{"id":9981,"date":"2022-07-03T15:25:58","date_gmt":"2022-07-03T15:25:58","guid":{"rendered":"http:\/\/legalblog.ie\/abuse-of-dominant-position-i\/"},"modified":"2022-11-19T16:51:53","modified_gmt":"2022-11-19T16:51:53","slug":"abuse-of-dominant-position-i","status":"publish","type":"post","link":"https:\/\/legalblog.ie\/abuse-of-dominant-position-i\/","title":{"rendered":"Abuse of Dominant Position I"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_63 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/legalblog.ie\/abuse-of-dominant-position-i\/#Commission_Powers\" title=\"Commission Powers\">Commission Powers<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/legalblog.ie\/abuse-of-dominant-position-i\/#EU_Treaty_Prohibition\" title=\"EU Treaty Prohibition\">EU Treaty Prohibition<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/legalblog.ie\/abuse-of-dominant-position-i\/#Undertakings\" title=\"Undertakings\">Undertakings<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/legalblog.ie\/abuse-of-dominant-position-i\/#Trade_Between_States\" title=\"Trade Between States\">Trade Between States<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/legalblog.ie\/abuse-of-dominant-position-i\/#Commission_Substitutability\" title=\"Commission Substitutability\">Commission Substitutability<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/legalblog.ie\/abuse-of-dominant-position-i\/#ECJ_Substitutability\" title=\"ECJ Substitutability\">ECJ Substitutability<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/legalblog.ie\/abuse-of-dominant-position-i\/#Analysing_Market\" title=\"Analysing Market\">Analysing Market<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/legalblog.ie\/abuse-of-dominant-position-i\/#Geographical_Market\" title=\"Geographical Market\">Geographical Market<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Commission_Powers\"><\/span>Commission Powers<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Fair competition is a fundamental part of the European Union&#8217;s single market.\u00a0 Parties with significant market power may distort competition.<\/p>\n<p>They may divide up markets within the EU to the prejudice of the internal market. The prohibition on the abuse of a dominant position seeks to prevent serious distortion of the operation of the market by entities with monopolistic or almost monopolistic power, such that there is an absence or impairment of effective competition.<\/p>\n<p>An entity with excessive market power may restrict output and increase prices.\u00a0 It may seek to prevent others from entering the market by discounting in order to drive out potential competitors.\u00a0 It may try to link its supply of products with other products.<\/p>\n<p>The EU Commission has significant power to apply sanctions where it finds that there has been an abuse of a dominant position.\u00a0 It may impose fines of up to 10 per cent of turnover worldwide.<\/p>\n<p>The EU Commission completed a review of its powers of sanction in February 2009, which sets out the methods by which the Commission uses its powers to proceed in investigations.\u00a0 The Commission is ultimately an administrative body, and the interpretation of completion law is ultimately one for the courts of the European Union.\u00a0 However, the guidance is practical assistance.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"EU_Treaty_Prohibition\"><\/span>EU Treaty Prohibition<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Article 102 of the European Union Treaty prohibits the abuse of a dominant position with the European Union insofar as it may affect trade between member states.\u00a0 The corresponding domestic legislation focuses on the abuse of a dominant position within the State.<\/p>\n<p>The prohibition applies to actions by \u201cundertakings\u201d, which include individuals and corporations which undertake a commercial activity.<\/p>\n<p>Holding a dominant position in itself is not an abuse under the legislation.\u00a0 There must be abuse in order for the prohibition to apply.\u00a0 There is separate legislation on mergers and acquisitions which is relevant to the accumulation of market powers by reason of a merger or acquisition.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Undertakings\"><\/span>Undertakings<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Undertakings comprise all entities carrying out any kind of commercial activity.\u00a0 It is not necessary that they be for-profit purposes.\u00a0 It has been held that certain public officials are carrying out quasi-commercial functions, which can be undertakings for this purpose.<\/p>\n<p>The European Court has held bodies which provide statutory health services as an exclusively social objective are not engaged in commercial or economic activity and accordingly are not undertakings. Where, however, the health bodies are market-based or have been privatised, they may be undertakings for the purpose of competition law.<\/p>\n<p>Undertakings may comprise a group.\u00a0 They may comprise separate linked companies, which are a single entity for the purpose of economic activity.\u00a0 This is the economic entity principle.<\/p>\n<p>The principle looks at the economic and management reality of the companies or entities in terms in order to determine whether they constitute an \u201dundertaking\u201d collectively.\u00a0 The consequence may be that one group entity is responsible for another\u2019s contravention of competition law.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Trade_Between_States\"><\/span>Trade Between States<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The EU prohibition applies where there is an effect on trade between states.\u00a0 Below this level, both the Republic of Ireland and UK competition law have an equivalent test for abuse of a dominant position within the State which has no inter-effects.<\/p>\n<p>Where there is an effect on interstate competition, national courts and their public authorities must themselves apply the EU prohibition.\u00a0 Domestic law may provide for higher standards in relation to the test for \u201cabuse\u201d of a dominant position.<\/p>\n<p>Actions may have an effect on inter-state trade if it is possible to foresee with a sufficient degree of possibility, on an objective basis, that the agreement may have an influence, direct or indirect, actual or potential, on the pattern of trade between states. This is a broad test and could potentially apply to anything that affects patterns of trade between states.<\/p>\n<p>Under the structural test, there may be an effect on inter-state trade, where there is a change in the structure of competition in the market occurs.\u00a0 This may be so even if the undertaking is dominant in one state only, on the basis that the change in structure may lead to the division of the single market.<\/p>\n<p>Economic analysis is necessary to order to consider whether there is a dominant position.\u00a0 The relevant market must be defined.\u00a0 There must be significant market power.\u00a0 The existence of barriers to entry is relevant.<\/p>\n<p>The Market Concerned<\/p>\n<p>Dominance will be relative to a particular market.\u00a0 The issue of market definition can be difficult.\u00a0 Markets may relate to particular products, locations or periods of time.\u00a0 The EU Commission has published a notice on the definition of a market.\u00a0 This sets out the Commission\u2019s practice in relation to its decision-making process in this context.<\/p>\n<p>The primary consideration in defining the market is to consider the range of products in competition with those of the undertaking concerned.\u00a0 The competitors may be actual or potential. If the product market is defined too narrowly, \u00a0then an entity may be deemed dominant. However, in a more broadly defined market, it may not be dominant.<\/p>\n<p>The interchangeability or the ability for substitution of the product with a competing product is a key factor. The Commission focuses on the level of demand substitution and the ease at which customers may switch from one product to the other.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Commission_Substitutability\"><\/span>Commission Substitutability<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The Commission applies \u201cthe small but significant non-transitory increase in price\u201d test.\u00a0 This applies a hypothetical permanent increase of the price of the order of 5 to 10 per cent.<\/p>\n<p>If there is evidence that this would cause a switch to other products as a consequence of such an increase, the product concerned and the substituted product are likely to be deemed to be part of the same market. The test is applied using an increasing set of competing products until no further substitutes are found in accordance with the test.<\/p>\n<p>If one single undertaking produced all the products for which there was no substitute in the above sense, there would be a hypothetical monopoly. The Commission cannot act on the basis of a hypothesis only.\u00a0 It must have evidence.\u00a0 Evidence may be by way of market studies and the views of market participants. It would be difficult, in practice, in smaller markets to gather sufficient evidence.<\/p>\n<p>In principle, there is always likely to be a limit to which any monopolistic provider can increase its prices without incurring some manner of substitution.\u00a0 In practice, there is likely to be a limit to increases, so as this would otherwise cause a reduction in profits.\u00a0 A wider range of products will act as substitutes at a higher price.<\/p>\n<p>If the monopolistic provider has already, as may commonly be the case, raised its price to this level, then a further 5 to 10 per cent increase might cause substitution and give the illusion that there is competition. The Commission is cognisant of this possibility and will look at the entirety of the evidence to order to gauge whether this is occurring.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"ECJ_Substitutability\"><\/span>ECJ Substitutability<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The European Court of Justice follows the Commission\u2019s approach in broad terms.\u00a0 The court is nonetheless free to interpret the provisions of the Treaty and regulations in accordance with the law as it sees fit.<\/p>\n<p>The court has traditionally focused on a substitution\/interchangeability test. It considers the cross-elasticity of demands.\u00a0 Cross elasticity is an economic concept referable to the extent to which changes in price causes changes in demand. The more elastic demand is at that price, the more changeable it is with referable to price.<\/p>\n<p>Where cross elasticity is high, relatively small changes in price will have a significant effect by way of substitution of demand by the public.\u00a0 In contrast, if demand is inelastic at a particular price, a significant, relatively high price increase will not necessarily cause a significant amount of substitution.<\/p>\n<p>The substitutability of products may be considered with reference to their objective characteristic.\u00a0 The more similar in nature the products and the more similar the functions they perform, the more likely they are to act as substitutes.<\/p>\n<p>The fact that products are similar does not necessarily mean that they are part of the same market, for the purpose of competition law.\u00a0 Famously the market for bananas was regarded by the courts as separate from the market for fresh fruit generally.\u00a0 Because bananas were available year-round and satisfied the particular needs of young, old persons and sick persons, they were accepted as being sufficiently differentiated from other fresh fruits.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Analysing_Market\"><\/span>Analysing Market<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Questions of judgment may arise in considering whether products are in the same market.\u00a0 Some products, which appear to be quite distinct, may perform the same functions so that they are sufficiently interchangeable, notwithstanding their difference in nature.<\/p>\n<p>The price range of goods and services may affect the judgment of what constitutes the relevant market.\u00a0 There may be luxury end goods which are distinct from the general market.<\/p>\n<p>Products may have multiple uses.\u00a0 There may be different markets relative to each type of use.\u00a0 The ECJ has held that the market in respect of car tyres differs depending on the type of demand.\u00a0 The original tyres fitted to vehicles during manufacturing and replacement tyres during repairs were regarded as being in separate markets.<\/p>\n<p>There was found to be a significant difference in the circumstances and strength of the market power of the purchasers in each case.\u00a0 In the former case, tyres were likely to be ordered in bulk with greater quantities, \u00a0whereas in the latter case, they were likely to be ordered as required.<\/p>\n<p>The supply side may be relevant.\u00a0 If other suppliers and producers can switch production to substitutes which can enter the relevant market at short notice and without significant cost, they may be part of the market.\u00a0 This potential competition may make a market more competitive.<\/p>\n<p>The Commission has given the example of the paper market, where e different types of paper are produced but where other producers could relatively easily enter the market by producing that different type of paper.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Geographical_Market\"><\/span>Geographical Market<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The geographical market must be considered.\u00a0 It will define the area in which conditions of competition apply between products.\u00a0 There are cultural, practical and legal reasons why products may only compete within a certain area.<\/p>\n<p>The court considers the geographical market to be the area where objective reasons based on the above criteria apply to all products and traders.\u00a0 Where radically different circumstances apply in other markets, they may not be part of the same geographic market.<\/p>\n<p>Transport costs may be a significant feature.\u00a0 Perishable goods or goods that are expensive to transport will be subject to a more limited market. Some particular markets may be seasonal or temporary.<\/p>\n<!--themify_builder_content-->\n<div id=\"themify_builder_content-9981\" data-postid=\"9981\" class=\"themify_builder_content themify_builder_content-9981 themify_builder tf_clear\">\n    <\/div>\n<!--\/themify_builder_content-->\n","protected":false},"excerpt":{"rendered":"<p>Commission Powers Fair competition is a fundamental part of the European Union&#8217;s single market.\u00a0 Parties with significant market power may distort competition. They may divide up markets within the EU to the prejudice of the internal market. The prohibition on the abuse of a dominant position seeks to prevent serious distortion of the operation of [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[158],"tags":[],"_links":{"self":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/9981"}],"collection":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/comments?post=9981"}],"version-history":[{"count":3,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/9981\/revisions"}],"predecessor-version":[{"id":20519,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/9981\/revisions\/20519"}],"wp:attachment":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/media?parent=9981"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/categories?post=9981"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/tags?post=9981"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}