Part V The Analytical Framework of Article 102, 12 General Conclusion

This concluding chapter retraces the main thread of the reasoning in this book, from the identification of the normative foundations of competition law to the discussion of the objective of EU competition law and Article 102 and the design of the tests to determine whether conduct is abusive and whether one or more undertakings are dominant. The objective, principles, and tests that constitute the legal fabric of Article 102 can be summarized in thirty-four propositions divided into three parts: objectives and general principles; assessment of conduct; and assessment of dominance. The chapter then highlights the main areas where the current case law or enforcement practice is in need of being reviewed. These main areas include the law on conditional rebates, refusal to supply, margin squeeze, tying, discrimination, and exploitative abuses.

Part III Tests of Abuse, 7 The As Efficient Competitor Test

This chapter looks at the as efficient competitor test. Under the as efficient competitor test, conduct is prima facie abusive if it is capable of excluding a competitor that is at least as efficient as the dominant undertaking. This test has received strong judicial endorsement in predatory pricing and margin squeeze but not in other pricing abuses, particularly rebates. The as efficient competitor test can be applied dynamically. This means that a practice can be exclusionary when it forecloses competitors that could become as efficient as the dominant undertaking within a reasonable period of time but are prevented from doing so by the allegedly abusive conduct. When this test applies, however, the only approach which is consistent with the purpose of Article 102 is to require proof of actual effects. The as efficient competitor test also applies to determine whether discrimination that is neither exclusionary nor exploitative is abusive under Article 102(c).

Part III Tests of Abuse, 8 The Consumer Harm Test

This chapter studies the consumer harm test. The consumer harm test asks whether the conduct of the dominant undertaking results in higher prices, lower output, or reduced product innovation. The test is not necessarily the manifestation of a consumer welfare objective of the competition rules but is consistent with the achievement of long-term social welfare. Therefore, the test may be applied under Article 102 even if this provision does not aim at maximizing some measure of consumer welfare but long-term social welfare. The chapter then looks at the consumer harm test in vertical foreclosure, focusing on refusal to supply and margin squeeze. Proof of consumer harm is required in all vertical foreclosure cases and not only when the refusal to supply relates to intellectual property rights.

Part II Legal Foundations, 5 The General Framework of the Abuse Tests in EU Law

This chapter assesses the key principles of the abuse test under Article 102. Article 102 envisages a causal link between dominance and abuse. The causal link must be established between dominance and competitive harm. Therefore, dominance must be an integral part of the assessment of competitive harm. Since the abuse tests under Article 102 rely on anti-competitive effects to presume competitive harm, this requirement means that dominance must be an integral element of the assessment of anti-competitive effects. Proof of the causal link between dominance and anti-competitive effects is particularly important in multi-market abuses where it is necessary to prove that dominance gives the undertaking in question either the ability or the incentive to harm competition by engaging in abusive conduct or causing anti-competitive effects on market on which it is not dominant.

Part IV Analytic of the Concept of Dominance, 10 Single Dominance

This chapter discusses the concept of dominance. There are two models of dominance: a structuralist model that regards dominance as coextensive with substantial and durable market power, and a behavioural or dynamic model that regards dominance as the ability to harm competition. Under Article 102, dominance is the ability to harm competition to the detriment of long-term social welfare. It is, therefore, a quintessentially behavioural concept. This dynamic concept of dominance is consistent with the objective of Article 102, which is not to address market failures resulting from market power but to prohibit certain unilateral conduct that harms long-term social welfare. Having defined dominance, the chapter goes on to examine the three necessary elements of the dominance test: substantial and durable market power, the presence of dynamic barriers to entry, and the absence of countervailing buyer power.

1 Introduction

This introductory chapter provides an overview of Article 102, which prohibits any abuse by one or more undertakings of a dominant position within the internal market. It is a fundamental element of the economic law of the European Union. However, its objective and scope are undefined. Only once the objective has been identified, can the legal tests for dominance and abuse be understood and developed consistently with the teleological hermeneutics that the case law mandates. This book then adopts an integrated and holistic approach to the analysis of the objective and the tests of Article 102, examines the objective and principles of Article 102 within the framework of the Treaties, and analyses Article 102 not only from a legal perspective but also under the lens of economics.

Part III Tests of Abuse, 9 Defences

This chapter explores the defences available to a prima facie case of abuse. Two preliminary issues had to be clarified first: the burden of proof and the thresholds of anti-competitive effects. When a prima facie case of abuse has been established, the dominant undertaking acquires the burden of adducing sufficient evidence to substantiate a defence. This calls for the determination of the degree of probability of the anti-competitive effects that the competition authority or claimant must prove. Defences under Article 102 can be divided into mere defences and objective justification. Mere defences do not plead a new primary fact but are limited to challenging the weight or significance of the evidence adduced by the competition authority or claimant. Objective justification is a defence that pleads a new primary fact consisting of benefits that contribute to long-term social welfare maximization.

Part II Legal Foundations, 4 The Objective of Article 102

This chapter identifies the objective of Article 102 through a process of literal and teleological interpretation. The literal interpretation of Article 102 sheds little light on its objective. The only element that points to the purpose of the prohibition is the requirement that abuses of a dominant position are prohibited as ‘incompatible with the internal market’. Therefore, the purpose of Article 102 must be determined in the light of the objectives of the internal market. A literal interpretation of Article 3(3) reveals that the economic objective of the internal market is to maximize long-term social welfare through productivity growth. Therefore, this is also the objective of the EU competition rules and Article 102 in particular. The chapter then looks at the case law on Articles 101 and 102 and the EU Merger regime.