Understanding Article 102 Of The TFEU: Abuse Of Dominance

Definition of Abuse of Dominance

The issue that can be determined from the current scenario is whether the conduct of Alfa was considered to amount as an abuse of dominance that is in association with Article 102 of the TFEU[1].

Article 102 of the TFEU[2] which was formerly or previously under Article 82 of the European Community Treaty is considered to prevent any kind of dominant and overriding undertakings from abusing the position within the internal market or a certain part of the market as such is considered to create incompatibility within the internal market as it causes an impact on the trade between the member states. The abuse is considered to be of commanding unfair procurement or retailing charges as well as unfair trade conditions in a direct or indirect manner. It also implies the restraining of production as well as markets or technical developments that might be detrimental for the customers[3]. Discrimination between the trade parties is supposed to be in connection with the placing of dissimilar conditions on equivalent transactions and this is considered to be abuse of dominance as well. In addition to this, the making of original contract into a subject of acceptance for supplementary obligations were considered to be through the nature of commercial usage an abuse of dominance as it was subjected to the contracts. It can be emphasized through the case of Aeroports de Paris v Commission [2000] ECR II-3929[4]. Thus, it can be stated that it is significant and essential to understand the context of the reforms as the European Union law follows a form-based approach that places too much dependance on the form of conduct rather than its effects. The elements of Article 102 of the TFEU[5] are considered to prohibit and regulate the abusive conduct through the dominant undertakings as the possession as well as strengthening of the dominant position is supposed to be through competition and such falls under the scope of prevention or prohibition. Therefore, it can be understood that the dominance alone is not supposed to be an offence as such can create a direct result of the inventions as well as entrepreneurship[6].

The modernizing effects of Article 102[7] is considered to be traced back to the fact that market power needs to be calculated on the effects of the market as these are supposed to be acknowledging the exceptions that create illegality of the horizontal price-fixing. Undertaking as per the TFEU[8] and the Competition Act 1998[9] is considered to be covering any natural as well as legal person who is supposed to be engaging in certain kind of economic activities in spite of the legal form in which it is financed. However, this particular section is supposed to concentrate on the market and the realistic problems faced by the market in competition as the behaviors of restrictive effects are considered to harm the consumers[10]. Due to this, there was a lot of uncertainty and ambiguity in connection with the new approach as the modernization of Article 102[11] led to a sequence of judgments due to the ancient formalistic approach. It can be elucidated through the case of United Brands Co v Commission of the European Communities (27/76) [1978] E.C.R. 207[12] which dealt with the abuse of the dominant position. The case was considered to demonstrate the central and along with such dominant position as a position of pecuniary strength as the undertaking gave power to prohibit operative competition in the pertinent market as it behaved independently of its customers, competitors and consumers. Thus, it can be stated that the market shares as well as the size and resources with respect to the enterprise as well as the economic power of the enterprise would be creating the basis for understanding abuse of dominance[13].

Elements of Article 102

This particular provision is considered to assess dominance on the basis of product market and along with such the geographic market. The product market is supposed to be made of products as well as services where the consumer is considered to offer a substitute for each other due to the features and prices that are made for their intended usage. On the other hand, the geographic market is supposed to relevant through the area where the conditions of the competition are given for products that are homogenous. Thus, it can be stated that the market shares are supposed to be the first indication in understanding the abuse of dominance as it is compared with others. It can be illustrated from the case of Hoffmann – La Roche v Commission Case 85/76 [1979] ECR 461[14]. However, the commission views that the higher the market share, the longer the duration of time is with which it is held. Therefore, it is a preliminary indication of dominance[15]. Nevertheless, it has also been stated that if a market share is less than forty percent then it is unlikely to be a dominant. The Commission due to such takes other factors into consideration in assessing the abuse of dominance. This is supposed to be inclusive of how easily the companies enter the market as the barriers are considered to be evaluated[16]. If there are no presence of counteracting buyer power then the overall size as well as strength of the company along with its resources are understood as such are pursuant to the several levels of supply chain. The competition regime is supposed to encourage any kind of efforts that form the basis of the society’s competitive layout. Consequently, as a result, until and unless there is an abuse the infringement would not be penalized on the basis of Article 102 of the TFEU[17].

Therefore, it can be stated that, holding a dominant position would not in itself make it illegal. Nevertheless, despite such, a dominant company is considered to have certain kind of responsibility to safeguard the interests of the others through its conduct as they have the duty to not distort the competition. An example of a behavior would be regarding the requirement of the purchasers to obtain all units of a explicit product only from a leading or dominant company would act as abuse of dominance. Furthermore, the setting prices at a loss-making level along with predatory pricing or refusing to supply any input that is indispensable for the competition is also considered to be abuse of dominance as it is for an ancillary market as the charge is for excessive prices[18]. Hence, the Article 102 of the TFEU[19] is considered to complement the regulations by dealing with arrangements between two or more activities. The provision therefore, is considered to limit or restrict the conducts of the undertakings by creating a dominant position as these should be engaging in diverse economic activities along with the competitors. Thus, each and every company being dominant has the option of having special responsibility that would not affect or hinder the competition on the market. As a result, it can be understood that, the Article 102 of the TFEU[20] does not just prohibit the dominance as such but it merely specifies the restrictions or limitations on the companies that are considered to create a dominant position[21].

Market Power and its Importance

If a firm or a company is considered to engage in any kind of anti-competitive behavior by infringing the competition law then the company or the firm in question would be subjected to fines as such would be levied by the Commission under the Regulation 1/2003[22]. The Commission’s fining policy is supposed to be intended at punishment and deterrence as the fines replicate the gravity and duration of the infringement. Therefore, they are calculated through the framework of a set of Guidelines that have been revised in the year 2006. However, the starting point for the fine is well-thought out to be for the percentage of the annual sales of the company as the product is supposed to be liable for infringement. The annual sales that would be penalized would be dependent upon thirty percent of the sales. This is considered to be then multiplied through the number of years as well as months in which the infringement lasted. The fine therefore, is considered to be increased as well as decreased as the maximum level of fine is supposed to be capped at ten percent of the general annual turnover of the company[23]. The dominant undertakings in case of abuse can claim for defence through objective justifications as per the case of Streetmap.EU Ltd v Google Inc [2016] EWHC 253[24] where the High Court detected that the exclusionary effect was open to the dominant undertaking and the counter-balance outweighed the advantages that benefitted the customers. Due to this the technical improvements in the quality of the goods were supposed to create economic considerations for the price or cost.

As per the above-mentioned rule, it can be comprehended that, a dominant position is not considered to be illegal in itself as a dominant company has the authority and the entitlement of competing on the merits as any other corporation or organization in its place. Nevertheless, a dominant company is awarded with a special responsibility that is in connection with the safeguard of a decent conduct that would not distort the competition as the abuse would be based on the behavior of the conduct that distorts competition. From the analysis of the scenario, it can be understood that, Alfa had abused its dominance to an extent when it refused to supply input indispensable for competition as such would create a loss-making level in the ancillary market by rejecting to sell Bravo’s vegan cheese in its specialist plant-based food stores. Alfa was also liable for abuse as it tried to make use of its dominance by selling the plant-based food vegan cheese at the entrance of its food stores and creating a disadvantageous position for other suppliers such as Charlie and Delta. Although, the market share was less than forty percent and such would not be enough for proving abuse of dominant position Alfa can be made liable for its abuse through the actions towards Bravo, Delta and Charlie. Therefore, as per Regulation 1/2003[25] of the Antitrust Regulation the Commission would be having the authority to investigate. By investigating the practices of Alfa, the Commission would send requests in context of the inspection and enter the premises of the company in question. They would also be examining or assessing the records in relation to the business and take copies of those records as well. The seal of the business premises as well as the records would be inspected and the members and staffs of the company would be questioned about the practices of Alfa. Subsequently, after the end of the initial investigative phase the Commission would be having the power of deciding on pursuing the case which would be a matter of priority as the behavior and the conduct would be analyzed in-depth of the investigation. It can be understood from the scenario that, the abuse of dominance by Alfa was regarding the refusal of dealing products and services so the exclusivity was infringed in case of Bravo. The exploitative and exclusionary practices of Alfa can be linked to abuse of its dominance. The conduct was considered to be taking place in a closely associated market and the action of Alfa towards Bravo, Charlie and delta likely strengthened the position on the dominated market. Due to this, the conduct created an abuse of dominance. However, Alfa has the authority to claim defence for the actions. In its defence, the dominant undertaking Alfa can show that the conduct was objectively justified and such would be acting as an exception, in spite of it restricting competition because the conduct was to counter-balance and benefit the consumers. The undertaking in this scenario, Alfa, needs to show the conduct to be proportionate in accomplishing the objective in order to claim defence against the allegation of abuse of dominance. Therefore, the indispensable and proportionate conduct would help the firm or the company to pursue the goal as there would not be any less-competitive alternatives for the conduct as such would have to produce similar effectiveness.

Conclusion

Therefore, in conclusion, it can be stated that, Alfa had abused the dominance as per Article 102 of the TFEU[26] with regards to the matter that they refused exclusive dealings with Bravo. The anti-competitive behavior is considered to create an imposition of fines that are subjected to the afore-mentioned regulations. These would help in punishing and deterring the individuals and the company for their practices. However, Alfa has the authority to claim defence on the basis of objective justifications.

Streetmap.EU Ltd v Google Inc [2016] EWHC 253.

Treaty on the Functioning of the European Union 1957.

Competition Act 1998.

Hoffmann – La Roche v Commission Case 85/76 [1979] ECR 461.

United Brands Co v Commission of the European Communities (27/76) [1978] E.C.R. 207.

Aeroports de Paris v Commission [2000] ECR II-3929.

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