Article 82 Theory Notes
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Theory: Article 82 Assessment of Approach to Abuse pre-effects based approach • Market definition: o United Brands decision clearly wrong: Court said that because there were some core/locked in consumers, the banana market was unique. Wrong: the aim of the SSNIP test is to identify other products that can be used as alternatives in the case of a price rise, which means you need to look at marginal consumers. o Microsoft case: Is an operating System really distinct from a media player?
CFI conceded that changes to understanding/products occur over time, and said it was looking at it from a 1997 perspective when the alleged abuse occurs. If an OS is distinct from all the programmes on it (internet explorer, word processor etc) then there would be nothing left on the OS! It comprises these 'complementary products'. • Market power: o Wrong to use opportunity cost of switching away from more profitable routes in British Midlands/Aer Lingus case. The fact that there are fewer competitors in a market with less demand is an example of the market working perfectly, with price and conditions being constrained by the potential for other airlines to move onto the currently 'less profitable route' in response to a rise in prices. o Wrong to use integration as an indicator per se. If the downstream firm could feasibly integrate and put itself in same position as the integrated one, then it is wrong to conclude that the integrated firm is dominant. There is potential upstream competition, which may stop it from behaving independently to an appreciable extent etc o Wrong to use technological advancement: This could chill innovation • Abuses: o Attitude to rebates is v formalistic: A loyalty inducing rebate (and especially individualised ones) are deemed to force consumers to deal with them alone and are therefore abusive per se. Courts don't actually look at effect on consumers. In Virgin/BA the court considered whether the rebates would foreclose the sales of tickets of other airlines from the market but NOT whether this would actually harm consumers: In an industry with huge fixed costs, any extra income that can be earned and contribute to paying off those costs is desirable for future consumers. Also the rebates would ensure that the planes were always full, improving allocative efficiency. It also treated retroactivity of rebate as indicating abuse, even though retroactive rebates help lower costs to customers/consumers the most. Loyalty-inducing rebates are presumed anticompetitive unless objectively justified (in Michelin the CFI said anti-competitive effects could be presumed in loyalty rebate cases)- NB this isn't quite a per se unlawfulness approach, but is a variant of it (given how strict CFI/ECJ/Commission have been in assessing objective justifications). This doesn't reflect economics: Rebate is another form of price competition and where one firm offers a price that is lower than another, the other will necessarily be excluded or foreclosed from custom. If the contract or sales are envisaged over the long term, this
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