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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

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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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