Abuse of Dominance

Objectives

By the end of this lecture, students should be able to:

• Understand the concept of dominance in competition law
• Identify how dominance is determined in relevant markets
• Explain different forms of abusive conduct
• Analyze the economic and legal assessment of abuse
• Understand enforcement approaches and remedies

1. Introduction to Abuse of Dominance

1.1 Meaning of Abuse of Dominance

Abuse of dominance refers to conduct by a dominant undertaking that exploits its market power in a manner that restricts competition or harms consumers. While holding a dominant position is not illegal, abusing that position is prohibited under competition law.

1.2 Rationale for Regulating Dominance

Dominant firms have the ability to influence market conditions independently of competitors and consumers. Without regulation, such firms may engage in conduct that excludes competitors, reduces consumer choice, and undermines market efficiency.

1.3 Legal Framework

Most competition regimes prohibit the abuse of a dominant position. For example, Article 102 of the Treaty on the Functioning of the European Union (TFEU) and similar provisions in other jurisdictions regulate dominant conduct.

2. Determination of Dominance

2.1 Relevant Market Definition

Determining dominance begins with defining the relevant market. This includes both the product market and the geographic market in which the undertaking operates.

2.2 Market Share

Market share is a key indicator of dominance. A high and sustained market share may suggest dominance, although market share alone is not conclusive.

2.3 Market Power

Market power refers to the ability of a firm to act independently of competitive pressures. Factors such as pricing freedom and customer dependence are considered.

2.4 Barriers to Entry

High barriers to entry, such as legal restrictions, high capital costs, or control over essential infrastructure, strengthen a firm’s dominant position by preventing new competitors from entering the market.

3. Types of Abusive Conduct

3.1 Exclusionary Abuse

Exclusionary abuse involves conduct aimed at excluding competitors from the market or preventing their expansion.

3.2 Predatory Pricing

Predatory pricing occurs when a dominant firm deliberately prices below cost to eliminate competitors, with the intention of raising prices once competition is weakened.

3.3 Refusal to Supply

A refusal to supply occurs when a dominant firm denies access to essential goods, services, or facilities without objective justification, thereby restricting competition.

3.4 Tying and Bundling

Tying involves making the sale of one product conditional upon the purchase of another. Bundling involves selling products together as a package. These practices may be abusive if they foreclose competition.

3.5 Exploitative Abuse

Exploitative abuse occurs when a dominant firm directly exploits consumers or trading partners.

3.6 Excessive Pricing

Excessive pricing involves charging unfairly high prices that bear no reasonable relation to the economic value of the product or service.

3.7 Unfair Trading Conditions

Dominant firms may impose unfair contractual terms, such as discriminatory pricing or unjustified exclusivity, on customers or suppliers.

4. Assessment of Abuse

4.1 Objective vs Effects-Based Analysis

Modern competition law focuses on the effects of conduct rather than form alone. Authorities assess whether the conduct has actual or potential anti-competitive effects.

4.2 Economic Analysis

Economic evidence plays a crucial role in assessing dominance and abuse. Authorities examine pricing strategies, cost structures, and market dynamics.

4.3 Objective Justification

A dominant firm may justify its conduct by demonstrating legitimate business reasons, such as efficiency gains or technical necessity.

5. Enforcement and Remedies

5.1 Role of Competition Authorities

Competition authorities investigate abuse of dominance through market studies, complaints, and proactive enforcement.

5.2 Remedies and Sanctions

Remedies may include fines, behavioural commitments, structural remedies, and orders to cease abusive conduct.

5.3 Private Enforcement

Victims of abusive conduct may bring private actions seeking damages or injunctive relief.

6. International Case Laws on Abuse of Dominance

6.1 United Brands v Commission (1978) – EU

• The court held that excessive pricing by a dominant firm may constitute abuseif the price is unfair in itself or when compared to competing products.

6.2 Hoffmann-La Roche v Commission (1979) – EU

• This case established that loyalty rebates offered by dominant firms may constitute abuse by foreclosing competition.

6.3 Microsoft Corp v Commission (2007) – EU

• Microsoft was found to have abused its dominant position by tying its media player and refusing to supply interoperability information.

6.4 Zambia Sugar Plc v Competition and Consumer Protection Commission (2018) – Zambia

• The court upheld findings of abuse of dominance where discriminatory pricing-practices restricted competition in the sugar market.

7. Conclusion of Lecture 3

7.1 Summary

This lecture examined the concept of dominance, methods of determining market power, forms of abusive conduct, and enforcement mechanisms. It highlighted that dominance itself is lawful, but abuse of that dominance is prohibited.

7.2 Link to Next Lecture

The next lecture will focus on merger control, examining how mergers and acquisitions are regulated to prevent excessive market concentration.

➡  Next Lecture:  Lecture 4 – Merger Control

Abuse of Dominance /E-cyclopedia Resources by Kateule Sydney is licensed under CC BY-SA 4.0