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The Effects Based Approach To Competition Law Notes

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Competition Law Reading Seminar 2: The effects-based approach to competition law 'Commission Guidance on its enforcement priorities in applying article 82 to abusive exclusionary conduct by dominant undertakings'- (3 rd December 2008) http://ec.europa.eu/competition/antitrust/art82/index.html

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This is a guidance note on the commission's priorities for enforcement (no legal effect though!),. It applies to exclusionary conduct (types mentioned here are exclusive dealing, tying and bundling, predation, refusal to supply, and margin squeeze) by dominant undertakings. Commission will be most likely to take action where an abusive practice harms consumers most (economic approach). The main point is not to protect competitors but consumers, and will not act unless there is 'cogent and convincing' evidence that the exclusion will harm consumers. Traditionally exclusionary conduct has been taken to mean 'foreclosure' of rivals, leading to impairment of effective competition. In this guidance, commission now speaks of 'anticompetitive foreclosure' instead. This isn't just change in terminology: Commission requires that the exclusion has a negative effect on consumers e.g. higher prices or reduced choice. In assessing this the commission will conduct a 'counterfactual exercise' i.e. asking what the situation would be but for the exclusionary conduct. "The Commission's experience suggests that dominance is not likely if the undertaking's market share is below 40% in the relevant market. However, there may be specific cases below that threshold where competitors are not in a position to constrain effectively the conduct of a dominant undertaking, for example where they face serious capacity limitations. Such cases may also deserve attention on the part of the Commission." Pays a lot of attention to non-transitory market share as an indicator of the potential harm that abusive practices could or do cause, and hence which cases merit the most critical attention. Exclusive dealing/rebates: The commission shifts away from a 'per se' approach to rebates to an analysis of economic effects, asking (in the Intel case, which occurred was the first case after this paper was published) whether an equally efficient competitor of the dominant company could compete, given the discounts offered by the dominant company, i.e. would an equally efficient competitor have to cut prices to below AAC to compete. NB where the cumulative effect of exclusive purchasing agreements prevent competitors from entering the market or expanding, to the detriment of consumers as a whole, then such cases will be a priority for the commission. The commission will take action where tying and bundling occurs where (1) the products are distinct, and (2) the practice is likely to lead to anticompetitive foreclosure. Commission expects a greater risk of anticompetitive foreclosure where tying or bundling is part of a lasting strategy. In the case of bundling, the risk of anticompetitive foreclosure is likely to be greater where a firm holds a dominant

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