (Hoffmann-La Roche v Commission,
paragraph 89). It is irrelevant whether the obligation in question is stipulated for without further qualification
or whether it is undertaken in consideration of the grant of a rebate”
“Such arrangements substantially restrict the contractual freedom of the customer, prevent competitive
entry, and are tantamount to an exclusivity clause. The agreements with these major customers meant that
they were tied to ICI for substantially the whole of their requirements (and in one case at least, their total
requirements) while the competitive effect of other suppliers was minimised.”
Irish Sugar plc v Commission [1999] ECR II-2969
In 1997, Irish Sugar brought an action in the European Court of First Instance (CFI) challenging a
Commission decision fining the company for infringing EC competition rules, namely Article 82 EC, between
1985 and 1990, in the market in granulated sugar intended for retail and for industry in Ireland. The decision
imposed a fine of Euro 8.8 million. According to the Commission, Irish Sugar had sought to restrict
competition from imports of sugar from other Member States and from smaller sugar suppliers in Ireland.
The infringements allowed Irish Sugar to maintain a significantly higher price level for packaged retail sugar
in Ireland compared with other Member States and to keep its ex-factory prices amongst the highest in the
EC.
“Fidelity rebates granted by an undertaking in a dominant position are an abuse within the meaning of
Article 86 of the Treaty (now Article 82 EC) where their aim is, by granting financial advantages, to prevent
customers from obtaining their supplies from competing producers. In such cases, all the circumstances
must be appraised, in particular the criteria and detailed rules for granting rebates. It must also be
determined whether there is a tendency, through an advantage not justified by any economic service, to
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remove or restrict the buyer's choice as to his sources of supply, to block competitors' access to the market,
to apply dissimilar conditions to equivalent transactions with other trading parties, or to reinforce the
dominant position by distorting competition.
The granting of target rebates by an undertaking in a dominant position, one of the immediate effects of
which is a build-up of stocks and a concomitant reduction in purchases, amounts to restricting the normal
development of competition and is incompatible with the objective of undistorted competition in the common
market. It is not based on any economic service justifying that advantage, but seeks to remove or restrict
the purchaser's freedom of choice concerning his sources of supply and to block the access of other
suppliers to the market.
British
Airways
plc
v
Commission
of
the
European
Communities.
Appeals - Abuse of dominant position - Airline - Agreements with travel agents - Bonuses linked to
growth in sales of that airline's tickets over a given period in comparison with a reference period Bonuses granted not only for tickets sold once the sales target achieved, but for all tickets sold
during the period in question.
In 1999 the Commission fined British Airways (BA) €6,800,000 for abuse of its dominant position on the
market for air travel agency services, contrary to article 82 of the EC Treaty. The abuse consisted of a
system of rebates granted to travel agents that was held to be both loyalty inducing and discriminatory. BA
paid travel agents a basic commission together with other financial incentives. These were of various types,
but essentially involved rebates based on the extent to which agents increased their sales of BA tickets
from one year to the next. The rebates were applied not only to the additional sales, but to all sales for the
period in question. The Commission held that this was an abuse of BA’s dominant position, because of
both its loyalty inducing effects and the discrimination as between travel agents providing equivalent
services. It went on to hold that it had the object and effect of excluding BA’s competitors from the UK air
transport markets.
The Court noted that BA devised bonus schemes on an individualised basis, linked to travel agents’ growth
in turnover during a given period. The Court referred to the very strong inducement effect that arose from
the fact that the bonus was payable not simply by reference to the growth in turnover, but to the whole of
the turnover: It could therefore be of decisive importance for the commission income of a travel agent as a
whole whether or not he sold a few extra BA tickets after achieving a certain turnover.
Eurofix-Bauco v. Hilti 1988 O.J. (L65) 19 (1988)
Eurofix and Bauco (Eurofix-Bauco) (plaintiffs) were European producers of nail guns, nails, and related
cartridge strips. Hilti (defendant), their competitor, was the largest European producer of those products.
Hilti held a dominant position in the nail-gun and cartridge-strip markets, largely due to its patents, but faced
greater competition in the nail market. As Hilti’s patents expired, competitors like Eurofix-Bauco began
entering the market, selling cartridge strips and nails that were compatible with Hilti’s nail guns. Hilti
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instituted several purchasing practices with which Eurofix-Bauco took issue. Specifically, Eurofix-Bauco
argued that Hilti had excluded them from the market for nails compatible with Hilti products by illegally tying
Hilti cartridges to Hilti nails. Eurofix-Bauco alleged that Hilti had done this in a few ways, including by
conditioning the purchase of Hilti’s cartridges on buying Hilti nails, inducing distributors to stop supplying
compatible cartridge strips to competitors, and refusing to supply cartridges to dealers that might resell
them to compatible nail producers like Eurofix-Bauco. Hilti argued that its conduct was objectively justified
because compatible nail producers’ products were of substandard quality and presented safety concerns
and that Hilti’s sales and distribution practices were motivated by these safety concerns. However, Hilti did
not warn customers of its alleged safety concerns with compatible nails, did not write to Eurofix-Bauco with
any concerns, and did not report its concerns to any government regulators. Eurofix-Bauco filed a complaint
with the European Commission.
In so far as the abuse relates to bundled discounts the court stated the following:
(i) Tying, reduced discounts and other discriminatory policies on cartridge-only orders
Making the sale of patented cartridge strips conditional upon taking a corresponding complement of nails
constitutes an abuse of a dominant position, as do reduced discounts and other discriminatory policies
described above on cartridge-only orders. These policies leave the consumer with no choice over the
source of his nails and as such abusively exploit him. In addition, these policies all have the object or effect
of excluding independent nail makers who may threaten the dominant position Hilti holds. The tying and
reduction of discounts were not isolated incidents but a generally applied policy.
Van den Bergh Foods Ltd (formerly HB Ice Cream Ltd) v Commission [2004] 4 CMLR
In Van den Bergh Foods, the Commission concluded that it was an abuse of a dominant position for Van
den Bergh to provide freezer cabinets free of charge to retail outlets on condition that they were to be used
exclusively for the storage of its ice cream products. The consequence of this practice was that, de facto,
Van den Bergh achieved outlet exclusivity, since retailers were unlikely to, and in practice did not, maintain
a second freezer in their shops; in effect, therefore, the retailers would purchase ice cream exclusively from
Van den Bergh.
Akzo Chemie v Commission, ([1991] ECR, p. I-3359, para 71
A dominant undertaking has no benefit from the use of such prices (predatory pricing) , as each sales event
produces loss, unless the purpose is to oust the competition in order to raise prices.
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