#5765 - Competition Ii - GDL EU Law

• Market dominance – usually single undertakings but can also be joint dominance by different undertakings acting together – either as part of a business entity/corporate group – but sometimes independent – Societa Italiana Vetro – 3 Italian glass manufacturers – breach of 101/102

• Often undertaking is dominant and part of cartel – breach of 101/102 - United Brands Co

Several things that the Commission or an NCA must establish - what market the undertaking is operating; that the undertaking is dominant in that market; that the conduct amounts to abuse of that position; that the abuse is capable of affecting trade btw MSs

What is the market?: determine exactly what market the undertaking is operating – economic/complex concept

• So long as undertaking can justify behaviour on objective grounds – unlikely to be caught

• Notice on the definition of the Relevant Market for the Purpose of Community Competition Law: product and geographic dimension – RPM/RGM – but also ‘relevant temporal market’ (following United Brands and Euroemballage Corn and Continental Can Co Ltd)

Relevant Product Market (RPM)

• Often difficult/highly contentious

• Hilti AG v Commission: produced nail guns – company tried to show that RPM for nail guns was the general market of industrial fastners, not just nail guns themselves – if broader RPM accepted then Hilti had small market share: CJ found that nail guns were sufficiently unique/separate – in smaller market they were dominant – narrow definition of market : the smaller the marker the more likely there will be dominance

Interchangeability or product substitution

Products will be in same RPM if they could be interchanged with one another/perform similar function

• United Brands: question of whether bananas were part of overall fruit market – bananas soft/seedless and so could be eaten by the very old or the sick – so CJ decided it was in a specialised sub-market

• Hilti : low cross elasticity of demand so found to be dominant: took in physical characteristics/functions

Demand Substitutability: Whether consumers are willing to buy another product – Notice on the definition of the relevant market -sets out a test – SSNIP: effect of small change in price to demand on demand for alternative

Supply substitutability: how easy it is for rival manufacturers to compete: Continental Can: cans for meat and fish and medal lids for jars – supply substitutability was high, reducing RTM – so not dominance – Microsoft – large share of software market and freezing out competitors with media player bundling – low substitutability

The Spare parts market

• Complementary products which need replacing e.g. ink cartridges – need to establish if they are part of the same market as the primary product – can amount to a sub-market in itself (consumables)

• Hilti – tried to argue that retailers selling its guns had to sell nail cartridges/nails too – ‘bundling’

• Hugin – Swedish firm manufacturing cash registers – Liptons was a company who serviced the registers – couldn’t use any spare parts other than those produced by Hugin – separate market for spare parts – Hugin was dominant in it

Examples of RPM decisions

• The RPM as deduced from the intended use of the product – Michelin– no interchangeability btw different types of tyres -so the RPM was the market for replacement tyres for heavy vehicles

• The RPM as deduced from marketing strategies – BBI/Boosey & Hawkes – different consumers/marketing strategies distinguished British brass band instrument market from the main brass instrument market

• Market power alone may be enough – BPB Industries and British Gypsum – plaster board/wet plaster – commission couldn’t decide if it was the same product market – didn’t concern themselves with precise definition of RPM – had power to allocate supplies – had to be judged objectively – was dominant

Relevant Geographic Market (RGM)

• Can generally mean the whole internal market – but can be interpreted more narrowly – United Brands – ‘an area where the objective conditions of competition applying to the product in question are the same for all traders’ – here found to cover 6 MS – France, Italy and UK excluded as had special outside arrangements

• Not just geographical area – but volume of trade - Michelin –Netherlands found to be ‘substantial part’ of the market – and the UK in British telecom – in RTE & ITP (McGill Tv Guide) - it was Eire

• Regions of MS have been a substantial part - e.g. Continental Can - NW Germany – but in Hugin SE England was not a substantial part and in Alsatel v Novasum - region of France was not substantial

• Even ports/airpotys with large volume of trade could be substantial – B&I line plc v Sealink – Holyhead port

• Hilti – whole internal market – different prices in different MS showed they were distorting market

Establishing dominance in the relevant market

• United Brands – dominance – ‘a position of economic strength…power to behave independently of its competitors/consumers’

• Barriers to entry – some might be unfair – others may seem reasonable

Relative share of the market

• Little difficulty finding dominance if >80% - Tetrapak dominant (90%), Continental Can (70-80%), Intel Corporation(70%), Akzo Chemie (>50%)

• Will also consider market fragmentation (United Brands – only 40-45% but fragmented market)

Legal Factors

• E.g. effect of IP rights – Hugin – design for cash registers was patented; Tetrapak – patent licence over design of cartons – in Microsoft – one of the penalties was to break IP protection

Superior Technology

• Can provide power base and insulate it from market forces – capable of abuse

• Hoffmann-La Roche & Co (vitamins) and Michelin (replacement tyres for heavy vehicles)

Wealth of Capital as a barrier to entry

• Access to large amounts of capital – predatory pricing policies can be undertaken – Akzo – chemical – reduced the price to below the average variable cost – making a loss on sales to drive rival out of market

Vertical Integration

• Can lead to someone controlling the whole process – United Brands

Sophisticated distribution systems

• Variation of vertical integration – Hoffmann-La Roche – highly sophisticated sales network – e.g. English clause

Brand Identification

• E.g. United Brandsi – Chiquita trademark

Abusive behaviour : Dominance itself doesn’t amount to a breach – non-exhaustive list in A102

• Often controversial as there is disiagreement as to what activity is harmful to a market

• Intel – system of generous rebates - inability of rivals to compete/innovate – 70% market dominance so rebates conditional on buying less of a rivals products/none at all was abusive

Refusal to Supply

• Commercial Solvents Corporation (CSC) – wouldn’t supply competitor with material necessary for end product

• Abusive if done w/o objective justification

• United Brands – sought to control the length of time that bananas remained under control of UB before sale

• B&I Sealink – used control of the port to give better sailing times to its own ferries

• McGill TV – TV company...