EU Law - Competition Law
PART 1 - Article 102 TFEU: Misuse of Market Power
The role of EU institutions in competition law:
- European Commission:
- Council of the EU delegated power to the Commission to supervise the
operation of comp law
- Responsible for:
- Development of competition policy
- Investigation of suspected infringements
- Taking decisions on most points of comp law
- Taking action against infringers
- Court of Justice of the European Union:
- The General Court
- When a decision has been taken by the Commission in relation to
comp law, that body/undertaking can appeal the decision to the
General court (Article 263 TFEU procedure)
- ECJ
- Further appeals on point of law from the General Court come here
- When a national court seeks a preliminary ruling on a point of EU
Comp Law from the ECJ (Article 267 TFEU procedure)
Abuse of a dominant position - Article 102 TFEU
Key elements of Article 102 TFEU:
1) Existence of a dominant position
- ECJ case law definition of dominance (United Brands):
- A position of economic strength, ‘market power’, which allows an
undertaking to prevent effective competition in the relevant market
- Test of dominance - when an undertaking can behave independently of
both its customers and its competitors
- Test of substitutability - for defining a (separate/unique) product market (as
shown in United Brands):
, - Demand substitutability (greater weight)
- Whether two products are interchangeable/substitutes for
consumers - consider whether a consumer of product A would buy
product B if the price of product A increased
- Confirmed and quantified in Commission Notice on
Definition of the Relevant Market, which lays out the
substitutability test as being whether a small but lasting
increase in the price of a product (5-10%) would result in
customers switching to available substitutes
- The more substitutability there is, the wider the market is, and the
harder it will be to establish dominance
- Supply substitutability
- Whether the supplier of product A could easily begin to supply
product B
- Affected by barriers to entry - start up costs, regulations...
- Geographic market:
- ‘The area in which the undertakings concerned are involved in the supply
and demand of products or services, in which the conditions are
sufficiently homogeneous and which can be distinguished from
neighbouring areas because the conditions of competition are appreciably
different in those areas’
- Applied in United Brands taking into account the following:
- Transportation costs
- If high, producers in a distant geographic area may
not be able to compete effectively as their product
prices will be higher
- Product characteristics
- Can a product be transported easily? Fragility or
perishability could prevent shipment over long
distances
- Shipment patterns
- Where are the products currently being shipped from
and sold?
- Location of manufacturing facilities
- Assessing whether there’s dominance (after defining product and geographic
markets):
- Market share
- Very large market shares are normally evidence of the existence of
a dominant position - Hoffman-La Roche
, - ECJ stated there is a presumption of dominance where market
share is 50% or more- AKZO Chemie
- So the burden of disproving dominance is on the
undertaking. If below 50% market share, the burden of proof
of dominance is on the Commission
- No clear definition of ‘very large’ market share required for
dominance to be established - 40-45% market share was sufficient
for evidence of a dominant position which made entry for new firms
difficult in United Brands
- Important to note the market share of nearest competitors,
only 16% and 10% in United Brands
- Length of time
- Must be in a strong position for a long period of time to establish
dominance
- Barriers to entry
- More barriers to entry (IP, start-up costs…) make dominance more
likely
- Other factors
- Uneven distribution of capital, technological expertise can make
dominance more likely
- High consumer bargaining power (e.g. very few large customers in
the market) makes dominance less likely
- Joint dominance:
- When multiple undertakings hold a dominant position
- Italian Flat Glass
- Facts:
- 3 Italian flat glass producers had independence from
competitive pressures and impeded competition - held a
dominant position
- Held:
- Although Commission’s decision overturned on appeal,
General Court stated there was nothing to prevent multiple
entities from holding a dominant position in a specific market
- Substantial part of the internal market:
- Article 102 TFEU requires an undertaking to be dominant ‘within the
internal market or a substantial part of it’
- Can be geographically small as long as it is economically significant
PART 1 - Article 102 TFEU: Misuse of Market Power
The role of EU institutions in competition law:
- European Commission:
- Council of the EU delegated power to the Commission to supervise the
operation of comp law
- Responsible for:
- Development of competition policy
- Investigation of suspected infringements
- Taking decisions on most points of comp law
- Taking action against infringers
- Court of Justice of the European Union:
- The General Court
- When a decision has been taken by the Commission in relation to
comp law, that body/undertaking can appeal the decision to the
General court (Article 263 TFEU procedure)
- ECJ
- Further appeals on point of law from the General Court come here
- When a national court seeks a preliminary ruling on a point of EU
Comp Law from the ECJ (Article 267 TFEU procedure)
Abuse of a dominant position - Article 102 TFEU
Key elements of Article 102 TFEU:
1) Existence of a dominant position
- ECJ case law definition of dominance (United Brands):
- A position of economic strength, ‘market power’, which allows an
undertaking to prevent effective competition in the relevant market
- Test of dominance - when an undertaking can behave independently of
both its customers and its competitors
- Test of substitutability - for defining a (separate/unique) product market (as
shown in United Brands):
, - Demand substitutability (greater weight)
- Whether two products are interchangeable/substitutes for
consumers - consider whether a consumer of product A would buy
product B if the price of product A increased
- Confirmed and quantified in Commission Notice on
Definition of the Relevant Market, which lays out the
substitutability test as being whether a small but lasting
increase in the price of a product (5-10%) would result in
customers switching to available substitutes
- The more substitutability there is, the wider the market is, and the
harder it will be to establish dominance
- Supply substitutability
- Whether the supplier of product A could easily begin to supply
product B
- Affected by barriers to entry - start up costs, regulations...
- Geographic market:
- ‘The area in which the undertakings concerned are involved in the supply
and demand of products or services, in which the conditions are
sufficiently homogeneous and which can be distinguished from
neighbouring areas because the conditions of competition are appreciably
different in those areas’
- Applied in United Brands taking into account the following:
- Transportation costs
- If high, producers in a distant geographic area may
not be able to compete effectively as their product
prices will be higher
- Product characteristics
- Can a product be transported easily? Fragility or
perishability could prevent shipment over long
distances
- Shipment patterns
- Where are the products currently being shipped from
and sold?
- Location of manufacturing facilities
- Assessing whether there’s dominance (after defining product and geographic
markets):
- Market share
- Very large market shares are normally evidence of the existence of
a dominant position - Hoffman-La Roche
, - ECJ stated there is a presumption of dominance where market
share is 50% or more- AKZO Chemie
- So the burden of disproving dominance is on the
undertaking. If below 50% market share, the burden of proof
of dominance is on the Commission
- No clear definition of ‘very large’ market share required for
dominance to be established - 40-45% market share was sufficient
for evidence of a dominant position which made entry for new firms
difficult in United Brands
- Important to note the market share of nearest competitors,
only 16% and 10% in United Brands
- Length of time
- Must be in a strong position for a long period of time to establish
dominance
- Barriers to entry
- More barriers to entry (IP, start-up costs…) make dominance more
likely
- Other factors
- Uneven distribution of capital, technological expertise can make
dominance more likely
- High consumer bargaining power (e.g. very few large customers in
the market) makes dominance less likely
- Joint dominance:
- When multiple undertakings hold a dominant position
- Italian Flat Glass
- Facts:
- 3 Italian flat glass producers had independence from
competitive pressures and impeded competition - held a
dominant position
- Held:
- Although Commission’s decision overturned on appeal,
General Court stated there was nothing to prevent multiple
entities from holding a dominant position in a specific market
- Substantial part of the internal market:
- Article 102 TFEU requires an undertaking to be dominant ‘within the
internal market or a substantial part of it’
- Can be geographically small as long as it is economically significant
