Article 102

Competition Law LLM

Table of Contents

Introduction to Article 102 4

Scope 4

Abuse 4

By One or More Undertakings 4

Dominance 4

Enforcement 5

Theoretical Framework 5

Objectives 5

Welfare 5

Socio-Political Objectives 5

Single market integration 5

European Competition Policy – Key Issues 6

Market power thresholds 6

Foreclosure 6

Exploitation 6

Discrimination 6

Dominance 7

Market Definition 7

SSNIP test 7

Framework for Market Definition 8

Demand-side substitution 8

Supply-side substitution 8

Quantitative techniques 8

Qualitative techniques 8

Dominant Position 9

Market Share 9

Lower Shares 9

Barriers to entry 10

Countervailing buyer power 10

Super-dominance 10

Associated Markets 10

Territorial scope of dominance 10

Exclusionary Abuses 11

Classification 11

Hoffmann-La Roche Standard 11

Form or Effect? 12

Effects 12

Probability of Effect 12

Pre-Review 13

Review 13

Post-Review Case Law 13

Prohibited Conduct 14

The Candidates 14

The Consumer Welfare Test 14

The As-Efficient Competitor Test 14

Intent 14

The Sacrifice / No Economic Sense Test 15

The “as if” test 15

Defences 15

Article 102 Defences 15

Article 101 Defences 16

Critiques 16

Nazzini 16

Akman 16

Rousseva 16

Primary Market Foreclosure 17

Predatory Pricing 17

Areeda-Turner Test 17

AKZO Test 17

Meeting Competition Defence 18

Recoupment 18

Sacrifice Principle 18

Above Cost Cases 18

Margin Squeeze 18

Exclusive Purchasing Contracts 19

Single Branding / Non-Compete Obligations 19

Discounts and Rebates 20

Conclusion 21

Introduction to Article 102

Scope

Article 102 TFEU (Formerly Art 82 and Art 86) is all about unilateral conduct. It prohibits

(i) any abuse – we are looking at conduct, but this is a really ambiguous definition

(ii) by one or more undertakings

(iii) of a dominant position – we are looking at a subset of firms that have market power

(iv) within the common market or a substantial part of it

(v) insofar as the abuse may affect trade between Member States.

Abuse

Article 102 includes examples of abuses, but this is not an exhaustive list, much like in Art 101. However, offences like tying and discrimination are clearly included, and the Commission and the CJEU often reasons by analogy from these examples.

There is no express provision for exemption but:

(a) the concept of abuse includes the possibility of objective justification (British Airways (ECJ), para 69).

(b) the notion of “Art 102(3)”, under which the criteria for objective justification replicate the provisions of Art 101(3), appears to have gained acceptance (Post Danmark, para 42).

The structure of Article 102 therefore differs significantly from that of Article 101. Whilst the latter makes explicit provision for exemption, through a 2-step process (implemented through important exemption regulations), Article 102 has no such provision for exemptions, and it is implied, not explicit. Whilst it is clear that prima facie abuses may be justified, the scope and application of that defence leaves much to be desired.

Abuses are classed as being either exclusionary or exploitative. Exclusionary abuses seek to drive competitors out of the market, and/or exclude them from entering the market, thus indirectly harming competitors through a lack of competition. Exploitative abuses directly harm consumers through a dominant firm’s exploitation of its market power e.g. direct pricing or through inefficiencies. It should be noted that in practice, the Commission’s enforcement action has focussed on exclusionary abuses to the virtual exclusion of exploitative abuses (like excessive pricing, or pure discrimination) outside the internal market area. If it does look at exploitative, it does so in the context of exclusionary abuses. Moreover, there are also internal market objectives to the Commission’s enforcement.

By One or More Undertakings

Article 102 is, therefore, essentially concerned with the control of unilateral behaviour by a single firm. Note, however, that Article 102 also reaches:

(i) agreements concluded by a dominant firm; and

(ii) abuses committed by firms that collectively hold a dominant position.

Therefore, there may be contractual co-ordination that can be challenged under Article 101 and Article 102.

Dominance

(i) Article 102 only applies to undertakings that, singly or collectively, hold a dominant position.

(ii) Dominance essentially comprises the ability to act independently of competitors and customers. Its existence is established on the basis of market shares supplemented by other market factors. A firm may hold a very high market share, and yet not be dominant, because the market is contestable, or a firm may hold not a very high market share, but still be held to be dominant. A high market share is neither necessary, nor sufficient.

Enforcement

In principle, the full range of remedies is available against abusive conduct. Decisions may be adopted under either Article 7 (infringement) or Article 9 (commitments) of Regulation 1/2003. In practice, the majority (over 75%) of decisions since 2005 have been commitment decisions. Article 102 is also directly enforceable in the courts of the Member States. Note that national competition authorities are responsible for over 90% of decisions taken to enforce Article 102. The practical application of the treaty happens mostly at national level. At a national level, there is the possibility of exemplary damages, particularly in the UK.

Theoretical Framework

Objectives

There are a number of competing claims to the purpose of Article 102. It is important to note that each of these purposes apply in each case, and while they will often lead to the same conclusion, there may also be tensions between them. Overall, we can contrast the EU’s objectives with America’s. European policy, in contrast to America, has evinced

(i) greater scepticism about the robustness of markets; and

(ii) greater faith in the abilities of regulators to intervene to correct market failures.

In that framework, there is less concern about the...

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