Flashcards
Competition Law II
Cards in this deck (31)
- 1What must be established for there to have been an infringement on art 102?-one or more undertakings are in a dominant positition within the internal market or a substantial part of it. requires a determination of the relevant market where the undertaking is operating and its dominance therein
-conduct being investigated amounts to an abuse of the dominant position of that undertaking
AND
-abuse mayaffectf trade between MS. - 2relevant marketeconomy concept requiring complex economic analysis
ID of the relevant market provides a framework within which to determine whether or not the undertaking under investigation has a dominant position which it has abused.
Does so by enabling Commission to determine which products are in competition in which geographical area within the relevant time frame
then enables commission to determine economic constraints on the undertaking and from that to determine whether or not it has dominate position.
see Notice on the def of relevant market for the purposes of community Competition Law.
Necessary to analyze both product (Relevant Product Market (RPM) and geographic dimensions of that market (Relevant geographic market (RGM). time is also relevant (Relevant Temporal market (RTM) - 3Relevant Product Market (RPM)consists of the products or services which are in competition.
see Hilti
essential elements:
-Interchangeability (product substitution)
-Demand substitutability
-Supply Substitutability
-Aftermarkets - 4Interchangeability or product substitutionessetnial in determining the RPM is the extent to which products are interchangeable. Those products which are interchangeable are in competition with one another and = relevant product market. is determined by looking at demand (analyses this from the perspective of consumers) and supply (analyses from the perspective of manufacturers)
- 5Demand Substitutabilityfocus is on the consumer: as per the Notice on the Definition of Relevant Market.
RPM comprises all those products/services which are regarded as interchangeable by the consumer, by reason of the product's characteristics their prices and their intended use.
If consumers will readily switch from one product to another they will both form part of the same product market.
re. united Brands Co. - 6Cross elasticity of demandlooks at the degree to which demand for on e product changes in response to a change in the rice of another product. if demand of rate first product increases in response to a rise in the price of the second product, there is said to be hight cross elasticity of demand and the two are considered to be in competition.
- 7Commission Notice on the Definition of the Relevant Market test: SSNIP testlooks at the effect of a small but significant (5-10%) non transitory (permanent) increase in price.
if a sufficient enough number of consumers would switch to another product to make the price reis unprofitable, the identified relevant product market to which the test was applied will have been too narrowly defined. The relevant product market will have to be widened to include more products and these should be applied again. the process repeats until the price rise is found to remain profitable. - 8Supply Substitutabilityto establish market dominance, it may also be necessary to examine supply substitutability, commission defines it in the defining of the relevant market of the purposes of community competition law as:
means that suppliers are able to switch production to the relevant products and market them in the sort term without incurring significant additional costs or risks in response to small and permanent changes in relative prices.
if switch is easy, unlikely that original manufacturer is dominant in the market.
see: Euroemballage Corn.
analysis of a market on the basis of supply substitutability will often produce the same result as an analysis based on demand substitutability however the commission need only establish that one of these forms of substitutability exists in order to find that the products fall within the same product market. - 9Aftermarketscomplementary products as spare parts or 'consumables'. parts are often replaced ink cartridges for eg.
in determining the RPM it is necessary to consider whether the complementary products form part of the main market, or are part of the aftermarket. if in aftermarket, then an undertaking which is not dominant in the primary market may be dominant in the aftermarket. Thus the commission may look at the aftermarket to establish whether dominance exists in that market specifically.
eg Hilti represents three separate markets.
also see Hugin - 10Relevant Geographic Market (RGM)second dimension of the relevant market = geographical area. Art 102 TFEU relevant market must be within the common market or in a substantial part of it.
United Brands court referred to the RGM as a clearly defined geographic area in which the product is marketed and where the conditions of competition are sufficiently homogeneous for the effect of the economic power o ht undertaking concerned to be able to be evaluated.
France, Italy, UK excluded from region due to outside trade agreements.
def as per Definition of Relevant Market for the Purposes of community Competition Law: relevant geographic market comprises the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighboring areas because the conditions of competition are appreciably different in those areas. - 11Relevant Temporal Market (RTM)embodies the relevant markets time dimensions. often treated as part of the RPM and RGM
eg: commission did not treat time as a distinct dimension of the relevant market in tits Notice on the definition of relevant market for the purposes of community competition law. yet time is significant
see: Benzine - 12Market DominanceUnited Brands defined dominance: position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, and ultimately its customers.
- 13Collective dominancewhen different undertakings act together. see Italian Flat Glass
collective dominance cannot be established solely by the existence of economic links. additional evidence was necessary in order to prove that he undertakings in question were presented on the market as a single entity. - 14Factors for establishing dominanceEU competition law does not consider that market dominance in itself achieved through such things as successful invention or research and development is wrong, however art 102 acts to protect the operation of the market if there is some abuse of dominant position.
-Market Share
-Intellectual property rights
-Superior Technology
-wealth of capital as a barrier to entry
-vertical integration
-sophisticated distribution and sales network
-brand identification - 15Market Sharerelative share of the market that it has, undertaking which has 100% of the market share is obviously dominant
98% = dominant i.e. Tetra Pak Rausging SA
70% is dominant i.e. Intel Corporation
Akzo Chemie BV v Commission held that: very large shares are in themselves and save in exceptional circumstances evidence of the existence of a dominant position. i.e 50% and up. or significant portions of a stratified market. - 16Intellectual property rightslegal factors such as the protective effect of IP rights may give rise to a dominant position. Hugin= only company in the UK that manufactured spare parts for Hugin cash registers because the design of the register was patented. Tetra pal, company had an exclusive patent license over the design of relevant cartons. Both eg respective IP rights made it difficult for undertakings to enter markets, reduced competition.
- 17Superior TechnologyCommission and Court take view that superior, technology can provide a peer base to an undertaking and insulate it from market forces, make it difficult to compete with.
see: Hoffman-La Roche - 18Wealth of capital as a barrier to entryaccess to large amounts of capital could indicate dominance and be capable of indicating abuse if it is used to create a barrier to entry to the relevant market for other undertakings.
eg. predatory pricing policies, involving deliberately lowering prices simply to drive out smaller rivals can be undertaken by wealthy undertakings to control the market as they can afford to reduce prices significantly. smaller undertakings are forces out of market.
if move to below cost price is done, court and commission look to dominance abuse, i.e. if there is no other objective than to drive out the competition.
see Akzo - 19Vertical Integrationthe control over the process of bringing a product into the market form production or growth to distribution to the ultimate sale to consumers. If an undertaking can control the whole process it can make it difficult for rivals to break into the chain at any stage.
United Brands is an example, Vertical integration allowed United Brands to quickly market bananas across world. - 20Sophisticated Distribution and Sales Networkvariation of vertical integration
eg. Hoffmann-La Roche had a highly sophisticated sales network. clauses in companies contracts with distributors were found to present practical barrier to entry into the market by rival undertakings.
Eg. English clause, allowed Hoffmann-La Roche's distributors to buy from rival suppliers when the rivals offered prices lower than Hoffmann-La Roche, provided that he distributors gave HLR the marketing information about its rivals. This enabled the company to match lower prices. Commission argued successfully that he effect of the clause was to close the market to rivals. HLR could always be in a position to match the lower prices and could continue to do so until the rival attempt to break back into market failed. - 21Brand Identificationover time consumers may associate a brand name with a product and often become unwilling to try alternative products.
United Brands, commission established that consumers can come to associate bananas with the United Brands Chiquita trademark as a result of heavy marketing by United Brands - 22Abusive Behaviorthere must be an abuse of a dominant position. any behavior by a dominant under tang that is designed to exclude or drive a competitor from the market will be held to be abusive as will any behavior that seeks to exploit consumers or take unfair advantage in some way of the dominant position.
eg:
-Refusal to supply
-essential facility doctrine
-predatory pricing
-excessive prices
-discounts and rebates
-'Tie-in' agreements
-Unfair terms - 23Refusal to Supplyabusive where it is done without any objective economic reason so sot reduce competition.
Company is justified economically in refusing to supply a company that is not creditworthy, but in refusing to supply simply as rivalry = abusive behavior. - 24Essential Facility Doctrinesee B&I Line plc v Sealink
dominant undertaking which both owns or controls and itself uses an essential facility i.e. then refuses its competitor access to that facility or grants access to them only on terms less favorable than those which it gives its own services, thereby placing competitors at a competitive disadvantage against art 102 if other conditions are met. - 25Predatory Pricingcharging excessively low pricing abusive because the dominant undertaking uses its financial strength to fund the price its and drive rival out of the market,
found where:
-price has been pushed below cost price
OR
-intention in price reduction has simply been to remove competition.
(same result essentially) - 26Excessive Pricespricing beyond what is reasonable pricing in certain areas. see Unite Brands. charging a price which is excessive because it has no reasonable relation to the economic value of the product supplied would be such an abuse.
- 27Discount and Rebatesgranting rebats = abuse when they have effect of stopping competitors from entering the market because the competitors cannot match the reductions embodied in the rebates.
Hoffman-La Roche allowed fidelity rebates on its prices in return for consumers only buying relevant products only from them. Court explained: fidelity rebate unlike quantity rebates exclusively linked with the volume of purchases from purdecre is designed through the grant of a financial advantage to prevent customers from obtaining their supplies from competing producers. - 28Tie-in agreementsagreements where the dominant undertaking agrees to supply someone which is usually a distributor only if that person agrees to accept further goods or supplementary conditions, these can amount than abuse.
see Hilti and Microsoft
Microsoft established criteria have to be fulfilled in order for bundling to amount to an abuse under art 102
-tying and tied goods must not be within the same product market
-undertaking must be dominant in the tying product market
-customers get no choice whether to accept the tied product with the tying product
AND
-tying closes out any competition
if all fulfilled = ABUSE! - 29Unfair Termssee SABAM
terms must go beyond what is absolutely necessary to attain objective. - 30May Affect Inter-state tradefinal requirement under art 102:
abuse of the dominant position may affect trade between MS.
See: Leyland
British Leyland established that here is not need to establish that the abuse has had an effect on trade between MS at the relevant time.
Sufficient that it may affect such trade. - 31Fines and Damagespowers to impose fines under REG 2003/1 apply equally to infringements or art 102. The provision son directive 2014/104 concerning actions for damages are also applicable to infringements of art 102.