Dominance
Article 102 TFEU
Elements
①an abuse;
②by one or more undertakings;
③of a dominant position;
④within the internal market or a substantial
part thereof;
⑤insofar
as it may affect trade between
Member States.
Dominance & Abuse
(Cumulative)
‘A finding that an undertaking has a dominant
position is not in itself a recrimination but
simply means that, irrespective of the reasons
for which it has such a dominant position, the
undertaking concerned has a special
responsibility not to allow its conduct to
impair genuine undistorted competition on
the [internal] market.’ (Michelin v Commission)
Dominance
‘… a position of economic strength enjoyed by
an undertaking which enables it to hinder the
maintenance of effective competition on the
relevant market by allowing it to behave to an
appreciable extent independently of its
competitors and customers and ultimately of
consumers.’(Hoffmann-La Roche v Commission)
Establishing Dominance
Determining whether an undertaking holds a
dominant position essentially involves two
stages:
o market
definition: dominance cannot be
assessed in a vacuum; it must be assessed
within the relevant product and geographic
market(s) (which must constitute a substantial
part of the internal market);
o market power: assessing
the degree of market
power (or economic strength) enjoyed by the
undertaking on the relevant market. This stage
involves consideration of various factors, such
as market share, barriers to entry, and
competitive constraints.
Market Definition
‘The concept of the relevant market in fact
implies that there can be effective competition
between the products which form part of it
and this presupposes that there is a sufficient
degree of interchangeability between all the
products forming part of the same market in
so far as a specific use of such products is
concerned. (Hoffmann-La Roche v Commission)
Tools of Evaluation (Courts)
The overall effect of the case law was summarised in the
judgment of the General Court in TiercéLadbroke:
o
‘the relevant product or service market includes products
or services which are substitutable or sufficiently
interchangeable with the product or service in question,
not only in terms of their objective characteristics, by
virtue of which they are particularly suitable for
satisfying the constant needs of consumers, but also in
terms of the conditions of competition and/or the
structure of supply and demand on the market in
question’.
The relevant geographic market is defined as comprising:
o
‘the area in which the undertakings concerned are
involved in the supply and demand of products or
services, in which the conditions of competition are
sufficiently homogeneous and which can be
distinguished from neighbouring areas because, in
particular, the conditions of competition are appreciably
different in those areas.’
Market Definition Notice
o The
publication of the Market Definition
Notice in December 1997 was significant as it
marked the adoption by the Commission of a
more systematic and conceptually rigorous
approach to market definition.
o the
Notice incorporates the methodology of
assessment known as the ‘hypothetical
monopolist’ or ‘Small but Significant Nontransitory Increase in Price’ (commonly known
as the ‘SSNIP’) test.
o The
Notice states that it is important to
distinguish between demand-side substitution,
supply-side
substitution
and
potential
competition as competitive constraints facing
suppliers
Market Power
o In
the
Commission’s
Article
102
Enforcement Priorities Guidance, the
Commission states that market shares
‘provide a useful first indication’ of the
market
structure
and
the
relative
importance of the different undertakings on
the market.
o However,
market shares should be
interpreted in the light of the dynamics of
the market and the extent to which products
are differentiated.
Market Shares
① in
ICI, an ‘historic market share of more than 90% …
over the whole period under consideration’ = dominant
position on the relevant market;
② in
Intel the market shares between 70 and 80 per cent
were a clear indication of dominance;
③ in Michelin I, the market share of 57 per cent to 65 per
cent on the market in new replacement tyres for heavy
vehicles (compared with the market shares of Michelin
NV’s main competitors of between 4 per cent and 8 per
cent) ‘constitutes a valid indication of Michelin NV’s
preponderant strength in relation to its competitors …’;
④ in
AKZO, a stable market share of 50 per cent over at
least three years was held to be evidence of the
existence of a dominant position;
⑤
in Metro, a 5–10 per cent market share of a market for
highly technical products which appear to the majority
of consumers to be readily interchangeable rules out the
existence of a dominant position.
Case Study
Case 27/76 United Brands
United Brands
The Court of Justice held that a market share
of between 40 per cent and nearly 45 per cent
‘does not permit the conclusion that UBC
automatically controls the market. [The
dominance] must be determined having
regard to the strength and number of the
competitors’. However, the Court went on to
find that that percentage represented a share
several times greater than that of UBC’s
competitors, the rest of whom were far behind.
This, together with other factors, afforded
‘evidence of UBC’s preponderant strength’.
Dynamic Markets
o The Commission has investigated a number of
markets with a high rate of innovation and a
significant importance of R&D. The dynamics
of these industries were taken into account in
the market definition exercise and even more
in the competitive assessment.
o As these markets are more apt to change due to
technological developments, the relevant
market definition can vary in such markets
depending on the time horizon which is in the
focus of the investigation. Also market shares
might be less indicative depending on the
individual case and the technological
development stage. However, these factors can
all be taken into account in the market share
interpretation.
Related Markets
This is of considerable importance in the
application of Article 102: an undertaking may
possess market power on one market but
exercise that power in a way that influences
conditions of competition on a related market.
For example:
o Separate markets for raw materials;
o Control
over other essential inputs and
facilities;
o Separate
market for spare parts and
ancillary services.
Case Study
Case 333/94 Tetra Pak II
Tetra Pak II
The Commission, upheld by the General Court
and the Court of Justice, condemned clauses
whereby Tetra Pak had tied the sale of carton
packaging materials to the sale of its filling
machines by requiring the purchasers of the
machines to agree to purchase from Tetra Pak
all their supplies of cartons. The Court of
Justice stated that even where tied sales of two
products are in accordance with commercial
usage or there is a natural link between those
products, such sales may still constitute an
abuse within the meaning of Article 102 unless
they are objectively justified.
Collective or Joint Dominance
102 refers to any ‘abuse by one or more
undertakings of a dominant position’ and
thereby envisages that two or more
undertakings may jointly hold a dominant
position. Although it is well established that
Article 102 is capable of applying to situations
in which several undertakings together hold a
dominant position, without each being
dominant individually.
Factors
Connecting factors which have been found to be
capable of establishing a situation where a group
of independent undertakings act as a collective
entity include:
o an
agreement
concerned;
between
the
undertakings
o the
use of model conditions of supply drawn
up by a common trade association;
o the
pursuit of a common market strategy or
sales policy;
o the
fact that the undertakings operate in an
oligopolistic market which is conducive to
parallel behaviour.
Affecting Trade
o The
same principle outlined in relation to
Article 101 applies to Article 102. The effect on
trade criterion is a jurisdictional standard,
confining the scope of application of Article
102 to abuses of a dominant position
appreciably influencing, either directly or
indirectly, actually or potentially the patterns
of trade of goods or services or other crossborder economic activity between Member
States.
o In the case of Article 102 the abuse must have
an effect on trade between Member States, but
this does not mean that each element of the
behaviour must be assessed in isolation to
determine its effect: the conduct must be
assessed in terms of its overall impact.
Case Study
139/98 AAMS
AAMS
In Amminstrazione Autonoma dei Monopoli dello
Stato v Commission the General Court
confirmed the Commission's conclusion that
AAMS, which had a dominant position on the
Italian market for the wholesale distribution of
cigarettes, had abused its dominant position
by imposing distribution agreements on
foreign producers which contained terms
limiting the access of foreign cigarettes to the
Italian market; a fine of €6 million was
imposed.