眾律國際法律事務所

Abuse of Dominance in the EU Competition law (Article 102 TFEU)

As mentioned in previous articles, competition law exists to ensure competition in a free market and is believed to bring efficiency, low prices and innovation. Article 102 of the Treaty on Functioning of the European Union (TFEU), together with Article 101 TFEU, promotes this competitiveness and are meant to prevent anti-competitive behaviour. In particular, a company can restrict competition if it is very strong on a given market. A dominant position is not itself anticompetitive, but if the company exploits this position to eliminate competition its behaviour can be considered abusive. The Article states:

Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.

Therefore, for Article 102 to be applicable four requirements must be met: (1) one or more undertakings must be in a dominant position, (2) such position must be held within the common market or substantial part of it. (3) There must be abuse, and (4) this must have an effect on inter-State trade.

Definition of ‘Dominant Position’

In one of the most important ‘abuse of dominance’ cases, Hoffman-La Roche, the European Court of Justice gave the definition of dominant position: “[The dominant position] 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 of the consumers”. The process employed by the Commission to assess dominance of a undertaking follows a two-stage procedure:

1. Evaluation of the market on which the undertaking is operating (‘the Relevant Market’). Competition takes place on markets, so that’s why it is necessary to determine the behaviour and status of the undertaking in the ‘relevant market’. In order to define it, the Commission has to define:

• Product/Service Market. Refers to the material scope of the market, the main products or services delimiting the relevant market.
• Geographic Market. A geographic delimitation is also necessary to define the relevant market (which may be EU-wide, national or even local).
• Temporal Market. It is less important, but it can also influence the relevant market and market positions.

2. The undertakings position on this particular market. Once the relevant market has been determined, the Commission must decide at what point the undertaking has sufficient power over this market to be considered as “dominant”. Generally, market share is the principal element to assess dominance, since only companies which have won a large part of one market can be deemed to be in a dominant position. Usually, a company is unlikely to be dominant if it has a market share of less than 40%.  However, market share is not determinative and other factor indicating dominance can also be taken into account, such as the existence of any barriers to entry and the extent of any countervailing buyer power.

Definition of ‘Abusive Conduct’

As mentioned above, holding a dominant position is not itself unlawful. However, where a company has a dominant position, it will be in breach of the EU competition if it “abuses” of that position. Article 102 includes a non-exhaustive list of examples of abusive conduct:

• directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
• limiting production, markets or technical development to the prejudice of consumers;
• applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
• making the conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

References:

Article 102 TFEU:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12008E102:EN:HTML

Overview of the EU Competition rules:

https://www.slaughterandmay.com/media/64569/an-overview-of-the-eu-competition-rules.pdf