VL 7: Competition Law 2.0

What is Abuse of Market Power (internal growth, monopoly)?

• When a dominant undertaking is detached from basic market mecchanisms (e.g. when companies are in competition for workers, price, quality, reputation etc)→ a dominant company does not have to react to customers and competition!!

• Rebuttable assumption (can be taken back): a company is dominant when it owns at least 30% of market share

• Dominance depends on market structure (e.g. entry barriers); size does not necessarily mean dominance!!!

• Rules of competition and freedom of contract don‘t apply to monopolies anymore!!

• NOTE: it is ok to be a monopoly but it is NOT ok to ABUSE that position!!!

What are different types of Abuse?

• excessive pricing

• limiting production, markets or technical development (Shortens supply and increases prices)

• applying dissimilar conditions to equivalent transactions (different pricing) AND refusal to deal (refuse to sell product) → could be justified in some cases

• linkage of unconnected products or services (E.g. when microsoft links with firefox to provide better browsers)

  • Only a problem when ONE of the companies is dominant in at least 1 market

• Unwritten examples: essential facilities doctrine (when one company has facilities necessary to enter the next market→ bridge to arrive to railway station), control of downstream markets, self preference (when google gives search results that give them more revenueO

How is abuse of market power punished?

• fines→ are based on revenue created

• Compensation and sueing

• Termination of abuse, which can result in equal treatment or delivery of requested goods

How can we use relevant markets to determine abuse of dominant position?

• at least one of three must be given so that one can determine the relevant market where abuse of dominant position takes place

  1. Product market: INTERCHANGEABILITY→ are same goods interchangeable with other goods→ same market when goods can be chosen

  2. Geographical Market: Territory in which all merchants operate and compete under homogenous market conditions in relation to relevant products and services (mostly EU or global)

  3. Temporal Factor: when a firm has market power only in certain times of the year (e.g. pepsi sponsors uefa champions league )

What are IP rights and how are they in conflict with Competition Law+solution?

• IP Rights= International Property rights (e.g. patents); owner has right of exploitatiion (can decide whether or not to Grant license)

• Clash with competition law: IP right as economic freedom BUT when owner of license is dominant undertaking and refuses license exceptions to IP rights may apply!!

• Solution: ESSENTIAL FACILITIES DOCTRINE!!

  • When refusal itself leads to prevention of the development of a secondary market it is abuse of dominant position!!

What is the idea behind merger control and difference to monopolies?

• mergers= external growth, monopoly = internal growth

• Controls market structure (when one company buys another there is less competition), as oppose to market behavior (monopolies)

• EU controls mergers with union wide relevance: threshold is world wide revenue of at least €5bn, EU wide revenue at least €250m each

  • anything below this threshold is controled by national agencies

• Merger must then be approved by EU Commission based on some prequisites so it does not harm competition!!

What is a State Aid and what are the four criteria to determine it?

• when a member state government supports an undertaking and that support provides competitive advantage for receiving undertaking over its competitors

  1. Must be some type of money flow from government but can take on many forms; e.g. tax relief, subsidies, state guarantees (better conditions on loans) etc

  2. Intervention confers an advantage to the recipient on a selective basis; e.g. one company or industry

  3. Intervention actually or potentially distorts competition

  4. Intervention affects trade between Member states

What are exceptions to the prohibition of State Aids in EU Law?

• Art. 107: generally prohibits state aid

• exceptions

  1. Social aid, disaster relief (covid??), german unification relief→ these are guaranteed to apply

  2. Promote underdeveloped areas or important European projects

  3. Remedy serious economic disturbance

  4. Promote culture and heritage conservation

• Consequence of breach: repayment (of taxes), fines