Chapter 5 Competition Regime Article 102 Notes

Competition regime: Article 102 (A) OVERVIEW OF ARTICLE 102 1. To prove an infringement of Article 102, there must be: * * * * * An abuse; By one/ more undertakings; Of a dominant position; Within the internal market or in a substantial part of it; Having an effect on trade between member states. 2. A non-exhaustive list of potential abuses: * * * * Imposing unfair prices or other trading conditions. Limiting production, markets or technical development. Undue discrimination. Tying. Relationship between Article 102 a nd Article 101 Difference between Article 102 & 101: 1. Art 102 has no requirement for an existence of an agreement/ concerted practice between participants in the market. Conduct by a single co will suffice. 2. Art 102 does not apply to all companies but only those are dominant in a relevant market which is subject to the higher standards of competitive behaviour. Dominant companies must not abuse their dominant position. 3. Art 102 is less certain in its area of application than Art 101. An Art 102 case, on will routinely involve substantial disputes on: * What is the relevant market? To ascertain whether a firm is dominant, it has to consider whether one product is in the same market as another will usually need to be examined in detail. The narrower the market, the larger the market shares will be, and the undertaking is more likely to be found to be dominant. United Brands case - whether bananas were in the same market as other fruits. Held: the relevant market consisted of bananas, so giving United Brands very much higher market shares than the market had consisted of all fruits. * Is a particular player dominant? Once the relevant market has been defined, market shares must be determined. It depends on the availability of reliable statistics. A high market share alone does not equate to market dominance, and additional factors must be considered unless is clear- cut case. * Is the conduct complained of an abuse? Dominant players are permitted (and indeed expected) to compete actively. The line between permissible and undesirable competition - eg, it is hard to distinguish whether a company is having a price reduction following production economies or unlawful predatory pricing. Maritime Belge case- "Articles [101] and [102] do not exist in watertight compartments". This is particularly so in the case of the increasingly important concept of joint /collective dominance (where 2 or more firms together are found to be dominant), even though they would not be dominant individually. 1 (B) HOW DOES ARTICLE 102 EVOLVE? Enforcement of Article 102 Extension of the scope of Article 102 1. In 2004 - Regulation 1/2003 came into force. Art 102 can be enforced by the national competition authorities & the EU Commission. Art 5 allows national authorities to take a number of decisions in relation to an infringement of Article 102 but it doesn't have power to take a decision that there has been no infringement. Where a national authority finds that the conditions for the application of Art 102 are not met, its power is limited to taking a decision that there are no grounds for action. 1. Commission has extended the scope of Art 102 over the years on a case-by-case basis, usually with the support of the ECJ. Eg: 2. The concept of abuse is objective and conduct may be abusive even in the absence of any intent to exploit customers or exclude customers. 3. There is no need for a causal link between the dominant position and the abuse. 4. A number of abuses have been based on what can be seen to be a per se approach, without a need to 2. In 2011 - Commission published demonstrate their actual effect on Best Practices on the conduct of competition (such as predatory proceedings concerning Articles pricing, fidelity rebates, exclusive 101 and 102 of the TFEU (the dealing and margin squeezing). Best Practices). 5. Dominance, abuse, conduct and effect can be in different markets. 3. In 2012 - Commission published its Antitrust Manual of 6. Art 102 applies to collective Procedures (states the internal dominance. An individual can Commission procedures for the abuse a dominant position which it application of Articles 101 and holds collectively with 3rd parties. 102). Best Practices take priority. Review of Article 102 1. In 2005 - Commission published a staff discussion paper on the application of Art 102 (at that time Art 82) to exclusionary abuses. 2. In 2008 Commission published Art 102 Paper to set out the Commission's enforcement priorities in applying Art 102 to exclusionary practices. 3. The Art 102 Paper is not intended to be a statement of the law. It focuses on exclusionary abuses by single dominant companies and is silent on the issues of collective dominance and other types of abuses i.e. nonexclusionary excessive pricing. 7. The scope of Art 102 is uncertain & Commission's apparent extension of Art 102 has created controversy because of the serious consequences of a finding of infringement. (C) DOMINANT POSITION 1. Dominance can exist: (i) on the part of one undertaking (single dominance); or (ii) 2 or more undertakings (collective dominance). Hoffman-La Roche - A dominant position is defined as: "A position of economic strength enjoyed by an undertak ing which enables it to prevent effective competition being maintained on the relevant mark et by affording it the power to behave to an appreciable extent independently of its competitors and customers and ultimately of the consumers." 2 

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