Abuse Concept
Market Power
The second aspect of competition law involves the control of monopolies and businesses with dominant market power. Monopolies and near monopolies have strong market power, which they are in a position to abuse. Until the Competition Act came into force, there was little restriction on such bodies using their market power as they as it wished.
Monopolies and near monopolies may impose unreasonable standard terms of trade. They may discriminate in relation to the terms of trade. They may restrict production and thereby artificially increase prices. They may choose not to deal with certain entities. They may engage in discriminatory pricing so as to maximise profits They may require customers who purchase the desired product to also buy other unrelated products.
Other Measures
Over the last 50 years, there have been a number of developments which have sought to protect businesses and consumers against monopoly powers. In the state sector, where there are a number of monopoly providers, European Union law has required significant changes to earlier practices. In transport, communications, broadcasting, gas and electricity, there are regulators who have a degree of control over the exercise of monopoly power by the relevant utility providers.
The courts in Ireland have indicated that they would interpret standard form contracts by public utilities in a way that requires at least a minimum of fairness. The Unfair Contract Terms regulations and other consumer protection legislation has limited the extent to which monopolies can impose whatever terms and conditions that they wish.
Competition Act Prohibition
Section 5 of the Competition Act is aimed at the abuse of a dominant position. Monopolies and near monopolies of themselves are not illegal in themselves. However, there may have powers to prevent and restrict mergers which might decrease competition, in particular by the emergence of dominant players or monopolies.
Section 5 of the Competition Act is the exact same terms as the corresponding Article 102 of the European Union Treaties. As with the prohibition on anticompetitive agreements and practices, the Irish Act applies to activities within the State or in part of the State. The Treaty provisions apply only to acts and conduct which affect trade between European Union states.
As with section 4 of the Act, interpretation of and abuse of a dominant position is informed and guided by decisions and practices of the EU Commission and the European court as well as decisions of the Irish Competition Authority and the Irish courts.
Abuse Instances
Abuse of a dominant position in relation to trade in goods and services is prohibited. Abuse covers a wide range of acts, omissions and behaviour.
The legislation sets out certain types of potentially abusive behaviour. It refers to
• directly or indirectly imposing unfair purchase or selling prices or other unfair conditions;
• limiting production, markets or technical development to the prejudice of consumers;
• applying dissimilar conditions to equivalent transactions with other trading parties, placing them at a competitive disadvantage; and
• making the conclusions of contracts subject to terms and conditions which have no connection with the subject matter of the contract.
Dominant Undertaking
An abuse of a dominant position by an undertaking is prohibited. An undertaking is any business for profit or gain. The legislation applies to single dominant undertakings and a number of undertakings which are collectively dominant.
In duopoly and oligopoly, a limited number of parties may act collectively. More commonly, they may breach the section 4 prohibition on cartel behaviour, but they also are found to be collectively dominant.
Dominance is not defined by the Act. It implies economic strength which enables the party concerned to prevent or restrict effective competition in the relevant market. Another defining characteristic is the ability to act independently of consumers without having to respoy have the power to exclude competition.
It may have the ability to eliminate or weaken existing competitors or potential competitors. It can typically have sufficient market power so that normal competition is eroded or eliminated. Dominance may be shown by factors such as high market share, the high costs of entering the market, governmental regulation, necessary resources or superior technology.
The existence of dominance is proved by economic evidence. The question of the relevant market is important. If the market is one where there are no ready substitutes, the entity may be more easily proved to be dominant in it.
The Irish Competition Act applies to dominance in the State or in a part of the State. Dominance may exist in a geographical area. It might be shown where customers do not have a practical alternative in relation to the goods and services concerned.
Abuse
The legislation applies to the abuse of a dominant position. An abuse is an improper exploitation of the undertaking’s position. An abuse usually involves methods and behaviour which would not be possible under circumstances of competition. Whether or not there has been abuse is judged objectively. There may be a question of degree as to the point at which conduct becomes abusive.
Relevant factors include
• whether the conduct is unfair and restrictive;
• whether it is normal industry practice;
• how far the competition is already weakened;
• the effect of the conduct on competitors;
• whether the intention is to exclude or is legitimate; and
• whether the conduct is proportionate.
The abuse of a dominant position is a criminal offence.
Prices & Irrelevant Conditions
The legislation gives a number of examples as set out above. This includes the imposition of unfair prices and selling conditions. A price may be unfair when there is no reasonable relationship between the cost and the economic value of the product. Another example is the limitation of production, markets or technical development to the prejudice of consumers.
A monopoly or near monopolist may be in a position to discriminate in the prices it charges. Monopolies may be able to charge a higher charge to some customers and lower charges to others. By charging each customer the maximum that it can afford to pay, the monopolist maximizes profits.
Tying involves applying conditions that unjustifiably require goods and services to be purchased that are irrelevant to the principal transaction. A manufacturer may require all parts and services to be purchased from it. Another potential abuse is the refusal to supply or deal with particular customers, in particular, potential competitors. If the refusals to dealers are objectively unjustifiable, they may constitute an abuse.
Mergers & Acquistions
Formerly, mergers were considered from the perspective that they might lead to potential abuses of a dominant position. Mergers are now subject to specific EU regulations.
A merger that complies with it, is unlikely to be an abuse of dominant position. Where a merger or acquisition is approved or where consent is not necessary, the putting into effect of the merger or acquisition is not the abuse of a dominant position.
The Competition Authority may use the abuse of dominant position provisions to break up monopolies under certain circumstances.
There is no mechanism for obtaining prior clearance in relation to prospective abuses of a dominant position.
Multiple Levels
Where a dominant firm is vertically integrated with entities at lower levels in the market, it may also compete with entities to which it is also a supplier. It need not be selling directly to the entities in competition but to an intermediary.
In these cases,  it may be determining both wholesale and retail prices. It may be able to protect its retail business from price competition by the level of its charges to competitors at the retail level. This may squeeze their margin.
The phenomenon is particularly likely in public utilities. Â Where there is a former state provider which is still the dominant player, it will typically be obliged to offer access to services such as infrastructure to competitors in the liberalised market.
Several cases involving telecom providers have been heard by the European Court of Justice, which has focussed on the difference between wholesale and retail prices. It is not necessary to consider the absolute levels of the price, if there is evidence that the competitor’s margin is being squeezed.
Below Cost Selling
If an equally efficient competitor cannot compete by reason of being forced to operate at a loss or below normal profitability, this may constitute evidence of an abuse. It is not necessary to prove that this has an adverse effect on competition.
Indeed, the requisite response may be to require the dominant player’s retailer to raise prices. The Commission’s guidelines on margin squeeze approach the issue in the same manner as s refusal to supply. It emphasises that former dominant public utilities bear special responsibility due to their historic position.
Requiring Purchase
A dominant undertaking may exercise its market power by requiring its customers to obtain supplies in a secondary or related market from it, or from a related entity. It may require that the principal product or service may not be purchased separately from other products or services, which may be available on more competitive terms elsewhere.
The classic example is where parts, components or elements are required to be purchased with a particular product. Another example is where the dominant supplier requires that purchases be delivered by the supplier’s transport service.
The dominant undertaking may have intellectual property rights. In an EU Commission decision regarding Microsoft, it required that Microsoft offered a non-bundled version of its operating system without Windows Media Player to PC manufacturers.
Refusal to Supply
It is a fundamental principle of contract law that a person cannot be required to enter a contract involuntarily. However, there are contexts when competition law and other systems of regulation require that parties, particularly dominant entities within the market, may be required to enter contracts for supply.
Many former public utility monopolies continue to retain the network infrastructure. They will be typically required to contract with each provider on non-discriminatory terms.
An acute threat to competition may arise where there is a refusal to supply. The dominant undertaker may have a duty not to further distort and foreclose competition. A refusal to supply by a dominant undertaking may be an abuse of its dominant position unless. there is an legitimate and objective basis for the refusal. This must not be based on a commercial interest in suppressing competition. A legitimate basis may be credit considerations or overall supply constraints, which may justify a refusal to supply, depending on the context.
An undertaking is not precluded from competing with a competitor. However, its actions must be proportionate. Where the dominant supplier is supplying to other entities and customers, the refusal to extend supplies to a potential new customer may be difficult to justify and thereby be abusive, where it could damage the potential competitor.
Where there is no existing market, the position may be less clear-cut and more complex. In early cases, the European Court suggested that it was potentially abusive for a dominant undertaking to fail to assist a new entrant to the market, but it did not elaborate on the extent of the principle.
Essential Facilities
The European Courts and Commission have decided, in a number of cases, that a dominant player must allow access to its essential facilities, such as its systems, where a refusal of access would preclude competition. Sealink, which owned the Holyhead port facility, was required to give access to B&I’s competing ferry business on a non-discriminatory basis. Access had been allowed, but B&I successfully complained of discrimination.
A facility will be essential for this purpose where it is indispensable to carrying on the relevant business and there is an available alternative. There must be technical, legal or economic obstacles which make it impossible or unreasonably difficult to duplicate the facility. There must be no objective basis for the refusal.
A facility is not essential simply because it is more convenient for a competitor to use it. Some ECJ decisions have held that the mere fact that the alternative is economically unviable may not necessarily mean there is an abuse. This proposition is controversial and may go too far. Â If the refusal excludes any effective competition and is not objectively justifiable, it is likely to constitute an abuse.
IP Rights & Supply
A dominant undertaking may be able to point to the legitimate exercise of its intellectual property rights in order to justify what might otherwise be categorised as an abuse. Article 102 of the EU Treaty seeks to balance the protection of property rights with the public policy of preventing the abuse of a dominant position.
Several cases have involved a refusal to license IP rights. One of the earliest and most influential cases involved the Irish magazine Magill, which sought to publish a weekly TV guide list of all program listings of RTE, ITV and BBC. At that time, each broadcaster had its own publication with a daily listing. Each refused to grant Magill a licence to publish its listings. Consumers were required to buy all three magazines in order to obtain a comprehensive TV listing.
The Commission decided that the refusal of the broadcasters to license their IP rights constituted an abuse of a dominant position, notwithstanding that it was based on their copyright in the listings. They denied a product for which there was patent demand while reserving to themselves a market in their own publications, secondary to their broadcasting activities.
In another case,  the Commission required Microsoft to disclose particulars of its interface to allow interoperability between Windows PCs and servers. Reasonable remuneration must be paid for the use of intellectual property rights.
The refusal must relate to a product or service which is necessary to undertake a particular activity on a related market. The refusal must be such as to exclude competition on that related market. It must prevent the emergence of a new competitor for which there is potential demand. It must be liable to or likely to eliminate effective competition. The refusal must not be objectively justified.
IP & Replicaton
IP rights may be asserted to prevent replication. The criteria in the case law require that there be a new product. This may be innovation in the creation of a  new product or in the way in which products and services are provided.
A difficulty with new technology is that several very successful enterprises have emerged, but have been quickly eclipsed within a relatively short time. This contrasts with the more traditional economy, where product markets have remained  more static.