Article 82

Dominant position

Continental Can

• the concept of a dominant position is when they have the power to behave independently, which puts them in a position to act without taking into account their competitors, purchasers or suppliers

• it happens because of their share of market, share of market combined with technical knowledge, raw materials or capital
  

• have to determine prices or to control production or distribution for a significant part of the products in question
  

United Brands

• 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, costumers and ultimately consumers

Market Definition

In Continental Can, it defined two tests:

• First, it has to define the relevant market and give reasons for its selection

  • The product or service

    • SSNIP test

      • Raise prices by 5/10% and if so many customers would switch to other products that the original price rise would be unprofitable, then it’s not in the market.

    • Relevant market is defined by substitutes

    • United Brands

      • Narrowly defined it as bananas only as other products are not substitutable

  • The geographic area

    • The geographic market must be wide enough to include ‘a substantial part of the common market’

    • Michelin I

      • Fined the dutch subsidiary just in Netherlands

      • ECJ said since:

        • I) its activities were concentrated in the Netherlands

        • Its main competitors also carried on activities there through local subsidiaries

        • The alleged abuse related to discounts given to dealers there

        • Dealers there obtained their supplies only from suppliers operating there

    • Can use SSNIP here to if they buy from elsewhere

• Assess the firm’s dominance therein

  • Barriers to entry is everywhere

  • Vitamins
    

    • A finding of dominance solely on the basis of market % in the 80s
      

  • Akzo
    

    • A stable market share of 50% or more raised a rebuttable presumption of dominance, although it added that the commission was right to consider other factors.
      

Joint Dominance

Joint dominance is a legal concept with no direct equivalent in economics. Broadly speaking, joint dominance can be thought to occur when a small number of large firms in a market are able to coordinate their actions and maintain prices above the competitive level. The coordination need not be explicit (tacit collusion). Successful co ordination requires not only being able to reach agreement on prices or output levels and to monitor them but also that some punishment strategy is available to deal with ‘cheating’.

There is no agreed test for JD. The commission view the following factors are typically thought to facilitate coordination

a)      high concentration levels

b)      stable and symmetric market shares

c)      similarity of cost structures

d)     stagnant demand

e)      inelastic demand

f)       homogenous products

g)      low levels of technological change

Collective Dominance

In the EU competition policy newsletter, it states ‘the question to assess in cases concerned with collective dominance is likelihood or tacit co ordination in the market’

a)      It is sufficient for oligopolists to act, independently, in ways which reduce competition

b)      Collective dominance is an important instrument in merger control.

Article 82 refers to an abuse ‘by one or more undertakings’ of a dominant position (Italian flat glass)

• The need to establish economic links would make it difficult for the commission to use the concept of joint dominance where it is most needed where there are no links of ownership, contract or concerted practices but each of a very small number of suppliers realizes.
  

France v Commission

• ECJ confirmed that there might be a joint dominance when two firms, merged undertaking and one independent of it, became  single entity in view of the links between them.

• There was a strong burden of proof to show that the merging firms would act as a single entity with its competitors

Gencor

• the commission condemned a merger that would lead immediately to the merging firms selling 30/35% of the world of the platinum and precious metals.

• On appeal CFI confirmed the commission’s finding of collective dominance when the two remaining firms were likely to act as a single entity, whether or not there were links between them.

Substantial part of the common market

Art 82 prohibits an abuse of a dominant position within a substantial part of the common market.

• even if dominance is established in a global market, abuse only within the common market is forbidden

Abuse in a linked market

• commission condemned an abuse in a market over which tetra pak was not found to be dominant when the market was linked to one over which it was found to be dominant

• Tetrapak was found to be dominant over the supply of cartons for milk and juice and machinery

• It also supplied 55% of the cartons for other milk and juice and the machines but was not found to be dominant even though AKZO said it is presumed dominance at 50%+.