4.1 Elements
Under 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 prohib-ited as incompatible with the internal market in so far as it may affect trade between Member States.
To establish the abuse of dominance, the following is required:
320 E.g. Commission Regulation 330/2010 of 20 April 2010 on the application of Art. 101 (3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices, OJ L 102, 23.4.2010, pp. 1–7.
321 E.g. Commission Regulation 461/2010 on the application of Art. 101 (3) of the Treaty on the Func-tioning of the European Union to categories of vertical agreements and concerted practices in the motor vehicle sector, OJ L 129, 28.5.2010, pp. 52–57.
• 1) the underlines must be committed by undertakings in the context of competition law;
• 2) one or more undertakings must have dominant position;
• 3) the dominant position must be held within the internal market or a sub-stantial part of it;
• 4) the undertaking or undertakings must abuse this dominant position;
• 5) effect on inter-State trade.
Ad 1) We have already covered the concept of undertaking in Chapter I, there-fore we are now just repeating the definition, namely any entity engaged in an economic activity, regardless of the legal status of the entity or the way in which it is financed, is an undertaking.
Ad 2) A dominant position is 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.322 Such a position does not preclude some competition, which it does where there is a monopoly or a quasi-monopoly, but enables the undertaking which profits from it, if not to determine, at least to have an appreciable influence on the con-ditions under which that competition will evolve, and in any case, to act largely in disregard of it, so long as such conduct does not operate to its detriment.323
Two or more undertakings hold a collective dominant position if the undertak-ings involved, because of factors giving rise to a connection between them, are able to adopt a common attitude and act on the market to a considerable extent independently of their competitors, their customers, and also of consumers.324
Three cumulative conditions must be met in order to establish collective dom-inance: firstly, each member of the dominant oligopoly must have the ability to know how the other members behave in order to monitor whether or not they are adopting the common policy. Secondly, the situation of tacit coordination must be sustainable over time, that is to say, there must be an incentive not to depart from the common policy on the market; thirdly, the foreseeable reaction of cur-rent and future competitors, as well as of consumers, must not jeopardise the re-sults expected from the common policy.325
322 Judgement of 14 February 1978 in Case C-27/76, United Brands Company and United Brands Continental BV v Commission of the European Communities, [1978] ECR 207. at 65.
323 Judgement of 13 February 1979 in Case C-85/76, Hoffmann-La Roche & Co. AG v Commission of the European Communities, [1979] ECR 00461. at 39.
324 Judgement of 31 March 1998 in Joined Cases C-68/94. and C-30/95, France and Société commer-ciale des potasses et de l’azote (SCPA) and Entreprise miniere et chimique (EMC) v Commission of the European Communities, [1998] ECR 1375. at 221.
325 Judgement of 26 January 2005 in Case T-193/02, Laurent Piau v Commission of the European Com-munities, [2005] ECR II-00209. at 111.
A dominant position must be distinguished from parallel courses of conduct which are peculiar to oligopolies in that in an oligopoly, the courses of conduct interact, while in the case of an undertaking having a dominant position, the conduct of the undertaking is to a large extent determined unilaterally.326
In order to establish the existence of dominant position, the first step is to de-fine the relevant market.327 The relevant market combines the product market and the geographical market. The 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, while the relevant geographical market is the area in which the un-dertakings concerned are involved in the supply and demand of products or ser-vices and in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas.328
Once the relevant market has been defined, the assessment of dominance will take into account the competitive structure of the market, and in particular the following factors:329
a) absolute and relative market share: the higher the market share and the longer the period of time over which it is held, the more likely it is that it consti-tutes an important preliminary indication of the existence of a dominant posi-tion;330
b) barriers to entry or expansion: the potential impact of expansion by actual competitors or entry by potential competitors, including the threat of such ex-pansion or entry, is also relevant when assessing dominance because an under-taking can be deterred from abusing its position if expansion or entry is likely, timely and sufficient;331
c) buyer power: even an undertaking with a high market share may not be able to act to an appreciable extent independently of customers with sufficient bar-gaining strength.332
Ad 3) A substantial part of the internal market is not only a matter of geo-graphical size. When determining whether a territory is large enough to qualify
326 Judgement of 13 February 1979 in Case C-85/76, Hoffmann-La Roche & Co. AG v Commission of the European Communities, [1979] ECR 00461. at 39.
327 See also: Commission Notice on the definition of relevant market for the purposes of Community competition law [1997] OJ C 372, 9.2.1997., pp. 5–13.
328 Commission Notice on the definition of relevant market for the purposes of Community competition law [1997] OJ C 372, 9.2.1997., paras. 7–8.
329 See also: Guidance on the Commission’s enforcement priorities in applying Art. 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings [2009] OJ C 45, 24.2.2009., pp. 7–20.
330 Ibid., para 15.
331 Ibid., para 16.
332 Ibid., para 18.
as a substantial part of the internal market, the pattern and volume of the produc-tion and consumpproduc-tion of the given product or service, as well as the habits and economic opportunities of customers and vendors must be taken into account.333 The territory of a Member State is likely to be a substantial part of the internal market within the meaning of Article 102 TFEU.334 It should be noted that even a part of the territory of a Member State might be sufficient to conclude that the condition is met.
Ad 4) A finding that an undertaking has a dominant position is not in itself an infringement but simply means that, irrespective of the reasons for which it has such a dominant position, the undertaking concerned has a special responsibility not to allow its conduct to impair genuine undistorted competition on the com-mon market.335
Abusing dominant position – provided there is a casual link – is, however, for-bidden. Abuses can be grouped in two ways. According to the first one, we can group them as price-based and non price-based abuses, while according to the second classification, we can group abuses as exploitative and exclusionary abuses.
Price-based abuses are for instance: a) discounts and rebates; b) certain forms of tying; c) predatory pricing; d) margin squeeze; e) price discrimination; f) other price-based abuses hindering the integration of the internal market; g) predatory pricing.
Non price-based abuses are typically: a) single branding; b) tying; c) refusal to supply; d) other non price-based abuses hindering the integration of the internal market.
It should be noted that the above-mentioned lists are just illustrative lists.
Abusing dominant position might be realised in any form of conduct which, as result of abusing dominant position, is capable of restricting competition or ex-ploiting consumers.
ad 5) Article 102 TFEU applies when the abusive conduct of the dominant un-dertaking appreciably affects trade between Member States. Since we already covered this topic when we dealt with restrictive agreements, at this point we only repeat that trade between Member States might even be affected potentially, it is sufficient for the condition to be met.
333 Judgement of 16 December 1975 in Cases C-40-73-48-73., 50-73., 54-73-56-73., 111-73., 113-73.
and 114-73, Coöperatieve Vereniging ‘Suiker Unie’ UA and Others v Commission of the European Communities, [1975] ECR 01663. at 371.
334 See e.g.: Judgement of 27 March 1974 in Case C-127/73, Belgische Radio en Televisie and Société belge des auteurs, compositeurs et éditeurs v SV SABAM and NV Fonior, [1974] ECR 00313., where Belgium was held to be a substantial part of the common market.
335 Judgement of 9 November 1983 in Case C-322/81, NV Nederlandsche Banden Industrie Michelin v Commission of the European Communities, [1983] ECR 03461. at 57.
4.2 Exemptions
Unlike in the case of Article 101 TFEU, Article 102 TFEU does not contain an explicit exemption provision. Case-law, however, developed the so-called objec-tive justification and efficiency claim by which abusive conducts infringing Arti-cle 102 TFEU may escape.
The question of whether the given conduct is objectively necessary and pro-portionate must be determined on the basis of factors external336 to the dominant undertaking.337
The undertaking holding dominant position might, for instance, justify its con-duct leading to the foreclosure of competitors on the grounds of efficiencies that are sufficient to guarantee that no net harm to consumers is likely to arise. In this context, the dominant undertaking will generally be expected to demonstrate, with a sufficient degree of probability, and on the basis of verifiable evidence, that the following cumulative conditions are fulfilled:
a) the efficiencies have been, or are likely to be, realised as a result of the con-duct. They may, for example, include technical improvements in the quality of goods, or a reduction in the cost of production or distribution;
b) the conduct is indispensable to the realisation of these efficiencies: there must be no less anti-competitive alternatives to the conduct that are capable of producing the same efficiencies;
c) the likely efficiencies brought about by the conduct concerned outweigh any likely negative effects on competition and consumer welfare in the affected markets;
d) the conduct does not eliminate effective competition, by removing all or most existing sources of actual or potential competition. Rivalry between firms is an essential driver of economic efficiency, including dynamic efficiencies in the form of innovation. In its absence, the dominant firm will lack adequate in-centives to continue to create and pass on efficiency gains. Where there is no residual competition and no foreseeable threat of entry, the protection of rivalry and the competitive process outweigh possible efficiency gains. In the Commis-sion’s view, exclusionary conduct which maintains, creates or strengthens a mar-ket position approaching that of a monopoly can normally not be justified on the grounds that it also creates efficiency gains.338
It is incumbent upon the dominant undertaking to provide all the evidence necessary to demonstrate that the conduct concerned is objectively justified.339
336 For instance: health or safety considerations.
337 Guidance on the Commission’s enforcement priorities in applying Art. 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings [2009] OJ C 45, 24.2.2009., para. 29.
338 Ibid., para 30.
339 Ibid., para 31.