Competition Law Webinar Article 102

Competition Law: Art. 102 TFEU

Clarification on Art. 101:

 Clarification – ICI v Commission was case where ECJ held there was an “oligopoly” or that producers of specialist dyes tended to be oligopolistic in a market with 10 producers with 80% of the market share who raised prices simultaneously in 5 different national markets. See page 967 of Craig & De Burca. There were no easy or ready substitutes for specialist dyes. Found to be concerted practice.

Wood Pulp decision by ECJ:   40 producers of wood pulp who made “quarterly announcements”

of price increases which ECJ held (annulling Commission’s decision) was not concerted practice in violation of Art. 101 but rather normal market behavior.

  ECJ found it was a “group of oligopolies” for each kind of wood pulp. However, the structure of the market and the high degree of “transparency” of prices meant that it functioned as an ordinary market. Producers knew that if they raised prices then they would lose customers to competitors who did not raise prices. Groups outside the cartel held 40% of the market (Para. 116).

  Parties purchasing wood pulp could turn to cheaper wood pulp or alternative products (Brazilian pulp or recycled pulp) which diluted impact of oligopoly (Para 104)

Wood Pulp decision:   “Following that analysis, it must be stated that, in this case,

concertation is not the only plausible explanation for the parallel conduct. To begin with, the system of price announcements may be regarded as constituting a rational response to the fact that the pulp market constituted a long-term market and to the need felt by both buyers and sellers to limit commercial risks. Further, the similarity in the dates of price announcements may be regarded as a direct result of the high degree of market transparency, which does not have to be described as artificial. Finally, the parallelism of prices and the price trends may be satisfactorily explained by the oligopolistic tendencies of the market and by the specific circumstances prevailing in certain periods. Accordingly, the parallel conduct established by the Commission does not constitute evidence of concertation.” (Para. 126)

Article 102 TFEU

Purpose of Art.102 TFEU:

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Article 102 TFEU

  “Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.”

“Such abuse may, in particular, consist in:

  (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

  (b) limiting production, markets or technical development to the prejudice of consumers;

  (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

  (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.”

Case Law

What is a “dominant position”   ___________________

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Case 27/76 United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207:   “dominant position ... relates to a 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, customers and ultimately of its consumers.”

  40 to 45% market share for bananas (plus consideration of other factors) indicated dominance in this case

Case 85/76 Hoffman-La Roche and Co AG v. Commission [1979] ECR 461:   “existence of a dominant position may derive from several

factors which, taken separately, are not necessarily determinative but among these factors a highly important one is the existence of very large market shares”

  ECJ held that, in this case, market share of 43% for B3 vitamins did not indicate dominance but, generally, very large share held for some time indicates dominance.

  Barriers to entry, developed sales network, technological lead, no competitors indicate dominance

Akzo Chemie BV v Commission [1991] ECR I-3359:

 Market share of 50% was very large and indicated dominance

Case C-497/99 P Irish Sugar plc v Commission [2001] ECR I-5333   Irish Sugar had 95% of market for sugar in Ireland

  Press Release: “In the late 1980s Irish Sugar and its subsidiary Sugar Distributors Limited (SDL) sought to restrict competition from imports of sugar from France and Northern Ireland by offering selectively low prices to customers of an importer of French sugar, swapping Irish Sugar's own Siucra brand of packaged sugar for an imported brand and offering selective "border" rebates to customers for packaged sugar that were located close to the Northern Irish border”

  Commission found violation of Art. 102 and imposed €8.8 million fine in 1997. Irish Sugar appealed to CFI to annul Commission’s decision but it affirmed decision. Appeal to ECJ which dismissed appeal.

Press Release [1997] on Irish Sugar:

  “Through its infringements Irish Sugar has been able to maintain a significantly higher price level for packaged retail sugar in Ireland compared with that in other Member States, notably in Northern Ireland, and has been able to keep its exfactory prices, particularly for bulk sugar for "domestic" Irish consumption, amongst the highest in the Community, to the detriment of both industrial and final consumers in Ireland”

Cases T-68 and 77-78/89 Re Italian Flat Glass: Societa Italiana Vetro v Commission [1992] ECR I-1403:

Facts:

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Procedural History:

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Holding:

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Rationale:

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Question:

 What is difference between collective dominance under Article 102 and restriction of competition under Article 101?

Answer:   Cannot simply “recycle” facts from Article 101 to prove

infringement of Article 102 (Italian Flat Glass; Compagnie Maritime)

  Article 102 does not require existence of an “agreement” or coordinated practices whereas Article 101 does

  Can prove collective dominance under Article 102 through “other connecting factors” and an “economic assessment and, in particular, an assessment of the structure of the market in question” (Compagnie Maritime)

  Can prove collective dominance when companies “united by such economic links” or have agreements or IP licenses (Italian Flat Glass)

Question:

  Is dominance, by itself, illegal under Article 102?

Question:

What is “abuse” of a dominant position?

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  Predatory pricing (Akzo – flour)

  Limiting production

  Price discrimination (United Brands - bananas)

  Tying (Microsoft)

 Certain mergers (Continental Can)

  Refusal to supply (Hugin – spare parts for cash registers; Commercial Solvents – raw materials for tuberculosis drug)

  Refusal to share an essential facility (Sealink – port of Holyhead ferry to Ireland; RTE – information on TV schedules)

 Other – list in Art. 102 is non-exhaustive

Question:

 Why is it important to define the relevant product and geographic market?

  You go to the grocery store and see the price of bananas went up 10 euros each. Would you be more likely to buy one of these other fruits or nothing at all:

  Peaches: _____ (seasonal)

 Grapes: _____ (seasonal)

 Apples: _____

 Oranges: _____

Pretend you are either very young or very old. Would your answer change at all?

Case 27/76 United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207:

Facts:

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Procedural History:

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Holding:

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Rationale:

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United Brands (continued): What isthe relevance of peaches and

table grapes?

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What is the relevance of apples and oranges?

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Question:

What was the product market in Case 322/81 Nederlandsche Banden-Industries Michelin NV v Commission [1983] ECR 3461?

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Product Market:  Commission Notice on Relevant Market: “A

relevant product market comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer, by reason of the products’ characteristics, their prices and their intended use.”

Question:

What was the product market in Hugin?

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Question:

What is the meaning of the term, relevant geographic market?

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Geographic Market:

  Territory in which all traders operate in same conditions of competition for the relevant product/service

  Hilti: entire EU unless other factors indicate otherwise

  United Brands: all 6 Member States at time except UK, France, Italy which gave special treatment to imports from own overseas territories so were not part of free market for bananas

  British Telecom: geographic market was UK where it had monopoly on telecom services

 Napier Brown-British Sugar: market was UK due to high transport costs and few imports

Question:

Why is it sometimes important to define the temporal market?

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Commission’s Notice on Definition of Relevant Market

Guidelines on how to define the relevant market:

  Product market and geographic market

 Demand substitutability – SSNIP test

  Supply substitutability

  Potential competition

Commission’s Notice (cont’d):

Commission considers:

 Views of customers and competitors

 Quantitative econometric tests

  Evidence of consumer preferences

  Barriers to entry and costs

 Distinct groups of consumers for product

  How do we know if there is an abuse of a dominant position that violates Art. 102 TFEU?

Four steps in analysis:

  1. Define the relevant market – both the product market and the geographic market over a certain period of time

  2. Decide whether the undertaking (or collection of undertakings in collective dominance) is dominant within that market

  3. Determine whether undertaking has abused its dominant position

  4. Determine whether there are any available defenses, i.e., objective justification that is proportionate

Case 6/72 Europemballage Corporation and Continental Can Co Inc v Commission [1973] ECR 215

Facts:

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Procedural History:

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Holding:

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Rationale:

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Question:  What is a “commitment decision”?

Answer:   Remedy to enforce competition law; a voluntary offer by a

company subject to a Commission prosecution to make changes. The terms of the offer are published in the Official Journal and can be adopted.

  Two types: behavioural commitments (eg to provide a particular good or service) and structural commitments (eg to divest)

  Aside from commitment decisions, the Commission can, as an alternative, make a “prohibition decision” and issue a fine with its decision against the infringing companies

  If a company does not comply with a “commitment decision” it can be fined up to 10% of annual turnover or 5% periodic payment penalties until it complies

Microsoft:   Fined 731 million euros in March 2013 for not

abiding by its commitment decision regarding an internet browser

  Fine was roughly 1% of annual turnover – bit more

Google:   Subject to commitment decision notified in

March 2013 regarding web searches that put competitors in disadvantageous position in search results

 Notification published in Official Journal with opportunity for anyone to submit comments within one month, i.e., by April or May 2013