Monopoly power
3. What role does market definition play in market power assessment?
European Union
Market definition serves as an analytical framework to assess market power and competitive effects. Certain types of abuse (eg, tying and bundling or refusal to supply) envisage market power and anticompetitive effects arising in different markets. In such cases, more than one market may need to be defined: see question 46.
While market definition represents an important element of the competitive analysis, it does not set an absolute limit to that analysis. Competitive interaction can take place in a continuum that crosses market boundaries. Depending on the case, competitive constraints outside a defined market therefore must be taken into account. This is consistent with the Commission’s Notice, which describes market definition as a “tool”.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
4. What is the approach to market definition?
European Union
The Commission Market Definition Notice provides guidance on the Commission’s approach to market definition for all areas of EU competition law, including the application of article 102 TFEU.
Market definition involves delineation of both relevant product and geographic markets. A relevant product market comprises all those products or services that are substitutable from either the demand side or supply side. Similarly, a relevant geographic market covers those locations that are either substitutable from the demand or supply side.
Substitutability is assessed by the hypothetical monopolist test known as the SSNIP test (referring to a "small but significant non-transitory increase in price"). The SSNIP test asks whether a hypothetical monopolist could profitably impose a 5 to 10 per cent permanent price increase over the candidate products without a sufficient number of consumers at the margin switching to other products to render the price increase unprofitable.
"Demand-side substitutability" measures the ability of consumers to switch their consumption to alternative products in the case of a small change in relative price. "Supply-side substitutability" measures the ability of suppliers to switch production to the products under consideration in response to small change in relative price. Either of these forms of substitution can provide effective competitive constraints. When either is present, the relevant market ought to be widened, although the Commission considers demand-side substitution to represent the most effective disciplinary force (Market Definition Notice, paragraph 13).
A number of EU Court judgments have discussed basic principles of market definition in the context of article 102 TFEU cases.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
5. How is market power or monopoly power defined?
European Union
EU Court judgments and the Guidance Paper describe dominance as "a position of economic strength" that confers on a company "the power to behave to an appreciable extent independently of its competitors, its customers and ultimately of its consumers" (Guidance Paper, paragraph 10; Case C-27/76 United Brands v Commission EU:C:1978:22, para. 65; Case 85/76 Hoffmann-La Roche & Co v Commission EU:C:1979:36, paragraph 38).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
6. What is the test for finding of monopoly power?
European Union
There is no single approach to identifying dominance that is applied universally in all abuse of dominance cases. Rather, several indicators of dominance have developed incrementally in the case law of the EU Court. The Guidance Paper classifies these indictors into categories relating to:
- constraints imposed by competitors (ie, an assessment of market structure and market shares);
- constraints imposed by the threat of expansion and entry; and
- constraints imposed by the bargaining strength of customers.
These categories are discussed in response to questions 8 to 17.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
8. What role do market shares play in the assessment of monopoly power?
European Union
Market shares represent an important element of the dominance analysis, although high market shares alone are not determinative for a finding of dominance. In volatile or bidding markets, for example, a snapshot of market shares at a single point in time may fail to capture competitive constraints imposed by competitors. Hence market shares over time need to be considered. In addition, the relevance of market shares may depend on other factors, such as barriers to entry, buyer power, or the importance of innovation in the market.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
9. Are there defined market share thresholds for a presumption of monopoly power?
European Union
The EU Court has established a (rebuttable) market share presumption for dominance pursuant to which a company is assumed to be dominant, if it holds a market share of 50 per cent or more in the relevant market (Case C-62/86 AKZO Chemie v Commission EU:C:1991:286, paragraph 60. See also Case T‑321/05 AstraZeneca v Commission EU:T:2010:266, paragraph 288).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
10. How easily are presumptions rebutted?
European Union
The presumption of dominance for firms with market shares above 50 per cent is not universally acknowledged, and may not be applied in every case. Thus the General Court in Hilti described high market shares as providing an "indication" of market power, rather than establishing a legal presumption (Case T-30/89 Hilti v Commission EU:T:1991:70, paragraph 92). In Hoffmann-La Roche the Court of Justice held that a 51 per cent share of one of the markets under consideration in a single year was "insufficient evidence of the existence of a dominant position" (Case 85/76, EU:C:1979:36, paragraph 58).
The UK Competition Appeal Tribunal, hearing an appeal against a finding of abuse under EU competition law, declined to presume dominance where the defendant had a market share of 89 per cent, since market share would not capture the true competitive landscape in the years following the loss of the defendant’s statutory monopoly (National Grid v Gas And Electricity Markets Authority [2009 CAT 14]).
In online services, a question has arisen to what extent usage shares for free services can indicate market power. In Microsoft/Skype and Facebook/WhatsApp, the Commission held that high usage shares for free services are not a good proxy for market power. This was confirmed by the General Court in Cisco and Messagenet v Commission.
In practice, the European Commission typically relies not solely on market shares for establishing dominance, but considers markets shares in combination with other factors, such as entry barriers, buyer power and development of market shares over time.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
11. Are there cases where companies with high shares have been found not to exercise monopoly power?
European Union
There is a paucity of article 102 TFEU decisions at the EU level where companies with high market shares have not been treated as dominant. This may be due to the fact that high market shares are generally not used in isolation but in conjunction with other factors to demonstrate that a company is dominant. Cases where companies are found not to hold a dominant position moreover may be closed without formal decisions. In merger cases, there are examples of the Commission finding no concerns despite relatively high shares.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
12. What are the lowest shares with which companies have been found to exercise monopoly power?
European Union
The Commission considers that dominance is unlikely if a firm’s market share is below 40 per cent (Guidance Paper, paragraph 14). In British Airways, the Commission found British Airways to hold a dominant position in the UK with a market share of just under 40 per cent (39.7 per cent). Despite the relatively low market share, dominance was established on the basis that British Airways’ market share was more than twice as large as the combined shares of its four largest competitors, it held substantially more slots at Heathrow and Gatwick airports than other airlines, and it offered the largest range of flights into and out of the UK (Case T-219/99 British Airways v Commission EU:T:2003:343, paragraphs 175–226).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
13. How important are barriers to entry and expansion for the assessment of monopoly power?
European Union
A market share-based presumption of dominance is inapplicable where competitors are able to meet rapidly the demand from customers who want to switch away from the firm with the largest share (Case 85/76 Hoffmann-La Roche & Co v Commission EU:C:1979:36, paragraph 41). As recognised in the Guidance Paper, "an undertaking can be deterred from increasing prices if expansion or entry is likely, timely and sufficient" (Guidance Paper, paragraph 16).
In assessing this likelihood, the Commission considers barriers that prevent timely entry or expansion. These can take the form of legal barriers (such as legislation conferring a statutory monopoly, or intellectual property rights: see, for example, Case 30/87 Corinne Bodson v Pompes funèbres des régions libérées EU:C:1988:225), or barriers such as economies of scale or scope (Case C-27/76 United Brands v Commission EU:C:1978:22, para 122), technological advantages (Case 85/76 Hoffmann-La Roche & Co v Commission EU:C:1979:36, paragraph 48) or network effects (Case COMP/39.530 Microsoft (Tying), Commission Decision of 16 December 2009, paragraph 420).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
16. Can countervailing buyer power negate a finding of monopoly power?
European Union
Customers with sufficient countervailing bargaining strength can prevent a company from exercising market power. Such buyer power, however, will not necessarily negate a finding of dominance where a strong buyer is only able to protect itself or a limited segment of customers, but not the entire market (Guidance Paper, paragraph 18).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
17. What if consumers can easily switch between suppliers?
European Union
The ease with which customers can switch is a relevant consideration in the competitive analysis. A competitive constraint may be exercised not just if individual buyers hold buyer power, but also where a sufficiently large number of customers would defeat price rises by switching to alternative supply sources. It is important to note that what matters in this analysis is the behaviour of customers at the margin, rather than the behaviour of average customers.
The ease of switching is also relevant in the analysis of barriers to entry. If customers can easily switch suppliers, that facilitates entry. It also counteracts possible barriers, such as network effects. Thus, in Microsoft/Skype and Facebook/WhatsApp, the Commission found that the ease with which users could switch between services mitigated network effects.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
18. Are there any other factors that the regulator considers in its assessment of monopoly power?
European Union
The categories of factors indicating dominance are not closed. That said what matters are competitive factors that impact a firm’s market power. Non-competitive factors are not considered.
Relevant competitive factors may include, for example, a firm’s spare production capacity (Case 85/76 Hoffmann-La Roche & Co. v Commission EU:C:1979:36), financial strength (Case T‑321/05 AstraZeneca v Commission EU:T:2010:266, paragraph 286), and first mover status (Case T‑321/05 AstraZeneca v Commission EU:T:2010:266, paragraph 283).
In the area of patent licensing, a patent owner may be constrained by the patent portfolios of licensees if it is vulnerable to countersuits in the event of overcharging for its own patents.
In the case of a multi-product firm that serves the same buyers in different product markets, buyers may constrain the firm’s ability to charge supra-competitive prices in a dominant market by threatening to switch their purchases in non-dominant markets.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
19. Are any entities or sectors exempt from the antimonopoly regime?
European Union
Entities that do not qualify as "undertakings" are not subject to article 102 TFEU. The concept of "undertaking", however, is interpreted broadly. It encompasses every entity engaged in an economic activity, regardless of its legal status or the way in which it is financed (see Case C-41/90 Hofner and Elser v Macrotron GmbH EU:C:1991:161, paragraph 21).
Public authorities do not qualify as undertakings when performing the essential functions of state. In Eurocontrol, the exercise of powers relating to the control and supervision of air space were not of an economic nature (despite the fact that Eurocontrol collected route charges) and it did not therefore constitute an undertaking (Case C-364/92, ECLI:EU:C:1994:7).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
20. Can companies be deemed to hold collective monopoly power?
European Union
Collective dominance may arise in an oligopolistic market where a number of firms together hold a dominant position, and the abuse would consist in one or more of the firms taking part in a tacitly agreed collective exclusionary or exploitative strategy.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
21. Can the exercise of joint monopoly power or tacit oligopolistic collusion be treated as an infringement?
European Union
While such situations can in principle arise, cases based on a theory of abuse of collective dominance have been rare (the principal example is Joined Cases C-395 and 396/96 P Compagnie Maritime Belge Transports v Commission EU:C:2000:132).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
22. Has the competition authority published guidance on how it defines markets and assesses market power?
European Union
The Commission’s approach to market definition is set out in the Market Definition Notice, and dominance is addressed in the Guidance Paper.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
Abuse of monopoly power
23. Is there a general definition for what constitutes abusive conduct? What does it entail?
European Union
Holding or acquiring a dominant position is not in itself unlawful under EU competition law, but dominant firms are subject to a "special responsibility" not to impair undistorted competition in the EU. A dominant company infringes article 102 TFEU if it abuses its dominant position to restrict or distort competition.
The term "abuse" has been defined as behaviour by a dominant undertaking "which, through recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition" (Case 85/76 Hoffmann-La Roche & Co v Commission EU:C:1979:36, paragraph 91).
Not all conduct that affects competitors qualifies as an abuse. The Court of Justice has made clear that "competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation" (Case C-209/10 Post Danmark I EU:C:2012:172, paragraph 22); recently reaffirmed in Case C-413/14 P Intel EU:C:2017:632, paragraph 134).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
24. What are the general conditions for finding an abuse?
European Union
The applicable conditions for determining whether an abuse has occurred depend on the specific type of conduct under investigation. The key element of the analysis is to distinguish between anticompetitive conduct that harms the competitive process and competition on the merits. The Commission therefore must identify conduct that is distinct from competition on the merits and that harms competition.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
25. Is there a list of categories of abusive or anti-competitive conduct in the applicable legislation?
European Union
Article 102 TFEU lists four examples of abusive conduct:
- article 102(a): directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
- article 102(b): limiting production, markets or technical development to the prejudice of consumers;
- article 102(c): applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; and
- article 102(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.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
26. Is this list open or closed?
European Union
The list is not exhaustive. The Commission and the EU Court have applied article 102 TFEU to conduct that is not expressly identified in the list of article 102 TFEU.
For example, unlike many other jurisdictions, measures by a dominant company to impose territorial restrictions on the resale of its goods may be treated as an abuse of dominance (see eg, GSK Greece and the Commission’s recently closed investigation Bulgarian Energy Holdings, following commitments).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
27. Has the competition authority published any guidance on what constitutes abusive conduct?
European Union
The Commission has published the Guidance Paper, which explains the analytical framework that the Commission applies in abuse cases. The Commission describes the Guidance Paper as setting out only the Commission’s enforcement priorities. But the Guidance Paper arguably binds the Commission by virtue of the principles of legal certainty and legitimate expectations.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
28. Is certain conduct per se abusive (without the need to prove effects) and under what conditions?
European Union
Traditionally, certain categories of conduct are qualified as "by nature" restrictive without the need for a detailed assessment of the conduct’s effects (eg, exclusive dealing requirements or discounts conditioned on exclusivity). This is not the same as a per se infringement, however, since the dominant company retains – in theory – the possibility of justifying its conduct (see question 31). Moreover, the implications of qualifying conduct as “by nature” abusive have been moderated by the recent Court of Justice judgment in Intel.
In that case, the Court clarified that the a finding that conduct is by nature abusive creates only a presumption that this conduct has restrictive effects. If the dominant undertaking “submits, during the administrative procedure, on the basis of supporting evidence, that its conduct was not capable of restricting competition and, in particular, of producing the alleged foreclosure effects” the Commission is then required to engage in a full assessment of all relevant circumstance to establish whether the conduct was likely to produce anticompetitive effects (Case C-413/14 P Intel EU:C:2017:632, paragraphs 138–140).
This follows from similar developments in the case law relating to “by object” restrictions under article 101 TFEU. The judgment of the Court of Justice in Cartes Bancaires made clear that the concept of "by nature" or “by object” restrictions must be used with restraint. It can only be applied to conduct that "reveals in itself a sufficient degree of harm to competition", such as to render an examination of its actual effects on the market "redundant" (Case C-67/13 Groupement des Cartes Bancaires, judgment of 11 September 2014, paragraph 58). This was confirmed by the judgment in Maxima Latvija (Case C-345/14, judgment of 26 November 2015, ¶¶18-23). These cases concern agreements that were assessed under article 101 TFEU, but there is no reason not to apply the same approach to unilateral conduct under article 102 TFEU.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
29. To the extent that anti-competitive effects need to be shown, what is the standard to demonstrate these effects?
European Union
Outside the narrow exception of conduct that is by nature restrictive, the Commission bears the burden of proving restrictive effects from the outset, including an assessment of the counterfactual scenario (Case T-491/07 CB v Commission, ECLI:EU:T:2016:379, ¶111; Guidance on the Commission's enforcement priorities in applying article 82 of the EC Treaty [2009] OJ /C 45/902, ¶21).
In the context of abuse of dominance cases specifically, the case law confirms the need to show effects. In Post Danmark II, the Court of Justice confirmed that "only dominant undertakings whose conduct is likely to have an anticompetitive effect on the market fall within the scope" of article 102 TFEU, taking into account all the relevant circumstances of the allegedly abusive conduct. In Intel, Advocate General Wahl confirmed that (even in the case of presumptively unlawful conduct), it is necessary to show "whether, in all likelihood, the impugned conduct has an anticompetitive foreclosure effect. For that reason, likelihood must be considerably more than a mere possibility that certain behaviour may restrict competition. Contrariwise, the fact that an exclusionary effect appears more likely than not is simply not enough" (Case C-413/14P Intel ECLI:EU:C:2016:788, paragraph 117); see also Case C-123/16P Orange Polska EU:C:2018:87, Opinion of Advocate General Wathelet, paragraphs 98).
If the conduct at issue has been ongoing for some time, an inability to demonstrate substantial and systematic anticompetitive effects will generally contradict a theory that the conduct restricts competition:
- In Post Danmark I, the Court considered it relevant that the complainant had “managed to maintain its distribution network despite losing the volume of mail related to the three customers involved and managed, in 2007, to win back” two customers, despite the alleged exclusionary conduct starting several years earlier (Case C-209/10 Post Danmark, ECLI:EU:C:2012:172, ¶39).
- In Streetmap v Google before the High Court of England and Wales, the alleged abuse had taken place over the course of several years. Roth J considered a review of actual effects “a very relevant consideration,” stating “I would find it difficult in practical terms to reconcile a finding that conduct had no anti-competitive effect at all with a conclusion that it was nonetheless reasonably likely to have such an effect” (Streetmap v Google [2016] EWHC 253 (Ch), ¶90).
- In Posten Norge, the EFTA Court considered that “in some cases, the persistent lack of actual negative effects on competition may cast doubt on a finding by ESA that a certain conduct is liable to restrict competition” (Case E-15/10 Posten Norge, paragraph 192).
EU law has a distinct approach to assess rebates that are not conditioned on quantity alone (which are presumptively lawful). Such rebates require an analysis of all relevant circumstances to assess whether they are capable of (i) making market entry very difficult or impossible for competitors, and (ii) making it more difficult or impossible for purchasers to choose their sources of supply or commercial partners (Case C‑23/14 Post Danmark II ECLI:EU:C:2015:651, ¶31). In other words, to assess whether rebates are “fidelity-building”.
Relevant circumstances include whether the rebates are retroactive, whether they are individualised or standardised, and the length of the reference period. In previous cases, rebates have been treated as “loyalty inducing” if the dominant company leverages a “non-contestable” portion of demand to prevent rivals from competing for the “contestable share” (Case C‑23/14 Post Danmark I ECLI:EU:C:2015:651, ¶¶32-33 and 35; C‑95/04 P British Airways v Commission EU:C:2007:166, ¶73).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
30. Does the abusive conduct need to harm consumers?
European Union
EU competition law does not serve to protect individual competitors, but the competitive process. If harm to the competitive process is demonstrated, the case law generally assumes that this harms consumers without need to prove separately consumer harm.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
31. What defences are there to allegations of abuses of monopoly power?
European Union
The Commission bears the burden of proving that the company under investigation holds a dominant position and that the conduct at issue is, in principle, abusive. The company under investigation is given the ability to challenge allegations of abuse, both informally during the initial stages of an investigation and formally in response to a statement of objections. The company under investigation can point out deficiencies in the factual and legal reasoning that underpins a concern and it can invoke evidence that contradicts or casts doubt on allegations of abuse.
In addition, the company under investigation can also invoke objective justifications for its conduct. The company must substantiate an objective justification. It is then for the Commission "to show that the arguments and evidence relied on by the undertaking cannot prevail and, accordingly, that the justification put forward cannot be accepted" (Case T-201/04 Microsoft v Commission EU:T:2007:289, paragraph 688).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
32. Can abusive conduct be objectively justified?
European Union
Yes, even if conduct is found to restrict competition, it is in principle open to justification, as described in more detail below under question 33.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
33. What objective justifications have been successful?
European Union
The Commission’s Guidance Paper notes that restrictive conduct may be justified if it is either (i) ‘objectively necessary’ or (ii) produces efficiencies that outweigh the restrictive effects. The case law of the EU Courts however does not limit justifications in this way. The Courts have more generally held that a dominant company may justify its conduct based on ‘legitimate commercial interests’ (Case 27/76 United Brands EU:C:1978:22, paragraph. 189–191).
In GSK Greece, for example, the Court of Justice recognised that it was legitimate for a dominant company not to meet orders that went beyond ordinary levels of supply, even if such limitations were intended to restrict parallel trade. And in Motorola and Samsung, the Commission accepted that it is legitimate for a holder of standard essential patents to seek injunctions against patent users that do not qualify as willing licensees. The same principle was recently confirmed by the Court of Justice in Huawei v ZTE.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
34. How is the burden of proof distributed in an abuse analysis?
European Union
The Commission bears the burden of proving the constituent elements of an abuse (article 2 of Council Regulation 1/2003). And any doubt must operating in favour of the addressee undertaking (Case T-321/05 AstraZeneca EU:T:2010:266, para 839).
To substantiate its allegations, the Commission must set out “sufficiently precise and consistent evidence to support the firm conviction that the alleged infringement took place” (Case T-286/09 Intel ECLI:EU:T:2014:547, ¶62).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
35. What are the legal conditions to establish an abusive tie?
European Union
The following conditions must be satisfied in order for a tie to be abusive (Case T-201/04 Microsoft v Commission EU:T:2007:289, para. 859):
- the tying and tied goods are two separate products;
- the undertaking concerned is dominant in the tying product market;
- customers have no choice but to obtain both products together (either as a result of a contractual requirement to purchase both products together, or as a result of the products being technically tied);
- the tying forecloses competition; and
- there is no objective and proportionate justification for the tie.
Whether two components constitute separate products or an integrated whole may depend on several factors, such as the functionality of the components at issue, whether the components are included at different levels of the supply chain (see, in contrast, Case T-201/04 Microsoft v Commission EU:T:2007:289, para. 904), whether independent providers supply the tied components to end users (Case T-201/04 Microsoft v Commission EU:T:2007:289, para. 927), and changes in customer habits or technical developments (Case T-201/04 Microsoft v Commission EU:T:2007:289, para. 913).
A dominant company may achieve the same effect as tying by ostensibly offering a stand-alone version of the dominant tying product alongside a bundled version, but at a price that renders it commercially unrealistic for customers to take the stand-alone version. Past cases have condemned the grant of discounts on dominant products that are conditioned on customers also taking non-dominant products (see, for example, Case 85/76 Hoffmann-La Roche & Co v Commission EU:C:1979:36). In the Guidance Paper, the Commission takes the position that such bundled discounts must be assessed by allocating the discounts fully to the price of the non-dominant "tied" product. If such a calculation results in a price below the dominant company’s long run average incremental costs of supplying the "tied" product, the discount is anti-competitive (unless rivals are able to replicate the bundle) (Guidance Paper, para. 60).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
36. What are the legal conditions to establish a refusal to supply or refusal to license?
European Union
As a general rule, companies, including dominant companies, are free to decide whether to deal with a counterparty. A refusal by a dominant undertaking to supply its products can therefore amount to an abuse under article 102 TFEU only in exceptional circumstances. According to established case law, the following general conditions must be met for a refusal to be abusive (see, for example, Case C-7/97 Oscar Bronner v Mediaprint EU:C:1998:569; and Case T-374/94 European Night Services EU:T:1998:198):
- the requested input must be indispensable to compete viably in the downstream market;
- the refusal is likely to eliminate effective competition in the downstream market; and
- there is no objective justification for the refusal.
If the refusal involves intellectual property rights (ie, a refusal to license) it is moreover necessary to demonstrate that the refusal would prevent the emergence of a new product or would hinder technical development and innovation more generally (see, for example, Case T-201/04 Microsoft v Commission EU:T:2007:289, paragraph 332; Case C-418/01 IMS Health v NDC Health EU:C:2004:257, paragraph 52; and Case C-241/91 P RTE & ITP v Commission EU:C:1995:98, paragraphs 50–56).
The refusal to supply can be express or "constructive" (for example, by insisting on unreasonable conditions: Guidance Paper, para. 79).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
37. Do these abuses require an essential facility?
European Union
Refusal to supply or refusal to license cases require that supply or access is "indispensable". In cases involving access to networks, such as distribution systems, the indispensable input has been described as an "essential facility" (see, for example, Case C-7/97 Oscar Bronner v Mediaprint EU:C:1998:569, paragraph 24). However, in cases concerning access to know-how or intellectual property, the term essential facility is not always used (see, for example, Case T-201/04 Microsoft v Commission EU:T:2007:289). This is largely a question of semantics, as indispensability remains the key criterion in refusal to supply or license cases.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
38. What is the test for an essential facility?
European Union
Indispensability implies that the input in question is essential for a commercially viable business to compete on the downstream market. The test is therefore whether a substitute input is available (even if less economically advantageous: see Case C-7/97 Oscar Bronner v Mediaprint EU:C:1998:569, paragraph 43) and, if not, whether a substitute is impossible or extremely difficult to create.
This test has been expressed in the case law by assessing whether there are "technical, legal or economic obstacles capable of making it impossible or at least unreasonably difficult" to create alternatives, or to create them within a reasonable time frame (See Case C-418/01 IMS Health v NDC Health EU:C:2004:257, paragraph 28; Case T-374/94 European Night Services EU:T:1998:198, paragaph 209. See also and Guidance Paper, paragraph 83). The feasibility of creating an alternative is assessed by reference to a (hypothetical) downstream competitor with output comparable to that of the owner of the essential facility; the fact that a downstream competitor’s small output would render it unfeasible to create an alternative does not prove indispensability (Case C-7/97 Oscar Bronner v Mediaprint EU:C:1998:569, paragraph 46).
In recent years, the increasing digitalisation of the economy and associated use of data fuelled the discussion on the general application of the essential facility doctrine to allegedly dominant digital platforms, with regards to their use of data. Members of the European Parliament addressed a formal question on 3 February 2020 on this issue. The Commission responded that the essential facilities test “requires a detailed case-by-case assessment of whether or not a data set is truly essential. It is, therefore, not possible to say that, in general, ‘data’, or ‘personal data’, is an essential facility.”
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
39. What is the test for exclusivity arrangements?
European Union
An exclusive purchasing obligation requires a customer to purchase all or a large majority of its needs for a specific product from one supplier. The purchaser may be obliged to obtain all or most of their requirements exclusively from the dominant undertaking, or this could be set as a condition for receiving a rebate.
Although exclusivity arrangements are presumed to restrict competition, in circumstances where “the undertaking concerned submits, during the administrative procedure, on the basis of supporting evidence, that its conduct was not capable of restricting competition and, in particular, of producing the alleged foreclosure effects,” a more detailed analysis is required.
Specifically, the Commission is required to analyse “first, the extent of the undertaking’s dominant position on the relevant market and, secondly, the share of the market covered by the challenged practice, as well as the conditions and arrangements for granting the rebates in question, their duration and their amount; it is also required to assess the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant undertaking from the market” (Case C-413/14 P Intel EU:C:2017:632, paragraphs 138-139). The Commission is required to carry out “an analysis of the intrinsic capacity of that practice to foreclose competitors which are at least as efficient as the dominant undertaking” (Case C-413/14 P Intel EU:C:2017:632, paragraph 140).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
40. What is the test for predatory pricing?
European Union
Predatory pricing arises when a dominant company prices its products below costs such that even equally efficient competitors cannot viably remain on the market.
In AKZO, the ECJ established a two-test rule for the assessment of predatory pricing conduct under article 102 TFEU (Case C-62/86 AKZO Chemie v Commission EU:C:1991:286): (i) pricing below average variable cost (AVC) is presumptively abusive; and (ii) pricing below average total cost (ATC) but above AVC is abusive if it is shown that this is part of a plan to eliminate a competitor. This is in line with the principle of profit sacrifice set out in the Guidance Paper (ie, the dominant company deliberately foregoes profits in the short term so as to foreclose competitors with a view to strengthening market power), which refers to Average Avoidable Costs and Long Run Average Incremental Costs (Guidance Paper, paras. 64–66) (Guidance Paper, paras. 64–66).
There may be cases where alternative benchmarks, such as average incremental costs, are more appropriate, if, for example, an industry is characterised by high fixed costs and very low variable costs (Case 209/10 Post Danmark I EU:C:2012:172, para. 33).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
41. What is the test for a margin squeeze?
European Union
A margin squeeze occurs when a vertically integrated company sells an input to its downstream competitors at a high price and at the same time prices its own downstream product at a low price such that its competitors are left with insufficient margin to compete viably in the downstream market. This is abusive in EU law when ‘the difference between the retail price charged by a dominant undertaking and the wholesale prices it charges its competitors for comparable services is negative, or insufficient to cover the product-specific costs to the dominant operator of providing its own retail services on the downstream market’ (see T-271/03 Deutsche Telekom v Commission, upheld on appeal; and C-52/09 TeliaSonera EU:C:2011:83).
Until recently, margin squeeze cases were generally viewed as instances of a constructive refusal to supply. However, the EU Court’s judgments in TeliaSonera and Telefónica (Case C-295/12 P, EU:C:2014:2062) have held that it is not necessary to establish the legal conditions for an abusive refusal to supply in such cases. Rather, these judgments appear to treat margin squeeze practices as akin to predatory pricing behaviour.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
42. What is the test for exclusionary discounts?
European Union
While the grant of discounts is generally pro-competitive, certain forms of discounts may constitute an abuse if applied by a dominant company. This includes discounts that are conditioned on exclusivity and retroactive rebates that pay out discounts on past purchases over a reference period if the customer meets pre-defined quantity targets.
The concern is that such discount schemes enable the dominant company to leverage non-contestable portions of demand and raise rivals' costs by forcing them to compensate customers for lost discounts on units that the rival will not sell.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
43. Are exploitative abuses also considered and what is the test for these abuses?
European Union
Exploitative abuse, such as excessive pricing, falls within the scope of article 102(a) TFEU, which provides that an abuse may consist of "directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions".
In United Brands the ECJ annulled the Commission’s decision that unfair prices had been charged for Chiquita bananas in Germany, Denmark and Benelux since the difference in prices between branded Chiquita bananas and non-branded bananas was not deemed to be excessive (Case C-27/76, EU:C:1978:22, paras. 248–268). In Scandlines Sverige, the Commission set out what it considers the most appropriate methodology for assessing unfair prices. The questions to be determined are: (i) whether the difference between the costs actually incurred and the price actually charged is excessive; and, if the answer to that is yes, then (ii) whether a price has been imposed that is either unfair in itself or when compared to the price of competing products (Case COMP/36.568 Scandlines Sverige v Port of Helsingborg, Commission decision of 23 July 2004, paragraph 147).
The difficulty of determining a benchmark against which prices can be assessed as being unfair has led to a dearth of decisional practice. That said, certain national competition authorities continue to investigate excessive pricing at the member state level (see eg, the UK’s Competition and Markets Authority investigation of Pfizer and Flynn Pharma’s pricing of phenytoin sodium capsules (Case CE/9742-13)). Concerns relating to price gouging also influence FRAND licensing obligations in EU cases concerning Standard Essential Patents (as discussed in Case C‑170/13 Huawei v ZTE EU:C:2015:477, Case COMP/39.939 Samsung, Commission decision of 29 April 2014, and Case COMP/39.985 Motorola, Commission decision of 29 April 2014).
In a preliminary reference to the Court of Justice (AKKA/LAA), the Court clarified that for a price to be considered “excessive,” the difference between the price charged and the competitive benchmark has be “significant and persistent” (C‑177/16 AKKA/LAA v Competition Council ECLI:EU:C:2017:689, paragraph 61). Competition authorities and courts have considered a range of benchmarks against which to compare the price charged, such as the cost plus a reasonable or return or the prices charged in other countries. In AKKA/LAA the Court clarified that cross-country comparisons should be carried out against objective, appropriate and verifiable criteria and such comparisons are made on a consistent basis.
Concerns relating to price gouging also influence FRAND licensing obligations in EU cases concerning Standard Essential Patents (as discussed in Case C‑170/13 Huawei v ZTE EU:C:2015:477, Case COMP/39.939 Samsung, Commission decision of 29 April 2014, and Case COMP/39.985 Motorola, Commission decision of 29 April 2014).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
44. Is there a concept of abusive discrimination and under what conditions does it raise concerns?
European Union
In principle, unlawful discrimination pursuant to article 102(c) TFEU may arise if a dominant company applies different terms to different customers for equivalent transactions. But such abusive "price discrimination" requires proof that: (i) similar situations are being treated in a dissimilar manner without legitimate commercial reasons; and (ii) that some customers are placed at a competitive disadvantage relative to other customers to such a degree that it creates a risk of foreclosing equally efficient competitors.
Not every difference in treatment is discriminatory. As a general matter, the EU Courts have recognised that differences arising from individual negotiations of terms can be explained by legitimate commercial reasons (Case C-322/82 Michelin v Commission EU:C:1983:313, paragraph 90). Other considerations that may be taken into account include, for example, whether the transactions involve similar products (see, for example, Case T-301/04 Clearstream v Commission EU:T:2009:317, paragraphs 179–180), costs (see, for example, Case T-301/04 Clearstream v Commission EU:T:2009:317, paragraphs 181–190) or timing (see, for example, Case IV/28.841 ABG/Oil Companies, Commission decision of 19 April 1977). Moreover, even if there is "discrimination", the ECJ’s Post Danmark judgment has made clear that such discrimination is only abusive if it is liable to foreclose equally efficient companies (Case 209/10 Post Danmark EU:C:2012:172, paragraph 30).
In MEO the Court of Justice confirmed that the requirement to show a “competitive disadvantage” pertains to behaviour that is capable of distorting competition. Such an analysis must take account of all the relevant circumstances and the effects of the conduct on the costs, profits or any other relevant interest of one or more of those partners. This includes the possible existence of “a strategy aiming to exclude from the downstream market one of its trade partners which is at least as efficient as its competitors” (Case C-525/16 MEO EU:C:2018:270).
As a general matter, "pure" discrimination cases are rare. In past cases, discrimination-type concerns have typically been raised as an "added" consideration in connection with abusive exclusionary practices, such as refusal to supply (see, for example, Case T-301/04 Clearstream v Commission EU:T:2009:317).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
45. Are only companies with monopoly power subject to special obligations under unilateral conduct rules?
European Union
Yes, unilateral conduct falls under the scope of EU competition law only if the company at issue is dominant. Some EU member states, however, have unilateral conduct rules that also apply to non-dominant companies (eg, Germany).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
46. Must the monopoly power exist in the same market where the effects of the anti-competitive conduct are felt?
European Union
There is no general requirement that dominance and anti-competitive effects arise in the same market. Indeed, for certain types of abuse, the opposite is true. For example, in the case of tying and bundling, refusal to supply, margin squeeze, and discrimination the effects arise in a different market from the one in which the company is dominant.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
Sanctions and remedies
47. What sanctions can the competition authority impose or recommend?
European Union
In principle, the Commission can impose a fine of up to 10 per cent of a company’s total turnover of the preceding business year for infringements of article 102 TFEU.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
48. How are fines calculated for abuses of monopoly power?
European Union
The Commission has set out the methodology by which it sets fines in its Fining Guidelines (Guidelines on the method of setting fines imposed pursuant to article 23(2)(a) of Regulation No. 1/2003, OJ C 210, 1 September 2006). The Commission takes into account, inter alia, the nature, length and scope of the infringement, the value of sales of goods affected by the infringement, and whether there are aggravating or mitigating circumstances.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
49. What is the highest fine imposed for an abuse of monopoly power?
European Union
The Commission imposed its highest ever fine of €4.34 billion in respect of its Google Android investigation.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
50. What is the average fine imposed over the past five years?
European Union
In the past five years the Commission has issued the following article 102 TFEU infringement decisions, imposing average fines of approximately €1.36 billion. These include:
- Case COMP/39759 ARA, Commission decision of 20 September 2016 (fine of €6,015,000);
- Case COMP/39740 Google Search (Shopping), Commission decision of 27 June 2017 (fine of €2,424,495,000);
- Case COMP/40220 Qualcomm, Commission decision of 24 January 2018 (fine of €997,000,000);
- Case COMP/40099 Google Android, Commission decision of 18 July 2018 (fine of €4.34 billion);
- Case COMP/39849 BEH Gas, Commission decision of 17 December 2018 (fine of €77,068,000);
- Case COMP/40411 Google Search (AdSense), Commission decision of 20 March 2019 (€1.49 billion); and
- Case COMP/39711 Qualcomm Predation, Commission decision of 18 July 2019 (€242,042,000).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
52. Can it impose both negative and positive behavioural obligations?
European Union
Yes. Typically, an infringement decision will include a negative order to bring the infringing conduct to an end. But, if necessary, the Commission may also impose positive obligations, notably if the Commission has found an abusive refusal to supply.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
53. Can the competition authority impose structural remedies?
European Union
Structural remedies are available but are a means of last resort, to be applied only if there is no equally effective behavioural remedy, or if a behavioural remedy would be more burdensome for the dominant company (article 7, Council Regulation 1/2003). Furthermore, structural remedies will generally only be considered proportionate if "there is a substantial risk of a lasting or repeated infringement that derives from the very structure of the undertaking" (Recital 12, Council Regulation 1/2003).
A structural remedy was imposed in the recent ARA decision (see question 61) where the Commission believed divestment was necessary “to ensure that [the abuse] is not repeated in the future”, given the uncertainty that would result from a mere declaration not to refuse access going forwards (Case COMP/AT.39759 ARA, Commission decision of 20 September 2016, paragraph 138).
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
54. Can companies offer commitments or informal undertakings to settle concerns?
European Union
Commission proceedings can be resolved through the offer of commitments (article 9(1) Regulation 1/2003). Negotiation of commitments can take place both prior to adoption of a Statement of Objections (SO) or following an SO and the filing of a response. If the Commission considers the offered commitments to be acceptable, it will subject them to a public market test and, if confirmed, make them binding through adoption of a decision under article 9 of Regulation 1/2003. Such a decision involves no finding of infringement and entails no fines.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
55. What proportion of cases have been settled in the past five years?
European Union
Since May 2013, the Commission has closed five abuse of dominance investigations on the basis of commitments, compared to 13 infringement decisions.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
56. Have there been any successful actions by private claimants?
European Union
Actions for damages take place in the courts of member states, the most popular fora for such actions being Germany, the Netherlands and the United Kingdom. At the EU level, Directive 2014/104, which member states were obliged to transpose into national law by 27 December 2016, harmonises certain rules concerning, inter alia, disclosure, proof of infringements and limitation periods.
Answer contributed by
Thomas Graf,
Alexander Waksman and
Myrane Malanda
