Article 82 give 4 examples of abusive exploitation

• directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions

• limiting production, markets or technical development to the prejudice of consumers

• applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage

• 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

Vitamins (Roche)

• the concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which influences the structure of a market where the degree of competition is weakened…

Reduction of competition prohibited by art 82

Continental can  , ECJ said that conduct leading to substantial reduction of competition might infringe art 82.

Discrimination

Single branding to exclude competitors of the dominant firm

The extreme example of a single branding is agreeing to obtain a product only from a single supplier or to handle only in a single brand.

Hoffman la roche (vitamin) v Commission

• obligations to buy a firm’s total requirements or a large part of them and loyalty discounts foreclose competition

  • they make it harder for smaller makers of vitamins, who cannot supply a large percentage of a large customer’s requirements, to compete

• they come within the examples of abuse listed in art 82

  • an undertaking that is dominant on a market and ties purchases (even at their request) by an obligation or promise to obtain all or most of their requirements exclusively from the undertaking is abuse of dominant position.

  • They are applying dissimilar conditions to equivalent transactions… etc.

• ECJ distinguished quantity discounts, which were legal, from loyalty rebates which are not.

Michelin II

• A system of non individualized, linear volume rebates offered by Michelin on the French Market.

  • As an extra bracket of discount was reached, the higher discount was applied to all the dealer’s sales over the period, including those made months before.

• the CFI denied that all loyalty discount schemes with a reference period exceeding 3 months were abusive but added that the longer the period of reference, the more the scheme was likely to foreclose.

• “For the purposes of establishing an infringement of Article 82 EC, it is sufficient to show that the abusive conduct of the undertaking in a dominant positin tends to restrict competition or in other words, the conduct is capable of having that effect”

Van den bergh foods

• supplier dominant in the manufacture and supply of ice cream, supplied small retailers with freezer cabinets free of charge but required them to be used only for its brand of ice creams

• at first allowed (comfort letters) then revoked when they didn’t comply and let them use the fridge or buy from others

British Airways v Commission

• the commission condemned another system of discounts where the incentives increased exponentially if a travel agent increased it sales over those in an earlier period because the additional bonus would apply not just to additional sales but to all sales.

  • “it is sufficient to demonstrate that the abusive conduct of the undertaking in a dominant position tends to restrict competition, or  that the conduct is capable of having or likely to have, such an effect”

Discrimination against competitors downstream

A firm dominant in the upstream market, A, competes with its customers downstream in market B.

Irish Sugar

• dominant supplier of industrial sugar gave a discount to customers who did not compete with it downstream in selling retail sugar but did not give the discount to competitors in the retail market

Discrimination by firms enjoying special or exclusive right

Portuguese airports

• accepted that quantity discounts might be acceptable but

  • “as a result of the thresholds of the various discount bands, and the levels of discounts are enjoyed by only some trading parties, giving them an economic advantage which is not justified by the volume of business they bring or by any economies of scale they allow the supplier to make compared with their competitors a system of quantity discounts leads to the application of dissimilar conditions to equivalent transactions”

• Court added that only 2 Portuguese carriers could benefit from the discounts and concluded that they were discriminatory and infringed article 82.

Even though in Hoffman la roche  and in Michelin II  it suggests that loyalty discounts are a per se offence, some judgments and decisions have said that where exclusive or near exclusive supply has neither an actual or potential effect on the market, it is not abusive. (Virgin/BA case)

Tying

Extending market power to another market

Microsoft Corporation

• the commission used  a wide definition of tying

• commission found that it had abused the dominant position by selling its pcs with a streaming media player already built in it

  • this closed other markers of streaming media players, which are different products from the operating system

• Commission not consider the efficiencies alleged by Microsoft

Compatible consumables

Commission accepted that it is not abusive to preserve the reputation of complex machines by ensuring that it used only with compatible consumables.

• ties to ensure a technically satisfactory exploitation of licensed technology are not contrary to Article 81 (1) (Exemption from TTBER)

Hilti

• the commission condemned unilateral tying under article 82

• it alleged that the nail gun, the nails and the cartridges that enabled them to be inserted easily were in 3 distinct markets and that they have extended its dominance over the gun to the nails and cartridges.

Telemarketing

• after hilti’s decision the ECJ gave a ruling on telemarketing
  

• CLT stopped accepting spot advertisements that indicated  phone # to be used by the public to obtain further info, unless the answering service being used given for Belgium was that of its own subsidiary

• CLT’s alleged conduct can be analyzed as a tie.

Commercial Solvents

• an unjustified refusal by a dominant firm to supply raw materials to a former competitor down stream in order to reserve for itself the market for a final product may infringe Art 82.

Tetra Pak II

• Commission found that tetra pak was dominant over for many different types of cartons and one type they’re not dominant in

• They required customers to who it supplied machines to use only tetra pak cartons and to obtain them from the tetra pak subsidiary within the MS

Refusal to deal

Commercial Solvents

• they enjoyed a dominant position in the common market and they are the only producer in the world to make something important

• refused supply to competitor in the common market

• infringed, forced them to supply

United Brands

• united brands reduced supplies to a distributor

  • the distributor selling competitors product and UB say they are selling fewer and fewer of theirs

• ECJ considered that UB’s conduct had interfered seriously with the independence of small and medium sized firms. It would discourage new entry and so on.

Obligation to license

Volvo

• independent repairers wanted to import from Italy spare body parts for Volvo cars but Volvo held a registered design in the UK and was not prepared to grant a license for royalty

• It seems that the proprietor of an exclusive right who is held to enjoy a dominant position may be required either to license third parties or to supply them with the protected product on terms that are not ‘unfair’… whatever that means.

Magill

• 3 television stations transmitting programmes

• Magill started to publish a comprehensive guide to the 3 stations, all 3 sued it

• Commission adopted a decision that this amounted to an abuse of a dominant position and required each to grant magill a copyright licence.

Bronner

• the duty to supply under the community law is often referred to by the courts as the essential facilities doctrine. Jacbos said it should be as narrowly construed as possible. He said:

  • First, an obligation to supply even when it is possible for 2 undertakings to use a facility, reduces the incentive to make the original investment

  • Secondly, it reduces the incentive to duplicate when this is practicable

  • Thirdly, since the holder does not want to grant access, someone will have to establish the amount of compensation.

• Only use it when there is a serious bottleneck and no competition downstream that there should be a duty to supply.

• Bronner wanted mediaprint’s home delivery service for its paper

  • ECJ held it is not enough to show that use of the facility would be desirable, it must be necessary

  • They can sell it in many ways and even though home delivery is desirable, it is not necessary.

Predatory Pricing

Pricing is treated as predatory only prices that are very low. They have mostly accepted the Areeda/Turner test of predation which is: sales below average variable cost are usually predatory.

• Average variable cost is the average cost of taking on a new customer.

Concrete roofing tiles

• they did not sell at below average variable cost

• its market was local and it reduced prices locally whenever a new firm started to supply.

• Even its most discounted areas, it is not selling below AVC

• The commission still concluded that there was still predation because it was selective price cutting jut where a new competitor entered the market with an intent to exclude and discourage others.

Akzo

• condemned predatory pricing largely on the basis of internal memoranda and threats by akzo to deter a smaller firm

In cyclical industries, it is normal to sell at below average total costs during the downturn of business cycle and recoup during the upturn.

Tetra pak II

• commission followed the statement that prices below average variable costs are predatory without taking into account the reasons for the rule

Unfair competition

Unfair prices

United Brands

• the commission found that UB prices for certain countries were excessive on 3 grounds:

  • exceeded prices in different countries

  • they were 20-40% higher than unbranded bananas and only about half of this difference could be justified by differences in quality and advertising

  • prices for the bananas were higher than for other brands

Integration of the common market

United Brands

• their price discrimination enabled them to be dominant to maximize its profits by charging what each geographic market will bear.

• An example of the unfair exploitative prices which article 82 was originally intended to control.

Article 82 also has to affect trade between MS

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