Competition Law and Anti-Trust: Abuse of Dominant Position (Video Notes)
Abuse of dominant position under Article 102 TFEU
Article 102 TFEU prohibits any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it, in so far as it may affect trade between Member States.
Abusive conduct may consist in:
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b) limiting production, markets or technical development to the prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(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.
Page references in the transcript repeat the definition (Art. 102 TFEU) to emphasize the core prohibitions and the non-exhaustive list of abusive practices.
BONO MALU – Goal of the provision
Question posed: What are the goals of Art. 102 TFEU?
Consumers? Competitors? Competition itself? (prompting reflection on the protective aim of the provision.)
Context: Presented in the slide as a framing prompt for the protective purpose of Article 102.
The protective purpose of Art. 102 TFEU
Cited proposition: “Article 82 EC … is not designed only or primarily to protect the immediate interests of individual competitors or consumers, but to protect the structure of the market and thus competition as such (as an institution) which has already been weakened by the presence of the dominant undertaking on the market.”
Source: Avv. Gen. Kokott, British Airways v. Commission, Case C 95/04 P, §68.
Implication: The aim is to safeguard the competitive structure, not merely to shield individual players.
Goals and tools of Article 102
Protection of competition as a means to broader social benefits: lower prices, broader product availability, better quality, and more innovation.
How Art. 102 seeks to achieve this:
1) Distinguish dominance from abuse; mere creation of dominance is not punished (contrast with some US antitrust concepts).
2) Punish abuse of a dominant position only when conduct may affect trade between Member States in the internal market or a relevant sub-portion of it.
The notion of an undertaking (EU Competition law)
Dominant position is defined with reference to an undertaking: a position of economic strength enabling it to prevent effective competition on the relevant market by acting independently of competitors, customers, and consumers. (Case C-85/76 Hoffman-La Roche v. Commission; Case C-27/76 United Brands v. Commission)
The notion of undertaking is central to Article 101 (joint conduct) and Article 102 (single-firm conduct).
EU Merger Regulation (EUMR) covers structural changes due to reorganizations.
The concept of an undertaking – functional approach
The term is not defined in the Treaty; meaning is developed through case-law.
Functional approach: encompasses any entity engaged in economic activity, regardless of legal personality or status.
The undertaking is not necessarily synonymous with natural or legal personality; can include individuals, companies, partnerships, states, or public bodies involved in economic activity.
The notion of an undertaking – examples of multi-person structures
An undertaking may be an economic unit formed by multiple persons or entities in a single economic activity.
Different forms where the same entity may be acting unilaterally or jointly depending on the context of the agreement.
Joint ventures (JVs) can be treated as a single economic unit with parents or as a separate undertaking depending on the degree of independence and control.
The notion of an undertaking – natural persons, legal persons and groups of persons
An undertaking may range from a single individual to a group of companies within a corporate group.
It is defined as an economic unit with a unitary organization pursuing a specific economic aim on a long-term basis.
Individuals (natural persons) may constitute undertakings when acting as independent economic actors (e.g., sole traders).
The notion of an undertaking – further case-law examples
Wouters v. Nederlandse Orde van Advocaten: Dutch bar members who offered legal services and bore financial risks constituted undertakings.
Legal persons (companies/partnerships) may also be undertakings; the focus is on economic activity rather than purely on formal personality.
The line between internal employees/agents and independent undertakings can be blurred; agents or employees may be considered part of the undertaking when they do not bear independent economic risk.
Undertaking – parent-subsidiary relationships and control
A subsidiary with no real economic independence or one that follows parent instructions may be part of the same economic unit.
If a parent controls a subsidiary (e.g., 100% ownership or other rights to exercise decisive influence), they may form a single economic unit.
The “unified conduct” principle: parent and subsidiary may act as a single unit for competition law purposes; this can exclude internal agreements from Article 101.
Copperweld-like insight: a parent and wholly-owned subsidiary may not conspire against each other under US antitrust law; similarly in the EU, they may be viewed as a single economic unit.
The notion of undertaking – summary points
The concept is broad and centred on control and economic unity.
It includes natural persons, legal persons, and groups of persons.
The boundaries between undertakings can be fluid, especially in parent-subsidiary and JV contexts.
Dominance – foundational concept
Dominance is the starting point for the Article 102 analysis.
United Brands v. Commission laid the definition: “a position of economic strength” enabling the undertaking to prevent effective competition and to act independently of others (customers, competitors, and consumers).
Hoffmann-La Roche refined this with the notion of appreciable influence on the market’s development conditions.
Dominance – structural and behavioral elements
Dominance comprises structural (market power) and behavioral (independence) elements; the combination enables a company to prevent effective competition.
The EU courts have not set absolute dominance thresholds; assessments are case-specific.
The test is not solely about market power; it also considers the capacity to influence market outcomes.
Dominance – the case-law framework
The determination of dominance starts with market definition and moves through a set of factors to assess market power, potential entry barriers, and countervailing buyer power.
The process is iterative and tailored to the marketpecific context.
Dominance – measurement and indicators
Market shares are a common initial indicator of market power.
Very large market shares tend to indicate dominance, but are not conclusive; market power depends on the market context.
AKZO (50% threshold) is used as an indicative benchmark, but the burden of proof remains on the dominant undertaking.
Market shares and indicators of dominance
In most markets, market shares provide a useful first approximation of dominance.
In a single-supplier market (monopoly), market shares are 100% by definition.
Large market shares strongly indicate power, but exceptions exist; very large shares are often evidence of dominance, except in exceptional circumstances.
The AKZO decision uses a 50% share as a reference point; however, dominance must be proved with a broader set of factors.
Other factors in dominance assessment
Beyond market share, the EU courts consider competition in the market for barriers to entry or expansion, and the presence of countervailing buyer power.
The analysis is not purely mechanical; the presence of strong entry barriers or a lack of effective competitive constraints strengthens the case for dominance.
The assessment recognizes that dominance is about the ability to exclude or impede competition, not merely about who controls most of the market.
Special responsibility of a dominant undertaking
Once an undertaking is dominant, it bears a special responsibility not to distort competition.
This special responsibility is rooted in the general EU objective of the internal market and competition policy, as affirmed in Michelin I and subsequent cases (N.V. Nederlandsche Banden Industrie Michelin v Commission; Post Danmark v Konkurrencerådet).
General definition of abuse (Hoffmann-La Roche framework)
Abuse is objective and can be proven regardless of intent; however, intent may be considered depending on the conduct (e.g., predatory pricing).
Abuse must have an influence on the market structure: restraining competition can cause certain market actors to exit or lose market share.
Abuse involves methods that run counter to normal competition.
The effects of abuse must restrict the growth of the remaining degree of competition; effects can be potential rather than actual, and there is no de minimis threshold required for evidence of abuse.
Exploitative abuses – Unfair excessive prices
Article 102(a) prohibits imposing unfair purchase or selling prices or other unfair trading conditions.
United Brands (banana case) established a two-stage test:
(1) Is there an excessive difference between the costs incurred and the price charged?
(2) Is the price unfair in itself or when compared to competing products?
The Court held that prices are excessive if the price-cost differential is excessive and the price is either unfair in itself or in relation to competitors.
Exclusionary abuses – overview
Continental Can established that abuse can concern market structure, not just direct harms to consumers.
The EU has developed a suite of tests to assess the legitimacy of a dominant undertaking’s conduct toward competitors under a more economic approach.
The enforcement landscape has narrowed the scope for exclusionary abuses and emphasizes effects on efficient competitors and market structure.
Exclusionary abuses – Predatory pricing
Predatory pricing: a price-related abuse where a dominant firm prices below costs to drive competitors out of the market.
Not all price competition is unlawful; the test requires comparing price with costs and the strategy.
AKZO: prices below average variable costs (AVC) are abusive regardless of immediate market exit; prices above AVC but below average total costs (ATC) can be abusive if part of a plan to eliminate competition.
The Areeda–Turner framework informs the practical assessment of predation in EU law.
Exclusionary abuses – Post Danmark I example
Post Danmark I involved a postal incumbent charging prices below ATC on one market but above average incremental costs on another (unaddressed mail).
Key takeaways:
Prices above ATC cannot be considered anti-competitive effects.
Prices below ATC, but above average incremental costs, may still allow an as-efficient competitor to compete; the incremental cost concept is central.
Exclusionary abuses – Margin squeezes
Margin squeeze occurs when an upstream supplier, who is also an incumbent, controls an essential facility and sets prices for upstream access in a way that makes downstream competition unprofitable.
Test: compare the price for access to the input with the retail price charged to end users; if the incumbent cannot profitably compete downstream given the upstream price, this is considered an exclusionary effect on efficient competitors.
Exclusionary abuses – Refusals to deal & Essential Facilities
Refusals to deal can be abusive depending on objective tests:
A dominant firm refuses to supply a raw material or reserves it to itself if the refusal risks wholly eliminating competition for a market.
Refusals to supply indispensable services may be abusive unless objectively justified.
Access to essential facilities (facilities that cannot be easily duplicated) can be grounds for abuse, including license of IP rights, if four cumulative conditions are met (not fully listed in the transcript).
Exclusionary abuses – Tying
Tying: a dominant firm makes the availability of one product conditional on obtaining another product, typically where the latter is not dominant.
Classic examples: Hilti tying cartridge strips to nails; Microsoft tying Windows OS to Media Player; Tetra Pak tying cartons to machines and services.
Article 102(4)(d) prohibits tying, but jurisprudence has not always followed a per se approach; courts historically treated tying as per se abuse when the tied products belong to different markets and the effect is foreclosure.
Exclusionary abuses – Exclusive dealing
Exclusive dealing: dominant supplier requires customers to purchase all or most of their needs from the dominant firm.
Could arise from contractual clauses or de facto arrangements.
Hoffmann-La Roche provided an early per se framework: exclusivity designed to restrict customers’ choice and negatively affect competition structure.
Exclusionary abuses – Rebates
Rebates: anti-competitive rebates confer advantages that incentivize customers to deal only with the dominant supplier, foreclosing competition.
Rebates can be viewed as a form of price-based de facto exclusive dealing and are analyzed under Article 102 (b) and (c) but typically under the broader abuse framework.
Case-law identifies multiple types: individualised rebates (Hoffmann-La Roche), targets (Michelin I), retroactive rebates (Tomra), bonuses or discounts on turnover (British Airways), and standardized conditional retroactive rebates (Post Danmark II).
Summary and connections
Art. 102 distinguishes between mere dominance and abuse, and emphasizes effects on trade and competition.
The protective aim is to preserve market structure and competitive processes for long-term welfare gains.
The notion of undertaking is broad and context-driven, including relationships among parent and subsidiary entities, JVs, and even individuals in economic activity.
Dominance is assessed through market definition, barriers to entry, and countervailing buyer power, with market shares serving as an indicative but non-definitive measure.
Abusive conduct can be exploitative (unfair prices) or exclusionary (anti-competitive conduct harming rivals or preventing competition).
A range of tests and principles guide analysis, from the two-stage price-excess test in United Brands to the Areeda–Turner approach for predation, and the incremental cost concepts in Post Danmark I.
Practical implications: dominant firms must balance profits with a duty not to distort competition; the framework supports consumer welfare through competition-friendly outcomes such as lower prices, innovation, and better services.
Key cases and principles cited in the transcript
Hoffman-La Roche v. Commission (Case 85/76; Case C-27/76)
United Brands v. Commission (Case 27/76)
AKZO Chemie BV v. Commission (Case C-62/86)
Post Danmark A/S v Konkurrencerådet (Case C-209/10, and Post Danmark II cited in the rebates discussion)
Michelin I (Case 322/81)
N.V. Nederlandsche Banden Industrie Michelin v Commission (ECJ 1983)
Continental Can (as to market structure and entry barriers)
Wouters v. Dutch Bar (Case C-309/99)
Bundeskartellamt v. Volkswagen (Case C-266/93)
Parker v. Viho (Viho Europe BV v Commission, Case C-73/95 P)
Hydrotherm Gerätebau GmbH v. Compact del Dott Ing Mario Andreoli & C Sas (Case 170/83)
Copperweld Corp. v. Independence Tube Corp. (US case cited for analogy)
MOTOE v Elliniko Dimosio (Case C-49/07)
Enichem v Commission (Case T-6/89)
Nungesser v Commission (Case 258/78)
Becu (Case C-22/98)
Breeders’ rights: roses (Case 258/78 reference in the context of undertakings)
ext{Important definitions and tests:}
ext{AVC} = average variable cost; ext{ATC} = average total cost.
The two-stage test for unfair prices: ext{Is the price-cost differential excessive? and is the price unfair in itself or relative to competitors?}
The Areeda–Turner test for predatory pricing, typically focusing on prices below variable costs and the strategic intent to drive competitors out.
The incremental cost concept in Post Danmark I: analyze prices in relation to incremental costs to assess anti-competitive effects.
Practical implications for exam preparation
Be able to distinguish dominance (a structural/market power concept) from abuse (conduct).
Understand the protective purpose of Art. 102 and its focus on market structure and competition, not merely individual competitors or consumers.
Be prepared to discuss how to identify an undertaking in various corporate structures (parents, subsidiaries, JVs, agents, and natural persons).
Know the main categories of exclusionary abuses (predatory pricing, margin squeezes, refusals to deal, essential facilities, tying, exclusive dealing, rebates) and the associated tests.
Recall key tests and thresholds (e.g., 50\% market share as a benchmark, AVC/ATC in predation, incremental costs in Post Danmark II).
Be able to connect the dots between market power, entry barriers, and buyer power when assessing dominance.
Consider ethical and social implications: protecting market structure benefits society through efficiency, innovation, and consumer welfare.
Connections to broader competition law themes
Article 101 (anti-competitive agreements) vs Article 102 (abuse of dominance): different conduct and different legal tests.
The EU’s shift toward a more economic approach in evaluating exclusionary abuses, with emphasis on effects on efficient competitors and market structure.
The role of case-law as the primary source for defining undertakings, dominance, and abuse, given the lack of formal statutory doctrine on some concepts.
Quick recap of core ideas
Abuse under Art. 102 is prohibited when it may affect trade between Member States and consists of practices that restrict competition or exploit consumers.
A dominant position is a position of economic strength allowing independence from competitors, customers, and consumers; dominance is context-specific and not solely about market share.
The undertaking concept is broad and situational; parent-subsidiary relationships can be treated as a single economic unit depending on control.
Abuse concepts split into exploitative (unfair prices) and exclusionary (conduct aimed at foreclosing rivals or preventing competition).
The law employs multiple tests and benchmarks (e.g., customer welfare, Areeda–Turner, Post Danmark cost tests) to assess the legality of conduct.
Article 102 TFEU prohibits the abuse of a dominant position by one or more undertakings within the internal market, or a substantial part of it, if it may affect trade between Member States. The primary goal of this provision is to protect the structure of the market and competition itself, rather than solely individual competitors or consumers, aiming for broader social benefits like lower prices and innovation.
The Notion of an Undertaking
An "undertaking" is a central concept, not defined in the Treaty, but developed through case-law.
It encompasses any entity engaged in economic activity, regardless of legal form or personality, including individuals, companies, and groups forming a single economic unit (e.g., a parent company and its controlled subsidiary).
Dominance
Definition: A position of economic strength enabling an undertaking to act independently of competitors, customers, and consumers, thereby preventing effective competition (United Brands, Hoffmann-La Roche).
Assessment: Determined by market definition, market shares (e.g., 50\% is an indicative benchmark as per AKZO), barriers to entry or expansion, and countervailing buyer power. Dominant undertakings bear a "special responsibility" not to distort competition (Michelin I).
General Definition of Abuse
Abuse is objective and involves conduct that runs counter to normal competition, restricting the remaining degree of competition; effects can be potential rather than actual (Hoffmann-La Roche).
Types of Abuse
1. Exploitative Abuses
Unfair Excessive Prices: Prohibited under Article 102(a). The United Brands two-stage test assesses if there's an excessive price-cost differential and if the price is unfair internally or in relation to competitors.
2. Exclusionary Abuses: Aim to harm rivals or prevent competition, concerning market structure.
Predatory Pricing: Pricing below costs to eliminate competitors.
AKZO test: prices below average variable costs (AVC) are abusive; prices above AVC but below average total costs (ATC) can be abusive if part of a plan to eliminate competition.
Post Danmark I clarified that prices above ATC are not anti-competitive, while prices below ATC but above average incremental costs may still allow efficient competition.
Margin Squeezes: An upstream incumbent supplier controls an essential facility and sets input prices making downstream competition unprofitable for efficient rivals.
Refusals to Deal & Essential Facilities: Can be abusive if a dominant firm refuses to supply an indispensable raw material or service, especially for essential facilities (which cannot be easily duplicated).
Tying: Making the availability of one product conditional on obtaining another (prohibited by Article 102(d)).
Exclusive Dealing: Requiring customers to purchase all or most of their needs from the dominant firm (Hoffmann-La Roche).
Rebates: Anti-competitive if they incentivize customers to deal exclusively with the dominant supplier, foreclosing competition (e.g., individualized, retroactive rebates as seen in Tomra, Post Danmark II).