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Law Notes Competition Law Notes

Article 102 Tfeu Notes

Updated Article 102 Tfeu Notes

Competition Law Notes

Competition Law

Approximately 389 pages

Competition Law notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB and BCL competition law cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Canada, Hong Kong or Malaysia (University of London).

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Article 102 TFEU – Abuse of dominant position

ARTICLE 102 TFEU

The big question in this field is whether abuse of dominance is based on an economic approach or a rules-based formalistic approach – companies would prefer a rules-based approach for certainty purposes (although they could plausibly hire economists to muddy the waters where the burden of proof is on EC). EC will often prefer a rule-based approach too – shorter process to a finding of abuse of dominance.

Article 102 TFEU can be broken down into four questions:

  1. Is there a dominant undertaking (DU) or dominant group of undertakings?

  1. Is there an undertaking?

  2. If so, does the undertaking occupy a dominant position?

  1. Is this dominant position within the internal market or a substantial part of it?

  2. Is this dominance being abused?

  1. Is there an abuse of dominance?

  2. Can this abuse be justified by:

  1. An objective justification; or

  2. Efficiencies?

  1. Could this abuse of dominance affect trade between Member States?

Article 102 TFEU is concerned with unilateral conduct on the part of DU.

1 – Dominant undertaking?

U must be dominant for Article 102 TFEU to apply. The shift to abuse of dominant position is easily done by DU when they don’t realise they are dominant.

1.1 – Undertaking?

The EU legislator did not define ‘undertaking’– it is an ambiguous concept.

The Court has adopted a functional definition of ‘undertaking’ – is the entity active on the market?

  • Hofner [1991]: ‘Undertaking’ encompasses every entity engaged in economic activity, regardless of legal status of entity and way it is financed.

  • Functional definition relies on nature of activity rather than form of entity.

  • In SAT [1994], Euro-control financed by contributions of Member States which established it, carrying out public/state tasks in the public interest – activities were not of an economic nature.

  • Offering goods and services on a given market is characteristic of economic activity (FENIN [2006]).

  • Distinguish between (a) economic act of selling, and (b) buying and distributing – only (a) indicates that X is an undertaking.

  • Nature of the purchasing activity must be determined according to the subsequent use of the purchased goods.

  • AG Maduro: We should establish whether the State-owned organisation would be guided solely by considerations of solidarity, intended to exclude all market considerations – if so, not an undertaking.

The fact firm X is state-owned will not matter where X is engaged in economic activity.

The functional approach requires each activity to be evaluated in its context (SELEX [2009]) – while Euro-control did not constitute an ‘undertaking’ in SAT [1994] in relation to airspace management, Euro-control could be an ‘undertaking’ in relation to other activities.

  1. Employees:

  • Conduct of employees is incorporated into employer’s economic unit – employees do not constitute undertakings in themselves (Jean Claude Becu [1999]).

  1. Subsidiaries:

  • Conduct of subsidiary can be imputed to the parent company, even if the subsidiary has a separate legal personality (Telefunken [1983]).

  • Particularly so where subsidiary does not decide independently on its own conduct, but carries out parent company’s instructions.

  • Viho [1996]: Parker Pen and its subsidiaries a single economic unit – subsidiaries did not enjoy real autonomy in determining course of action on the market.

  • Where parent company has 100% shareholding in a subsidiary, there is a rebuttable presumption of decisive influence over subsidiary’s conduct (AKZO [2009]).

  • Parent company must show that its subsidiary acts independently on the market to avoid liability.

NOTE: Analytically in an Article 102 TFEU PQ, it makes sense to deal with the issue of whether there is an undertaking first – without an undertaking, there cannot be an abuse of dominant position, and thus even questions of jurisdiction and market definition wouldn’t arise.

1.2 - Dominant position?

Dominance is about market power – we care about market power once U ‘has the ability to act independently of normal competitive pressures to an appreciable extent’ (United Brands [1978]). This means that market definition is very important.

Where U’s market share exceeds 50%, there is a rebuttable presumption of U holding a dominant position (AKZO [2009] – although also see Hoffmann-La Roche [1979] for a qualification of that).

Commission Guidance on its enforcement priorities in applying [Article 102 TFEU] to abusive exclusionary conduct by dominant undertakings (‘Article 102 TFEU Commission Guidance’ = 102CG) gives a number of factors to consider in assessing a possible dominant position:

  1. Market position of DU and its competitors:

  • United Brands [1978]market conditions:

  • Consumers showed preferences for UB bananas despite price differences between labelled and unlabelled bananas.

  • Strength and number of U’s competitors a key consideration; UB’s market share was several times greater than its closest competitors.

  • Was significant that, whatever losses UB made, customers continued to buy goods from them.

  • Market share provides a useful first indication of market structure, however EC interprets market shares in light of relevant market conditions.

  • AKZO [2009] presumption of dominance if market share is 50%+.

  • Dominance unlikely if market share is below 40% - Virgin/BA the only case of dominant position being found with a sub-40% market share.

  • Hoffmann-La Roche [1979]: Very large market shares sustained for some time, save in exceptional circumstances, are evidence of dominance.

  • Particularly relevant in dynamic/fast-developing markets.

  • NOTE: Thus, a high market share (even one engaging the AKZO presumption) would probably not be enough if only temporary.

  1. Expansion or entry (i.e. potential competitors):

  • U can be deterred from increasing price if expansion of entry is timely, likely and sufficient.

  • Likely:

  • Sufficiently profitable for competitor or entrant, considering barriers to expansion/entry, likely reactions...

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