BLP Midterm PDF Notes

ABUSE OF DOMINANT POSITION
xxx it is not in itself illegal for an undertaking to be in a dominant position and such a dominant
undertaking is entitled to compete on the merits. However, the undertaking concerned has a
special responsibility not to allow its conduct to impair genuine undistorted competition on the
common market. Xxx
Communication from the Commission

Guidance on the Commission's enforcement priorities in applying Article 82 of the EC Treaty to
abusive exclusionary conduct by dominant undertakings
(2009/C 45/02)
Main Questions
1. What is the relevant market? (Section 4(i, k) & Section 24)
(i) Market refers to the group of goods or services that are sufficiently interchangeable or
substitutable and the object of competition, and the geographic area where said goods or services
are offered;
(k) Relevant Market refers to the market in which a particular good or service is sold and which is
a combination of the relevant product market and the relevant geographic market, defined as
follows:
(1) A relevant product market comprises all those goods and/or services which are regarded as
interchangeable or substitutable by the consumer or the customer, by reason of the goods
and/or services’ characteristics, their prices and their intended use; and
(2) The relevant geographic market comprises the area in which the entity concerned is involved
in the supply and demand of goods and services, in which the conditions of competition are
sufficiently homogenous and which can be distinguished from neighboring areas because the
conditions of competition are different in those areas.
SEC. 24. Relevant Market. – For purposes of determining the relevant market, the following
factors, among others, affecting the substitutability among goods or services constituting such
market and
the geographic area delineating the boundaries of the market shall be considered:
(a) The possibilities of substituting the goods or services in question, with others of domestic or
foreign origin, considering the technological possibilities, extent to which substitutes are available
to consumers and time required for such substitution;
(b) The cost of distribution of the good or service, its raw materials, its supplements and
substitutes from other areas and abroad, considering freight, insurance, import duties and non-
tariff restrictions; the restrictions imposed by economic agents or by their associations; and the
time required to supply the market from those areas;
(c) The cost and probability of users or consumers seeking other markets; and
(d) National, local or international restrictions which limit access by users or consumers to
alternate sources of supply or the access of suppliers to alternate consumers.
2. Is there a dominant entity or a dominant group of entities in the relevant market? (Section 4(g)
and Section 27)
(g) Dominant Position refers to a position of economic strength that an entity or entities hold
which makes it capable of controlling the relevant market independently from any or a
combination of the following: competitors, customers, suppliers, or consumers;
SEC. 27. Market Dominant Position. – In determining whether an entity has market dominant
position for purposes of this Act, the Commission shall consider the following:
(a) The share of the entity in the relevant market and whether it is able to fix prices unilaterally or
to restrict supply in the relevant market;
(b) The existence of barriers to entry and the elements which could foreseeably alter both said
barriers and the supply from competitors;
(c) The existence and power of its competitors;
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(d) The possibility of access by its competitors or other entities to its sources of inputs;
(e) The power of its customers to switch to other goods or services;
(f) Its recent conducts; and
(g) Other criteria established by the regulations of this Act.
There shall be a rebuttable presumption of market dominant position if the market share of an
entity in the relevant market is at least fifty percent (50%), unless a new market share threshold
is determined by the Commission for that particular sector.
The Commission shall from time to time determine and publish the threshold for dominant
position or minimum level of share in the relevant market that could give rise to a presumption of
dominant position. In such determination, the Commission would consider the structure of the
relevant market, degree of integration, access to end-users, technology and financial resources,
and other factors affecting the control of a market, as provided in sub-sections (a) to (g) of this
Section.
The Commission shall not consider the acquiring, maintaining and increasing of market share
through legitimate means not substantially preventing, restricting, or lessening competition in the
market such as but not limited to having superior skills, rendering superior service, producing or
distributing quality products, having business acumen, and the enjoyment and use of protected
intellectual property rights as violative of this Act.
3. Is this dominance being abused/Is the dominant entity engaged in exclusionary conduct?
(Section 15)
SEC. 15. Abuse of Dominant Position. – It shall be prohibited for one or more entities to abuse
their dominant position by engaging in conduct that would substantially prevent, restrict or lessen
competition:
(a) Selling goods or services below cost with the object of driving competition out of the relevant
market: Provided, That in the Commission’s evaluation of this fact, it shall consider whether the
entity or entities have no such object and the price established was in good faith to meet or
compete with the lower price of a competitor in the same market selling the same or comparable
product or service of like quality;
(b) Imposing barriers to entry or committing acts that prevent competitors from growing within
the market in an anti-competitive manner except those that develop in the market as a result of
or arising from a superior product or process, business acumen, or legal rights or laws;
(c) Making a transaction subject to acceptance by the other parties of other obligations which, by
their nature or according to commercial usage, have no connection with the transaction;
(d) Setting prices or other terms or conditions that discriminate unreasonably between customers
or sellers of the same goods or services, where such customers or sellers are contemporaneously
trading on similar terms and conditions, where the effect may be to lessen competition
substantially: Provided, That the following shall be considered permissible price differentials:
(1) socialized pricing for the less fortunate sector of the economy;
(2) price differential which reasonably or approximately reflect differences in the cost of
manufacture, sale, or delivery resulting from differing methods, technical conditions, or quantities
in which the goods or services are sold or delivered to the buyers or sellers;
(3) price differential or terms of sale offered in response to the competitive price of payments,
services or changes in the facilities furnished by a competitor; and
(4) price changes in response to changing market conditions, marketability of goods or services,
or volume;
(e) Imposing restrictions on the lease or contract for sale or trade of goods or services concerning
where, to whom, or in what forms goods or services may be sold or traded, such as fixing prices,
giving preferential discounts or rebate upon such price, or imposing conditions not to deal with
competing entities, where the object or effect of the restrictions is to prevent, restrict or lessen
competition substantially: Provided, That nothing contained in this Act shall prohibit or render
unlawful:
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(1) Permissible franchising, licensing, exclusive merchandising or exclusive distributorship
agreements such as those which give each party the right to unilaterally terminate the
agreement; or
(2) Agreements protecting intellectual property rights, confidential information, or trade secrets.
(f) Making supply of particular goods or services dependent upon the purchase of other goods or
services from the supplier which have no direct connection with the main goods or services to
be supplied;
(g) Directly or indirectly imposing unfairly low purchase prices for the goods or services of, among
others, marginalized agricultural producers, fisherfolk, micro-, small-, medium-scale enterprises,
and
other marginalized service providers and producers;
(h) Directly or indirectly imposing unfair purchase or selling price on their competitors, customers,
suppliers or consumers, Provided that prices that develop in the market as a result of or due to a
superior product or process, business acumen or legal rights or laws shall not be considered unfair
prices; and
(i) Limiting production, markets or technical development to the prejudice of consumers, provided
that limitations that develop in the market as a result of or due to a superior product or process,
business acumen or legal rights or laws shall not be a violation of this Act;
Provided, That nothing in this Act shall be construed or interpreted as a prohibition on having a
dominant position in a relevant market or on acquiring, maintaining and increasing market share
through legitimate means that do not substantially prevent, restrict or lessen competition.
Provided further, That any conduct which contributes to improving production or distribution of
goods or services within the relevant market, or promoting technical and economic progress while
allowing consumers a fair share of the resulting benefit may not necessarily be considered an
abuse of dominant position.
Provided finally, That the foregoing shall not constrain the Commission or the relevant regulator
from pursuing measures that would promote fair competition or more competition as provided in
this Act.
4. Are there objective justification and efficiencies? (Section 15)
5. If the dominance is abused, or if the dominant entity/entities is/are engaged in exclusionary

conduct, what actions or penalties may be imposed against them? What power does the PCC have
over entities that abuse their dominant position? (Sections 12, 28, 29, 31, 33, 40, 41)
SEC. 28. Forbearance. – The Commission may forbear from applying the provisions of this Act, for
a limited time, in whole or in part, in all or specific cases, on an entity or group of entities, if in its
determination:
(a) Enforcement is not necessary to the attainment of the policy objectives of this Act;
(b) Forbearance will neither impede competition in the market where the entity or group of
entities seeking exemption operates nor in related markets; and
(c) Forbearance is consistent with public interest and the benefit and welfare of the consumers.
A public hearing shall be held to assist the Commission in making this determination.
The Commission’s order exempting the relevant entity or group of entities under this Section shall
be made public. Conditions may be attached to the forbearance if the Commission deems it
appropriate to ensure the long-term interest of consumers.
In the event that the basis for the issuance of the exemption order ceases to be valid, the order
may be withdrawn by the Commission.
SEC. 29. Administrative Penalties. –
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(a) Administrative Fines. – In any investigation under Chapter III, Sections 14 and 15, and
Chapter IV, Sections 17 and 20 of this Act, after due notice and hearing, the Commission may
impose the
following schedule of administrative fines on any entity found to have violated the said Sections:
First offense: Fine of up to One Hundred Million Pesos (P100,000,000.00);

Second offense: Fine of not less than One Hundred Million Pesos (P100,000,000.00) but not more
than Two Hundred Fifty Million Pesos (P250,000,000.00).
In fixing the amount of the fine, the Commission shall have regard to both the gravity and the
duration of the violation.
(b) Failure to Comply With An Order of the Commission. – An entity which fails or refuses to
comply with a ruling, order or decision issued by the commission shall pay a penalty of not less
than Fifty Thousand Pesos (P50,000.00) up to Two Million Pesos (P2,000,000.00) for each
violation and a similar amount of penalty for each day thereafter until the said entity fully
complies. Provided that these fines shall only accrue daily beginning forty five (45) days from the
time that the said decision, order or ruling was received.
(c) Supply of Incorrect or Misleading Information. – The Commission may likewise impose upon
any entity fines of up to One million pesos (P1,000,000.00) where, intentionally or negligently,
they supply incorrect or misleading information in any document, application or other paper filed
with or submitted to the Commission or supply incorrect or misleading information in an
application for a binding ruling, a proposal for a consent judgment, proceedings relating to a show
cause order, or application for modification of the Commission’s ruling, order or approval, as the
case may be.
(d) Any other violations not specifically penalized under the relevant provisions of this Act shall be
penalized by a fine of not less than Fifty Thousand Pesos (P50,000.00) up to Two Million Pesos
(P2,000,000.00). Provided that the schedule of fines indicated in this Section shall be increased by
the Commission every five (5) years to maintain their real value from the time it was set.
SEC. 31. Fact Finding; Preliminary Inquiry. – The Commission, motu proprio, or upon the filing of
a verified complaint by an interested party or upon referral by a regulatory agency, shall have the
sole and exclusive authority to initiate and conduct a fact-finding or preliminary inquiry for the
enforcement of this Act based on reasonable grounds.
The Commission, after considering the statements made, or documents or articles produced in the
course of the fact-finding or preliminary inquiry, shall terminate the same by:
(a) Issuing a resolution ordering its closure if no violation or infringement of this Act is found; or
(b) Issuing a resolution to proceed, on the basis of reasonable grounds, to the conduct of a full
administrative investigation.
The Commission, after due notice and hearing, and on the basis of facts and evidence presented,
may issue an order for the temporary cessation or desistance from the performance of certain
acts by the respondent entity, the continued performance of which would result in a material and
adverse effect on consumers or competition in the relevant market.
If the evidence so warrants, the Commission may file before the DOJ criminal complaints for
violations of this Act or relevant laws for preliminary investigation and prosecution before the
proper court. The DOJ shall conduct such preliminary investigation in accordance with the revised
rules of criminal procedure.
The preliminary inquiry shall, in all cases, be completed by the Commission within ninety (90)
days from submission of the verified complaint, referral, or date of initiation by the Commission,
motu proprio, of the same.
Except as provided in Section 12 (i) of Chapter II of this Act, no law enforcement agency shall
conduct any kind of fact-finding, inquiry or investigation into any competition related matters.
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SEC. 33. Power to Investigate and Enforce Orders and Resolutions. – The Commission shall
conduct inquiries by administering oaths, issuing subpoena duces tecum and summoning
witnesses, and commissioning consultants or experts. It shall determine if any provision of this
Act has been violated, enforce its orders and carry out its resolutions by making use of any
available means, provisional or otherwise, under existing laws and procedures including the power
to punish for contempt and to impose fines.
SEC. 40. Writ of Execution. – Upon the finality of its binding ruling, order, resolution, decision,
judgment, or rule or regulation, collectively, the Commission may issue a writ of execution to
enforce its decision and the payment of the administrative fines provided in the preceding
sections.
SEC. 41. Basic Necessities and Prime Commodities. – If the violation involves the trade or
movement of basic necessities and prime commodities as defined by RA 7581, as amended, the
fine imposed by the Commission or the courts, as the case may be, shall be tripled.
6. Are there non-adversarial remedies? (Section 37)
SEC. 37. Non-Adversarial Remedies. – As an implementing and enforcement policy, the

Commission shall, under such rules and regulations it may prescribe, encourage voluntary
compliance with this Act and other competition laws by making available to the parties concerned
the following and other analogous non-adversarial administrative remedies, before the institution
of administrative, civil or
criminal action:
(a) Binding Ruling. – Where no prior complaint or investigation has been initiated, any entity that
is in doubt as to whether a contemplated act, course of conduct, agreement, or decision, is in
compliance with, is exempt from, or is in violation of any of the provisions of this Act, other
competition laws, or implementing rules and regulations thereof, may request the Commission, in
writing, to render a binding ruling thereon; Provided that the ruling is for a specified period,
subject to extension as may be determined by the commission, and based on substantial
evidence.
In the event of an adverse binding ruling on an act, course or conduct, agreement, or decision,
the applicant shall be provided with a reasonable period, which in no case shall be more than
ninety (90) days, to abide by the ruling of the Commission and shall not be subject to
administrative, civil, or criminal action unless the applicant fails to comply with the provisions of
this Act;
(b) Show Cause Order.- Upon preliminary findings motu proprio or on written complaint under
oath by an interested party that any entity is conducting its business, in whole or in part in a
manner
that may not be in accord with the provisions of this Act or other competition laws, and it finds
that the issuance of a show cause order would be in the interest of the public, the commission
shall
issue and serve upon such entity or entities a written description of its business conduct
complained of, a statement of the facts, data, and information together with a summary of the
evidence thereof, with an order requiring the said entity or entities to show cause, within the
period therein fixed, why no order shall issue requiring such person or persons to cease and desist
from continuing with its
identified business conduct, or pay the administrative fine therein specified, or readjust its
business conduct or practices;
(c) Consent Order. – At any time prior to the conclusion by the commission of its inquiry, any
entity under inquiry may, without in any manner admitting a violation of this Act or any other
competition laws, submit to the commission a written proposal for the entry of a consent order,
specifying therein the terms and conditions of the proposed consent order which shall include
among others the following:
(1) The payment of an amount within the range of fines provided for under this Act;
(2) The required compliance report as well as an entity to submit regular compliance reports;
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(3) Payment of damages to any private party/parties who may have suffered injury; and
(4) Other terms and conditions that the Commission deems appropriate and necessary for the
effective enforcement of this Act or other Competition Laws.
Provided, That a consent order shall not bar any inquiry for the same or similar acts if continued
or repeated;
(d) Monitoring of Compliance. – The Commission shall monitor the compliance by the entity or
entities concerned, their officers, and employees, with the final and executory binding ruling,
cease and desist order, or approval of a consent judgment. upon motion of an interested
party/parties, the commission shall issue a certification or resolution to the effect that the entity
or entities concerned have, or have not, as the case may be, complied with a final and executory
ruling, order, or approval.
(e) Inadmissibility of Evidence in Criminal Proceedings. – The request for a binding ruling, the
show cause order, or the proposal for consent order; the facts, data, and information therein
contained
or subsequently supplied by the entity or entities concerned; admissions, oral or written, made by
them against their interest; all other documents filed by them, including their evidence presented
in the proceedings before the Commission; and the judgment or order rendered thereon; shall not
be admissible as evidence in any criminal proceedings arising from the same act subject of the
binding ruling, show cause order or consent order against such entity or entities, their officers,
employees, and agents.
ARTICLE 102 TFEU

Article 102 TFEU (ex Article 82 TEC)
Any abuse by one or more undertakings of a dominant position within the internal market or in a
substantial part of it shall be prohibited as incompatible with the internal market in so far as it
may
affect trade between Member States.
Such abuse may, in particular, 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.
Note: Please see https://eur-lex.europa.eu/legal-

content/EN/TXT/PDF/?uri=CELEX:52009XC0224(01)&from=EN for the Guidance on the
Commission's enforcement priorities in applying Article 82 of the EC Treaty to abusive
exclusionary conduct by (single) dominant undertakings.
MARKET DEFINITION
Section 4 (i.) Market – Market refers to the group of goods or services that are sufficiently
interchangeable or substitutable and the object of competition, and the geographic area where
said goods or services are offered;
Section 4 (k.) Relevant market - Relevant market refers to the market in which a particular good
or service is sold and which is a combination of the relevant product market and the relevant
geographic market, defined as follows:
(1) A relevant product market comprises all those goods and/or services which are regarded as
interchangeable or substitutable by the consumer or the customer, by reason of the goods and/or
services’ characteristics, their prices and their intended use; and
(2) The relevant geographic market comprises the area in which the entity concerned is involved
in the supply and demand of goods and services, in which the conditions of competition are
sufficiently homogenous and which can be distinguished from neighboring areas because the
conditions of competition are different in those areas.
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Section 24. Relevant Market. – For purposes of determining the relevant market, the following
factors, among others, affecting the substitutability among goods or services constituting such
market and the geographic area delineating the boundaries of the market shall be considered:
(a) The possibilities of substituting the goods or services in question, with others of domestic or
foreign origin, considering the technological possibilities, extent to which substitutes are available
to consumers and time required for such substitution;
(b) The cost of distribution of the good or service, its raw materials, its supplements and
substitutes from other areas and abroad, considering freight, insurance, import duties and non-
tariff restrictions; the restrictions imposed by economic agents or by their associations; and the
time required to supply the market from those areas;
(d) National, local or international restrictions which limit access by users or consumers to
alternate sources of supply or the access of suppliers to alternate consumers.
Section 4 (g). Dominant position refers to a position of economic strength that an entity or
entities hold which makes it capable of controlling the relevant market independently from any or
a combination of the following: competitors, customers, suppliers, or consumers;
Section 27. In determining whether an entity has market dominant position for purposes of this
Act, the Commission shall consider the following:
(a) The share of the entity in the relevant market and whether it is able to fix prices unilaterally or
to restrict supply in the relevant market;
(b) The existence of barriers to entry and the elements which could foreseeably alter both said
barriers and the supply from competitors;
(c) The existence and power of its competitors;
(d) The possibility of access by its competitors or other entities to its sources of inputs;
(e) The power of its customers to switch to other goods or services;
(f) Its recent conducts; and
(g) Other criteria established by the regulations of this Act.
There shall be a rebuttable presumption of market dominant position if the market share of an
entity in the relevant market is at least fifty percent (50%), unless a new market share threshold
is determined by the Commission for that particular sector.
The Commission shall from time to time determine and publish the threshold for dominant
position or minimum level of share in the relevant market that could give rise to a presumption of
dominant position. In such determination, the Commission would consider the structure of the
relevant market, degree of integration, access to end-users, technology and financial resources,
and other factors affecting the control of a market, as provided in subsections (a) to (g) of this
section.
The Commission shall not consider the acquiring, maintaining and increasing of market share
through legitimate means not substantially preventing, restricting, or lessening competition in the
market such as but not limited to having superior skills, rendering superior service, producing or
distributing quality products, having business acumen, and the enjoyment and use of protected
intellectual property rights as violative of this Act.
Note: See IRR for other criteria:

(b) The share of other market participants in the relevant market;
(e) The credible threat of future expansion by its actual competitors or entry by potential
competitors (expansion and entry);
(f) Market exit of actual competitors;
(g) The bargaining strength of its customers (countervailing power);
(k) Its ownership, possession or control of infrastructure which are not easily duplicated;
(l) Its technological advantages or superiority, compared to other competitors;
(m) Its easy or privileged access to capital markets or financial resources;
(n) Its economies of scale and of scope;
(o) Its vertical integration; and
(p) The existence of a highly developed distribution and sales network.
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https://www.phcc.gov.ph/wp-content/uploads/2016/04/RA-10667-Implementing-Rules-and-
Regula
tions-1.pdf
NOTE: market share ≥ 50% = rebuttable presumption of market dominant position
SEC. 15. Abuse of Dominant Position

It shall be prohibited for one or more entities to abuse their dominant position by engaging in
conduct that would substantially prevent, restrict or lessen competition:
product or service of like quality; PREDATORY PRICING/PREDATION
the
market in an anti-competitive manner except those that develop in the market as a result of or
arising from a superior product or process, business acumen, or legal rights or laws; IMPOSING
BARRIERS/BARRIERS TO ENTRY OR EXPANSION
their nature or according to commercial usage, have no connection with the transaction; TYING
or
sellers of the same goods or services, where such customers or sellers are contemporaneously
substantially
(DISCRIMINATORY BEHAVIOR/PRICE DISCRIMINATION/DISCRIMINATION):
Provided, That the following shall be considered permissible price differentials:

(1) Socialized pricing for the less fortunate sector of the economy;
(2) Price differential which reasonably or approximately reflect differences in the cost of
(3) Price differential or terms of sale offered in response to the competitive price of payments,
(4) Price changes in response to changing market conditions, marketability of goods or services,
or
volume;
competition substantially (IMPOSING RESTRICTIONS/REBATES/DISCOUNTS):
Provided, That nothing contained in this Act shall prohibit or render unlawful:
agreements such as those which give each party the right to unilaterally terminate the
agreement; or
(2) Agreements protecting intellectual property rights, confidential information, or trade secrets;
services from the supplier which have no direct connection with the main goods or services to be
supplied; BUNDLING
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and other marginalized service providers and producers; (MONOPSONY)
suppliers or consumers, provided that prices that develop in the market as a result of or due to a
prices; (UNFAIR PRICING) and
(i) Limiting production, markets or technical development to the prejudice of consumers, provided
that limitations that develop in the market as a result of or due to a superior product or process,
business acumen or legal rights or laws shall not be a violation of this Act: (PREJUDICIAL
LIMITATION)
Provided, That nothing in this Act shall be construed or interpreted as a prohibition on having a
dominant position in a relevant market or on acquiring, maintaining and increasing market share
through legitimate means that do not substantially prevent, restrict or lessen competition:
Provided, further, That any conduct which contributes to improving production or distribution of
goods or services within the relevant market, or promoting technical and economic progress while
allowing consumers a fair share of the resulting benefit may not necessarily be considered an
abuse of dominant position:
Provided, finally, That the foregoing shall not constrain the Commission or the relevant regulator
from pursuing measures that would promote fair competition or more competition as provided in
this Act.
Dominant position refers to a position of economic strength that an entity holds, making it capable
of controlling the relevant market independently from any or a combination of the following:
competitors, customers or consumers, suppliers
Rebuttable presumption of market dominant position market share ≥ fifty percent (50%)
Market Definition
❖ An analytical tool to identify and define the boundaries of competition between firms
❖ The process involves the definition of the product and geographical market as a means to
identify the competitive constraint faced by the entities involved.
PCA Section 4 (i) Market refers to (1) the group of goods or services that are sufficiently
interchangeable or substitutable and the object of competition, and (2) the geographic area where
said goods or services are offered.
Factors in determining the market:

(a) possibilities of substituting: technology, availability & time
(b) cost of distribution, restrictions imposed by economic agents or by their associations, and
the time required to supply the market
(d) National, local or international restrictions
PRODUCT MARKET
CASE 27/76 UNITED BRANDS V COMMISSION
FACTS: United Brands Company (UBC) was the main supplier of bananas in Europe, using mainly
the Chiquita brand. UBC forbade its distributors/ripeners to sell bananas that UBC did not supply.
UBC fixed pricing each week; charging a higher price in different Member States.
Issue: How do we determine whether UBC has a dominant position on the banana market?
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Discussion: In order to determine whether UBC has a dominant position on the banana market, it
is necessary to define this market both from the standpoint of the product and from the
geographic point of view.
On product market: Are bananas integral part of the fresh fruit market, because they are
reasonably interchangeable by consumers with other kinds of fresh fruit such as apples, oranges,
etc.?
SOME FACTS TO CONSIDER:

❖ ripening of bananas takes place the whole year round, & as such there is no unavoidable
seasonal
substitution
❖ Oranges are not interchangeable with banana, and for apples, there is only a relative degree of
substitutability
❖ “Banana has certain characteristics, appearance, taste, softness, seedlessness, easy handling, a
constant level of production which enables it to satisfy the constant needs of an important section
of
the population consisting of the very young, the old and the sick”
❖ Banana is only affected by the falling prices of other fruits (and only of peaches and table
grapes)
during the summer months and mainly in July and then by an amount not exceeding 20%
CONCLUSION: banana is a product market on its own
❖ The decision centers on the characteristics of bananas that single them out from other fruits.
These unique features indicate low substitutability.
❖ To prove substitutability one need not show that all customers would seek substitutions when
faced with an increase in price, but that a sufficiently large number of customers would do so.
❖ It is therefore important to assess the size of the marginal consumer group which would react
to a
change in price. When this group is large enough the increase in price would be deemed
unprofitable.
❖ The Court commented that a large group, which consists of the very young, the old and the
sick,
especially values the special characteristics of bananas and is ‘locked in’ due to its inelastic
demand.
Q: Does UBC have a dominant position in the market for bananas?
A: (To) find out whether UBC is … in a dominant position…(we must) examine its structure and
then the situation on … competition….
(T)ake (into) account the facts put forward as acts amounting to abuses without necessarily
having to acknowledge that they are abuses.’
Some facts:
1. UBC can supplement its own production when needed by obtaining supplies from independent
planters.
2. Some independent planters grow the varieties of bananas which UBC has advised them to
adopt.
3. UBC plantations are spread over a wide geographic area, allowing it to cope with regional
natural disasters and comply with all the requests which it receives.
4. At the packaging and distribution stages, UBC has, at its disposal, factories, manpower, plant
and material which enable it to handle the goods independently.
5. UBC uses its own transport means to deliver products from plantation to port.
6. UBC is the only undertaking of its kind which is capable of carrying two-thirds of its exports by
means of its own banana fleet.
7. UBC is able to transport regularly to Europe, using its own ships to ensure that three regular
consignments reach Europe each week.
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8. In the field of technical knowledge, UBC keeps on improving the productivity and yield of its
plantations and perfecting new ripening methods; competing companies are unable to develop
research at a comparable level and are in this respect at a disadvantage compared with UBC.
9. UBC has made its product distinctive by large-scale repeated advertising and promotion
campaigns which have induced the consumer to show a preference for it in spite of price
differences between the price of labelled and unlabelled bananas.
10. It has revolutionized the commercial exploitation of the banana and made its brand name
‘Chiquita’ the premier brand name with the result that distributors cannot afford not to offer it to
the consumer.
11. UBC is the largest banana group having accounted in 1974 for 35 per cent of all banana
exports on the world market; UBC’s share of the relevant market is more nearly 45 per cent;
UBC’s market share is several times greater than that of its competitor, Castle and Cooke, which
is the best placed of all the competitors, the others lagging far behind.
Dominant position … is ‘a position of economic strength enjoyed by an undertaking which enables

it to prevent effective competition being maintained on the market by giving it the power to
behave to an appreciable extent independently of its competitors, customers and ultimately its
consumers.’ In general, a dominant position derives from a combination of several factors which,
taken separately, are not necessarily determinative.
UBC’s market share does not permit the conclusion that UBC automatically controls the market.
Dominance must be determined having regard to the strength and number of the competitors
operating in the market. The fact that UBC’s market share is several times greater than that of its
competitor, Castle and Cooke, together with the other facts, may be regarded as a factor which
affords evidence of UBC’s preponderant strength.
❖ A trader can only be in a dominant position on the market for a product if he has succeeded in
winning a large part of this market. However, an undertaking does not have to have eliminated all
opportunity for competition in order to be in a dominant position.
Q: Did UBC abuse its dominant position?
A: Yes. UBC abused its dominant position by:

1. forbidding its distributors to resell the products of its competitors, limiting the markets to the
prejudice of consumers
2. having a policy of different prices enabling UBC to apply dissimilar conditions to equivalent
transactions with other trading parties, placing them at a competitive disadvantage (NOTE: giving
different prices possible if determined objectively (example: compare selling price with cost of
production, effectively disclosing profit margin)
PRODUCT MARKET
CASE 85/76 HOFFMANN-LA ROCHE & CO. V COMMISSION
FACTS: Hoffmann-La Roche entered into 26 agreements with 22 undertakings engaged in the
production and/or sale of vitamins in the Common Market for use either in the pharmaceutical
industry (25%) or for food (15%) or as an additive in animal feed (60%). There are 13 groups of
known vitamins. Roche, the world's largest manufacturer of bulk vitamins, produces eight of
those 13 groups (vitamin A, B1, B2, B3 (pantothenic acid), B6, C, E, and H (biotin), and is in the
market as a reseller for the others (vitamins B12, D, K, M (folic acid) and PP). All these vitamins
are used because of their bionutritive properties. Because of their chemical properties (use in
technology), Vitamins C and E are also used as antioxidants and fermentation agents. They
encounter no competition from other products as far as their bionutritive use is concerned.
Q: Do the 13 vitamins constitute one market or 13 markets?
A: Each of these groups has specific metabolizing functions. For this reason, each vitamin is not
interchangeable with the others.
If a product could be used for different purposes (food, animal feed and for pharmaceutical
purposes), and if these different uses are in accordance with different economic needs, this
product may belong to separate markets.
11
The concept of the relevant market in fact implies that there can be effective competition between
the products which form part of it and this presupposes that there is a sufficient degree of
interchangeability between all the products forming part of the same market in so far as a specific
use of such products is concerned.
MARKET
CASE T-219/99 BRITISH AIRWAYS V COMMISSION
Background: British Airways (BA) operated a range of target incentives which were offered to
travel agents. These commission schemes had one notable feature in common: in each case,
meeting the targets for sales growth lead to an increase in the commission paid on all tickets sold
by the travel agent, not just on the tickets sold after the target was reached. The Commission
found that this practice amounted to an abuse of BA’s dominant position. For the purpose of
establishing dominance, the Commission took the view that the relevant market was the UK
market, comprised of the services which airlines purchase from travel agents for the purposes of
marketing and distributing their airline ticketS. BA challenged that analysis by the Commission,
arguing that even if it exists, the
market for services supplied by travel agents to airlines cannot constitute the relevant product
market in the circumstances of this case.
Q: For purposes of investigating the possible dominant position of an undertaking on a given

product market, in what context are the possibilities of competition judged?
A: The possibilities of competition must be judged in the context of the market comprising the
totality of the products or services which, with respect to their characteristics, are particularly
suitable for satisfying constant needs and are only to a limited extent interchangeable with other
products or services.
xxx Since the determination of the relevant market is useful in assessing whether the undertaking
concerned is in a position to prevent effective competition from being maintained and behave to
an appreciable extent independently of its competitors and, in this case, its service providers, an
examination to that end cannot be limited to the objective characteristics only of the relevant
services, but the competitive conditions and the structure of supply and demand on the market
must also be taken into consideration.
Q: Do the services of air travel agencies represent an economic activity and as such, a product
market?
A: Yes, the services of air travel agencies represent an economic activity for which xxx airlines
could not substitute another form of distribution of their tickets. Xxx they xxx constitute a market
for services distinct from the air transport market.
(The provision on abuse of abuse of dominant position) applies ‘both to undertakings whose
possible dominant position is established in relation to their suppliers and to those which are
capable of being in the same position in relation to their customers.
BA cannot validly argue that, in order to define the product market in question, with a view to
assessing the effects on competition of the financial advantages which it allows to travel agents
established in the United Kingdom, it is necessary to determine whether a single supplier of air
transportation services on a particular route can profitably increase its prices.
Such a parameter, which might be relevant in relation to each airline, is not of such a kind as to
enable measurement of BA’s economic strength in its capacity not as provider of air transport
services but as purchaser of travel agency services, on all routes to and from United Kingdom
airports, either in relation to all other airlines regarded in the same capacity as purchasers of air
travel agency services or in relation to travel agents established in the United Kingdom.
Q: What is geographic market?
12
A: Geographic market may be defined as the territory in which all traders operate in the same or
sufficiently homogeneous conditions of competition in so far as concerns specifically the relevant
products or services, without it being necessary for those conditions to be perfectly homogeneous.
In the overwhelming majority of cases, travellers reserve airline tickets in their country of
residence.
Moreover, IATA’s rules on the order of using the coupons in airline tickets prevent tickets sold
outside the territory of the UK from being used for flights departing from UK airports.
Since the distribution of airline tickets takes place at national level, it follows that airlines normally
purchase the services for distributing those tickets on a national basis, as is shown by the
agreements signed to that end by BA with travel agents established in the United Kingdom.
Contrary to what BA maintains, the fact that BA concludes global agreements with certain travel
agents is not capable of establishing that the latter increasingly deal with airlines on the
international level. Those global agreements were signed with only three travel agents and only
for the winter season 1992/1993.
Moreover, those agreements were merely added to local agreements made in the countries
concerned.
Product Market
Interchangeability
❖ Demand side substitutability
❖ Supply side substitutability
� Cross elasticity of demand (are products substitutes or complements?)
� Physical characteristics
� Price
� Intended use
� Consumer preferences
❖ SSNIP – Small but significant non-transitory increase in price (hypothetical monopolist)
❖ Cellophane fallacy – false substitution
SSNIP Test
https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:31997Y1209(01)&from=EN
SSNIP – Small but significant non-transitory increase in price (hypothetical monopolist)
17. The question to be answered is whether the parties' customers would switch to readily
available substitutes or to suppliers located elsewhere in response to a hypothetical small (in the
range 5 % to 10 %) but permanent relative price increase in the products and areas being
considered. If substitution were enough to make the price increase unprofitable because of the
resulting loss of sales, additional substitutes and areas are included in the relevant market. This
would be done until the set of products and geographical areas is such that small, permanent
increases in relative prices would be profitable. The equivalent analysis is applicable in cases
concerning the concentration of
buying power, where the starting point would then be the supplier and the price test serves to
identify the alternative distribution channels or outlets for the supplier's products. In the
application of these principles, careful account should be taken of certain particular situations as
described within paragraphs 56 and 58.
18. A practical example of this test can be provided by its application to a merger of, for instance,
soft-drink bottlers. An issue to examine in such a case would be to decide whether different
flavours of soft drinks belong to the same market. In practice, the question to address would be
whether consumers of flavour A would switch to other flavours when confronted with a permanent
price increase of 5 % to 10 % for flavour A. If a sufficient number of consumers would switch to,
say, flavour B, to such an extent that the price increase for flavour A would not be profitable
owing to the resulting loss of sales, then the market would comprise at least flavours A and B. The
process would have to be extended in addition to other available flavours until a set of products is
identified for which a price rise would not induce a sufficient substitution in demand.
13
Cellophane fallacy
The SSNIP test which is used to define the market is based on the assumption that prevailing
prices
on the market are competitive. However, in the context of (abuse of dominant position) cases, it
is
often the case that the price on the market is likely to be above competitive levels. Failure to take
this into account may give rise to the ‘cellophane fallacy’ and lead to the market being defined too
widely. Consequently, in cases of dominance it is appropriate to rely on a wider range of methods
to
assess the market and eliminate false substitutes.
The ‘cellophane fallacy’ highlights a significant shortcoming in the process of market definition.
The
risk of distortion in the analysis may arise even below the levels of dominance, when more limited
levels of market power are present. Subsequently, conclusions as to the elasticity of demand
should
be treated with caution when used to delineate the market. It is prudent to treat the defined
market
as a valuable analytical framework but refrain from attributing rigid boundaries to it. Ezrachi,
Ariel.
E.U. Competition Law, An Analytical Guide to the Leading Cases. Portland, OR, Hart Publishing,
2016.
Geographical Market
❖ Identify actual competitors that are capable of constraining the entity’s behaviour and
preventing them from behaving independently of effective competition pressure.
❖ Geographical area where the conditions of competition are sufficiently homogeneous/
❖ Influencing variables:
� cost of distribution of the good or service (freight, insurance, import duties)
� non-tariff restrictions
� restrictions imposed by economic agents or by their associations
� time required to supply the market from those areas
� cost and probability of seeking other markets
� National, local or international restrictions which limit access to alternate sources of supply or
of
Consumers
Collective Dominance
❖ PCA IRR, Rule 8. Determination of Dominance, Section 1. Existence of dominance. Dominance
can exist on the part of one entity (single dominance) or of two or more entities (collective
dominance).
❖ Two or more entities present themselves or act together on a particular market as a collective
entity.
❖ To establish the existence of a collective entity, examine the economic links or factors which
give rise to a connection between the undertakings concerned. It must be ascertained whether
economic links exist between those undertakings which enable them to act together
independently of their competitors, their customers and consumers. The mere fact that two or
more undertakings are linked by an agreement, a decision of associations of undertakings or a
concerted practice … does not, of itself, constitute a sufficient basis for a finding of collective
entity. But when an agreement, decision or concerted practice is implemented, it may result in the
undertakings concerned being so linked as to their conduct on a particular market that they
present themselves on that market as a collective entity vis-à-vis their competitors, their trading
partners and consumers.
❖ The existence of a collective dominant position may therefore flow from the nature and terms of
an agreement, from the way in which it is implemented and, consequently, from the links or
factors which give rise to a connection between undertakings which result from it. Nevertheless,
the existence of an agreement or of other links in law is not indispensable to a finding of a
14
collective dominant position; such a finding may be based on other connecting factors and would
depend on an economic assessment and, in particular, on an assessment of the structure of the
market in question.
❖ A finding that two or more undertakings hold a collective dominant position must, in principle,
proceed upon an economic assessment of the position on the relevant market of the undertakings
concerned, prior to any examination of the question whether those undertakings have abused
their position on the market.
Ezrachi, Ariel. E.U. Competition Law, An Analytical Guide to the Leading Cases. Portland, OR, Hart
Publishing, 2016.
COMPAGNIE MARITIME BELGE TRANSPORTS ET. AL. V COMMISSION

JOINED CASES C-395/96P, 366/96P
NOTE: A shipping conference, also known as a liner conference, is an association of several

shipping companies that follow certain terms and provide regular service on specific routes at
publicly announced prices.
FACTS: Associated Central West Africa Lines (Cewal), Cowac and Ukwal shipping conferences
entered into agreements according to which the members of the conference refrain from
operating as an independent shipping company ("outsider") in the area of activity of the other two
conferences in order to share out the liner market between northern Europe and western Africa on
a geographical basis.
Compagnie Maritime Belge Transports SA (CMB) and other shipping companies are part of Cewal,
which operate a regular liner service between the ports of Zaire (Democratic Republic of Congo)
and Angola and those of the North Sea, with the exception of the United Kingdom. The Cewal
members:
1. implemented its cooperation agreement with Ogefrem and by [requesting] repeatedly by a
variety of means that it be strictly complied with,
2.modified its freight rates by departing from the tariff in force in order to offer rates the same as
or less than those of the principal independent competitor for vessels sailing on the same date or
neighbouring dates (practice known as fighting ships), and
3. establishing 100% loyalty arrangements (including goods sold fob), accompanied by the use,
as described in this decision, of blacklists of disloyal shippers.
HELD: ‘In certain circumstances, abuse may occur if an undertaking in a dominant position
strengthens that position in such a way that the degree of dominance reached substantially fetters
competition’.
The conduct at issue here is that of a liner conference having a share of over 90 per cent of the
market in question and only one competitor. The conference engaged in a practice known as
‘fighting ships’ in an attempt to eliminate its only competitor from the market.
‘Where a liner conference in a dominant position selectively cuts its prices in order deliberately to
match those of a competitor, it derives a dual benefit. First, it eliminates the principal, and
possibly the only, means of competition open to the competing undertaking. Second, it can
continue to require its users to pay higher prices for the services which are not threatened by that
competition.’
Distinction should be made between a permissible attempt by the dominant firm to meet the
competition by lowering prices in a reasonable and proportional manner (above average total
cost) and an anticompetitive practice of selective price cuts aimed at beating the competition.
Recap Main Questions

1. Basic: what is the relevant market? (product + area; Secs. 4(i,k) & 24)
2. Is there a dominant entity or a dominant group of entities?
❖ Does the entity have a dominant position in the relevant market? (Sec. 4(g); Sec. 27 for factors
in determining whether an entity has a dominant position)
❖ Note rebuttable presumption of market dominant position when market share
15
≥ fifty percent (50%)
3. Is this dominance being abused?
❖ general rule: is the act meant to substantially prevent, restrict or lessen competition (SLC) (aka
EXCLUSIONARY CONDUCT)
❖ For specific instances of abuse, see enumeration in Section 15
❖ Note the legitimate means: superior skills or service, quality products, business acumen,
intellectual property rights
4. Are there objective justification and efficiencies?
❖ Benefits the consumer + (improves production or distribution OR promotes progress)
(a) PREDATORY PRICING/PREDATION

Section 15. It shall be prohibited for one or more entities to abuse their dominant position by
engaging in conduct that would substantially prevent, restrict or lessen competition:
product or service of like quality;
Elements of predatory pricing/predation:

1. the entity has a dominant position (note: market definition)
2. It is selling good or services below cost
3. The object is to drive the competition out of the relevant market
Specific Defense:
1. Good faith - the object and the price made to meet or compete with the lower price of a
competitor in the same market selling the same or comparable product or service of like quality;
or
Other General Defenses:

1. The entity does not have a dominant position;
2. Dominant position achieved and maintained through legitimate means that do not substantially
prevent, restrict or lessen competition; or
3. Conduct contributes to improving production or distribution of goods or services within the
relevant market, or promoting technical and economic progress while allowing consumers a fair
share.
(a) PREDATORY PRICING/PREDATION

Case C-62/86 AKZO Chemie BV v Commission
Background: AKZO Chemie and its subsidiaries form the specialty chemicals division of the Dutch
group, AKZO NV, which manufactures chemical products and artificial fibres. AKZO UK, wholly-
owned subsidiary of AKZO Chemie, produces organic peroxides, which are specialty chemicals
used in the plastics industry. It also produces compounds based on benzoyl peroxide (one of the
organic peroxides) used as bleaching agents for flour, and potassium bromate and vitamin mixes,
two other flour additives. AKZO has two main competitors, ECS and Diaflex. The three suppliers
offer almost complete range of flour additives in the United Kingdom and Ireland. Their customers
for additives may be divided into three categories:
1. the three main milling groups, of comparable size, RHM, Spillers and Allied Mills, (85% of the
demand)
2. millers that are large but independent from the 3 main milling groups aka “large independent”
(10% of the demand)
3. millers that are small but independent from the 3 main milling groups aka “small independent”
(5% of the demand).
Q: Does AKZO have a dominant position?
16
A: When considering the possibly dominant position of an undertaking within a particular market,
"the possibilities of competition must be judged in the context of the market comprising the
totality of the products which, with respect to their characteristics, are particularly (a) suitable for
satisfying
constant needs and are only to a limited extent (b) interchangeable with other products”.
Market: 90% of the use of organic peroxide is in various operations in the plastics industry and
they are therefore suitable for satisfying constant needs. They are also not exposed to
competition from other products. AKZO itself regarded organic peroxides as a single market, since
it calculates its market share in relation to those products as a totality.
Acts of Predation
(i.) AKZO had systematically offered and supplied flour additives to its competitors customers in
the "large independent" sector at unreasonably low prices
(ii.) made quotations selectively to customers of ECS for flour additives while maintaining
substantially (up to 60%) higher prices to comparable buyers who were already their own regular
customers
(iii) had offered potassium bromate and a vitamin mix (the latter is a product which it did not
normally supply) at a bait price in a package with benzoyl peroxide to ECS' customers (iv) had
maintained the prices for flour additives in the UK at an artificially low level over a prolonged
period
(v) obtaining from customers precise details of offers made by other suppliers of flour additives
and then offering a price just below the lowest alternative offer and requiring that the customers
should agree to obtain their entire supply of flour additives from AKZO
Object
(i.) compelled ECS either to abandon the customer to AKZO or to match a loss-making price in
order to retain the customer.
(iiI) attracted ECS' customers for the full range of flour additives to the exclusion of ECS.
(i) able to do so over a prolonged period because of its superior financial resources in comparison
with ECS.
(iv) purpose is to obtain the business, driving ECS out of the market.
(b) IMPOSING BARRIERS/BARRIERS TO ENTRY OR EXPANSION

Section 15 It shall be prohibited for one or more entities to abuse their dominant position by
engaging in conduct that would substantially prevent, restrict or lessen competition …
the market in an anti-competitive manner except those that develop in the market as a result of
or arising from a superior product or process, business acumen, or legal rights or laws;
Elements:
1. Entity or entities have a dominant position
2. imposing barriers to entry or preventing growth/expansion
3. Doing so in anti-competitive manner
Justification/Defenses:
Barriers because of any of the following:
a.) superior product or process, business acumen
b.) legal rights
c.) laws
NOTE: The 3 justifications and defenses are the same justification/defenses for Unfair Pricing and
Prejudicial Limitation
Other General Defenses:

1. The entity does not have a dominant position;
2. Dominant position achieved and maintained through legitimate means that do not substantially
prevent, restrict or lessen competition; or
17
3. Conduct contributes to improving production or distribution of goods or services within the
relevant market, or promoting technical and economic progress while allowing consumers a fair
share.
Barriers to Expansion or Entry, and Potential Competition

❖ The methodology used to define the market primarily focuses on demand and supply
substitutability. As such, it does not provide the complete picture of the competitive pressures
faced by the undertakings. For example, potential competition is a major competitive restraint on
undertakings, but does not feature in assessments of market definition. An analysis of the wider
picture is called for where the position of the undertakings involved in the relevant market raises
concerns from a competition point of view
- EU Competition Law, An Analytical Guide to the Leading Cases, Fifth Edition, Ariel Ezrachi
(b) IMPOSING BARRIERS/BARRIERS TO ENTRY OR EXPANSION

Case IV/M.833 The Coca-Cola Company/Carlsberg A/S
FACTS: The Commission received a notification of a proposed concentration by which the Coca-
Cola Company (TCCC) and Carlsberg A/S (Carlsberg) would set up a jointly owned company,
Coca-Cola Nordic Beverages (CCNB). The proposed joint venture was to own interests in various
soft drink entities in the Nordic region, including certain assets that were to be transferred from
Carlsberg to
TCCC pursuant to a licence agreement. The Commission cleared the transaction subject to
conditions. In its decision the Commission reviewed the barriers to entry to potential competition
in the carbonated soft drinks market.
Questions to consider when determining the issue of barriers to entry:

1. Given the market, is new entry possible?
2. And if new entry is possible, is it likely to be on a scale sufficient to restrict the merged entity
or joint venture from behaving largely independently of its competitors following the
concentration?
Factors to consider in the soda industry:

1. access to brands and to a distribution network
2. shelf space
3. sales and service network
4. brand image and loyalty
5. advertising sunk costs
Discussion: In view of the risks, costs and the time needed to launch an international brand, it is
likely that only TCCC, PepsiCo and Cadbury Schweppes are the only international brand owners
that would be able to launch new international soda brands in any country. Sodas rely heavily on
brand image to drive sales, and companies like TCCC and PepsiCo have established brand loyalty
through heavy investments to maintain the high profile of their brands. The introduction of a new
brand would thus require heavy expenditure on advertising and promotion in order to persuade
brand-loyal consumers to switch away from their usual soda brand. Moreover, consumer loyalty to
the established brands would make it difficult for a new supplier to persuade retail customers to
change
suppliers and would thus further hinder entry. Such advertising and promotion expenditures are
sunk costs and add substantially to the risk of entry.’
‘In addition, any potential entrant would also be hindered by the need for access to bottling and to
a distribution system. Each of the major brewers in Denmark has its own distribution system,
meaning that any new entrant would have to either incur the significant cost of setting up its own
system or negotiate with a competitor for the use of their system. It is unlikely that a new entrant
would find it economically viable to set up a new distribution operation, since the entrant would
have to include beers and packaged waters in its system in order to achieve a sufficient volume of
distribution.
18
The brewers’ power in this field is reinforced by the fact that sodas are distributed in refillable
containers and any new entrant’s bottles would have to comply with the relevant standards.
Therefore, a new entrant’s products would have to be distributed by one of the existing brewers
as is today the case for TCCC and Cadbury Schweppes products, which are distributed by
Carlsberg,
and PepsiCo brands, which are distributed by Bryggerigruppen. However, as the existing brewers
are well established, and have their own line of soft drinks, it would be difficult for a new entrant
to find distribution. Moreover, Carlsberg’s holdings in several other Danish brewers makes it less
likely that any potential entrant would be able to cooperate or otherwise form an alliance with a
Danish brewing company. Furthermore, as mentioned above, it should be noted that Carlsberg
has by far the best and most wide-ranging distribution system on the Danish market. For a new
entrant the most efficient way to enter the Danish market would be to be distributed by
Carlsberg.’
‘Finally, even if a new entrant were to obtain access to an adequate distribution network, the firm
would still have to obtain shelf space and incur the expenses of supporting a sales and service
network in order to ensure that its products were properly stocked and positioned.’ Entry may be
possible on a smaller scale, for example by deliveries directly to a supermarket chain with
distribution completed through the supermarket chain’s distribution system. This strategy does
not involve heavy advertising costs or major investment in a distribution system. In addition,
limited success and entry has been achieved by discount brands. However, overall there are no
potential competitors who would or could enter the Danish sodas markets at either a brand or a
bottling level.
(c) TYING & (f) BUNDLING

Section 15 It shall be prohibited for one or more entities to abuse their dominant position by
engaging in conduct that would substantially prevent, restrict or lessen competition.
their nature or according to commercial usage, have no connection with the transaction (TYING)
supplied (BUNDLING)
TFEU Article 102 wording: (ex Article 82 TEC): Any abuse by one or more undertakings of a
dominant position within the internal market or in a substantial part of it shall be prohibited as
incompatible with the internal market in so far as it may affect trade between Member States.
Such abuse may, in particular, consist in… :
Elements:
1. Entity or entities have a dominant position (Sec. 15 GR)
2. Products offered have no connection (Sec. 15 (c/f))
3. Customers given no choice to obtain the tying product without the tied products (Sec. 15 (c/f))
4. The practice forecloses competition (prevents, restricts or lessens competition) (Sec. 15 GR)
5. No objective justification (case law)
Defenses:
1. Not a dominant position
2. Products offered comprise one, and by their nature and characteristics should be sold together
3. economies of scale, efficiencies and safety considerations
Tying and bundling commonly refer to a situation where a dominant entity links the sale of
separate products requiring customers who wish to purchase one product to purchase the other as
well. Such practice enables the dominant firm to leverage its market power from the market
where it enjoys a dominant position to the tied product’s market where it faces competition.
19
This may be done by contractual arrangements, through discounts or other incentives. The
practice may involve pure bundling, where the products are only offered together and cannot be
purchased separately.
Alternatively, it may involve mixed bundling, where products are available separately outside the
bundled package, but are offered at a discounted price when purchased as a bundle.

Case C-333/94P Tetra Pak International SA v Commission
FACTS: Tetra Pak, whose registered office is in Switzerland, coordinates the policy of a group of
companies, originally Swedish, which has acquired a global dimension. The Tetra Pak group
specializes in equipment for the packaging of liquid or semi-liquid food products in cartons. Its
activities cover both the aseptic and the non-aseptic packaging sectors. They consist essentially in
manufacturing cartons and carton-filling machines.
In 1983, 90% of cartons were used for the packaging of milk and other liquid dairy products. In
1987 that share was approximately 79%. Approximately 16% of cartons were at that time used
for packaging fruit juice. Other products (wine, mineral water, tomato-based products, soups,
sauces and baby food) accounted for the remaining 5%.
In the aseptic sector, Tetra Pak manufactures the "Tetra Brik" system, designed for packaging
UHT milk. In that sector, only one competitor of Tetra Pak, PKL, also manufactures a comparable
system of aseptic packaging. Possession of an aseptic-filling technique is the key to market entry
both for machines and for aseptic cartons.
In contrast, non-aseptic packaging calls for less sophisticated equipment. The "Tetra Rex" carton,
used by Tetra Pak on the market for non-aseptic cartons, is in direct competition with the "Pure-
Pak" carton produced by the Norwegian group Elopak.
During the period in question, various standard-form contracts for the sale and leasing of
machines and the supply of cartons were in force between Tetra Pak and its customers in the
various Member States of the Community.
Some contract stipulations are: the purchaser must use only Tetra Pak cartons on the Tetra Pak
filling machines; the purchaser must obtain supplies of all packaging materials to be used on Tetra
Pak filling machines solely from Tetra Pak.
Question:
By their nature and characteristics, should the cartons, supplies and filling machine be deemed as
one, and as such should be sold together?
Discussion: Tetra Pak interprets the prohibition on tying and bundling as prohibiting only the
practice of making the conclusion of contracts dependent on acceptance of additional services
which, by nature or according to commercial usage, have no link with the subject-matter of the
contracts. Consideration of commercial usage does not support the conclusion that the machinery
for packaging a product is indivisible from the cartons. For a considerable time there have been
independent manufacturers who specialize in the manufacture of non-aseptic cartons designed for
use in machines manufactured by other concerns and who do not manufacture machinery
themselves”. That assessment, itself based on commercial usage, rules out the existence of the
natural link claimed by Tetra Pak by stating that other manufacturers can produce cartons for use
in Tetra Pak’s machines. With regard to aseptic cartons, “any independent producer is quite free
to manufacture consumables intended for use in equipment manufactured by others, unless in
doing so it infringes a competitor’s intellectual property right”. It was not for Tetra Pak to impose
certain measures on its own initiative on the basis of technical considerations or considerations
relating to product liability, protection of public health and protection of its reputation.
Court Note: The list of abusive practices set out in the second paragraph of [Article 102 TFEU] is
not exhaustive. Consequently, even where tied sales of two products are in accordance with
commercial usage or there is a natural link between the two products in question, such sales may
20
still constitute abuse within the meaning of [Article 102 TFEU] unless they are objectively
justified.
… whilst the finding of a dominant position does not in itself imply any criticism of the undertaking
concerned, that undertaking has a special responsibility, irrespective of the causes of that
position, not to allow its conduct to impair genuine undistorted competition on the common
market …
Case T-201/04 Microsoft Corp v Commission

Background:
Microsoft Corp., established in Redmond, Washington, USA, designs, develops and markets a wide
variety of software products for different kinds of computing devices. Those software products
include, in particular, (i) operating systems for client personal computers (‘client PCs’), (ii)
operating systems for work group servers, and (iii) streaming media players. Microsoft also
provides technical assistance for its various products. Media players are software products that
are able to ‘play back’ audio and video content, or to decode the corresponding data and translate
them into instructions for the hardware, such as loudspeakers or a display.
The streaming of audio and video content to an end user often entails specific streaming protocols
which govern communications between the media player and the software server which
distributes the content over the Internet. In order to access sound and video content streamed
using a given protocol, the user must have a media player that ‘understands’ that protocol.
What are the economic factors that characterize supply, competition and consumption
patterns in the digital media industry?
1. the content owners, who generally have copyright in the content and can therefore control its
reproduction and distribution.
2. the content is then aggregated by content providers, who distribute the content to consumers,
in particular by storing it on servers connected to the Internet which consumers are able to access
from their client PCs.
3. the software infrastructure that enables the creation, transmission and playback of digital
content is provided by software developers, including Microsoft, RealNetworks and Apple.
What are the channels through which media players may be distributed to end users?
1. media players may be installed on client PCs by Original equipment manufacturers (OEMs)
under agreements between the OEMs and the software developers. OEMs are companies which
assemble computers using a variety of components supplied by different manufacturers. That
assembly generally includes the installation of an operating system supplied by a software
developer or developed by the OEM itself, together with the bundling of several applications
required by the end users. The devices thus assembled are then purchased by ‘resellers’, who
resell them with additional software.
2. end users may download media players on to their client PCs over the Internet.
3. media players may be sold in retail outlets or distributed with other software products.
What are the products of Microsoft and of its competitors?

Microsoft’s media player is called Windows Media Player and at the time of the contested decision
the most recent version of that player was called ‘Windows Media Player 9 Series’ (WMP 9). WMP
9, which allows the playback of downloaded or streamed audio and video content, has been
available since 7 January 2003 and since November 2003 has also worked with the Mac OS and
UNIX operating systems. WMP 9 does not support the Real and QuickTime formats. Microsoft’s
competitors are RealNetworks and Apple.
What gave rise to the investigation?

On 5 May 1999, Microsoft released ‘Windows 98 Second Edition’ for client PCs, which included the
media player WMP 6; that media player could not be removed by OEMs or by users and was also
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included in subsequent versions of Windows, namely ‘Windows Me’, ‘Windows 2000 Professional’
and ‘Windows XP’.
In August 1999, Microsoft released the ‘Windows Media Technologies 4’ architecture, which
included Windows Media Player, ‘Windows Media Services’, ‘Windows Media Tools’ and Microsoft’s
own digital rights management technology. That software did not provide native support for
RealNetworks’ or QuickTime’s formats.
In February 2000, the Commission, acting on its own initiative, launched an investigation relating,
among others, to the integration by Microsoft of its Windows Media Player in its Windows client PC
operating system. The Commission found that Microsoft made the availability of the Windows
client PC operating system conditional on the simultaneous acquisition of Windows Media Player.
The Commission found that this conduct constitutes an abusive tied sale.
What are the necessary conditions for a finding of abusive tying?

PCA Section 15 Abuse of Dominant Position. – It shall be prohibited for one or more entities to
abuse their dominant position by engaging in conduct that would substantially prevent, restrict or
lessen competition:
their nature or according to commercial usage, have no connection with the transaction
supplied.
TFEU Article 102 (ex Article 82 TEC): Any abuse by one or more undertakings of a dominant
position within the internal market or in a substantial part of it shall be prohibited as incompatible
with the internal market in so far as it may affect trade between Member States. Such abuse may,
in particular, consist in… :
The necessary conditions for a finding of abusive tying are:

1. the undertaking concerned is dominant in the market for the tying product;
2. the tying and tied products are two separate products;
3. the undertaking concerned does not give customers a choice to obtain the
tying product without the tied product; and
4. the practice in question forecloses competition
5. tying was not objectively justified
1. The undertaking concerned is dominant in the market for the tying product
Microsoft acknowledged that it held a dominant position in the supply of operating systems that
run on personal computers.
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2. the tying and tied products are two separate products
Microsoft: media functionality is not a separate product from the Windows client PC operating
system but forms an integral part of that system. As a result, what is at issue is a single product,
namely the Windows client PC operating system, which is constantly evolving. Customers expect
that any client PC operating system will have the functionalities which they perceive as essential,
including audio and video functionalities, and that those functionalities will be constantly updated.
Held: The IT and communications industry is an industry in constant and rapid evolution. In such
an industry what initially appear to be separate products may subsequently be regarded as
forming a single product, both from the technological aspect and from the aspect of the
competition rules.
The distinctness of products for the purpose of an analysis under Article 102 TFEU has to be
assessed by reference to customer demand. In the absence of independent demand for the
allegedly tied product, there can be no question of separate products and no abusive tying.
According to the EU case-law on bundling, complementary products can constitute separate
products for the purposes of Article 102 TFEU. It is possible that customers will wish to obtain the
client PC operating systems and application software together, but from different sources. For
example, the fact that most client PC users want their client PC operating system to come with
word-processing software does not transform those separate products into a single product for the
purposes of Article 102 TFEU.
There exists a demand for client PC operating systems. That fact is not disputed by Microsoft. In
addition, ‘a series of factors based on the nature and technical features of the products concerned,
the facts observed on the market, the history of the development of the products concerned and
also Microsoft’s commercial practice demonstrate the existence of separate consumer demand for
streaming media players.
The fact that tying takes the form of the technical integration of one product in another does not
have the consequence that, for the purpose of assessing its impact on the market, that
integration cannot be qualified as the bundling of two separate products.
Microsoft’s argument that the integration of Windows Media Player in the Windows operating
system was dictated by technical reasons is scarcely credible in the light of the content of certain
of its own internal communications … it follows from Mr Bay’s email of 3 January 1999 to Mr Gates
… that the integration of Windows Media Player in Windows was primarily designed to make
Windows Media Player more competitive with RealPlayer by presenting it as a constituent part of
Windows and not as application software that might be compared with RealPlayer.’
‘Microsoft cannot rely on the fact that vendors of competing client PC operating systems also
bundle those systems with a streaming media player. On the one hand, Microsoft has not adduced
any evidence that such bundling was already carried out by its competitors at the time when the
abusive bundling commenced. On the other hand, moreover, it is clear that the commercial
conduct of those competitors, far from invalidating the Commission’s argument, corroborates it. …
23
in any event, it is settled case law that even when the tying of two products is consistent with
commercial usage or when there is a natural link between the two products in question, it may
nonetheless constitute abuse within the meaning of [Article 102 TFEU], unless it is objectively
justified.
The Commission was correct to find that client PC operating systems and streaming media players
constituted separate products.
Client PC operating systems and streaming media players are different insofar as their
functionality is concerned.
From the perspective of a client PC user, a client PC operating system has special characteristics
that make it suitable for a particular use, namely to manage the PC hardware and to offer the
user an interface to interact with the computer and run applications. Media players are client-side
software applications, the core functionality of which is to decode, decompress and play (and
further allow to process) digital audio and video files downloaded or streamed over the Internet
(and other networks). Media players are also capable of playing back audio and video files stored
on physical carriers such as CDs and DVDs. As with other application software, a media player
consists of a Graphical User Interface and the underlying technology, that is to say, the software
code, which enables multimedia playback functionality.
While it is correct that many consumers expect their PCs to be able to render streaming media
content and media players do need to access an operating system to function - that does not
make the two an integrated product any more than a nail gun and nails of the same brand are a
single product.
3. the undertaking concerned does not give customers a choice to obtain the tying
product without the tied product
Normally, the OEMs that license Windows from Microsoft for pre-installation on their client PCs are
the direct addressees of this coercion, passing it ultimately on to the end-users. By virtue of
Microsoft`s licensing model, OEMs must license Windows with WMP pre-installed. Microsoft does
not offer a license which would cover Windows without WMP. OEMs which choose to install an
alternative media player on Windows can only do so in addition to WMP. If a user buys Windows in
a retail store, the same considerations apply. Removal of end-user access does not restore the
choice of Microsoft`s customers as to whether to acquire Windows without WMP. There are no
ready technical means to un-install WMP.
According to Microsoft, that is the case because other parts of the operating system and
numerous third party products are built to take advantage of the capabilities that WMP provides.
If WMP were removed, other parts of the operating system and third party products that rely on
WMP would not function properly, or at all.
Microsoft: The fact that it integrated Windows Media Player in the Windows client PC operating
system does not entail any coercion or supplementary obligation within the meaning of [Article
102(d) TFEU]. In support of its argument, it emphasizes … that customers pay nothing extra for
the media functionality of Windows; [and] that they are not obliged to use that functionality; and,
in the third place, that they are not prevented from installing and using competitors’ media
players.’
Commission: The wording of paragraph (d) of Article 82 does not include a reference to paying
when introducing the element of a supplemental obligation. Microsoft`s line of argumentation,
which would only allow for the application of Article 82 in cases where customers need to buy
something extra, seems to suggest the absence of competitive harm if customers do not have to
spend money for the tied product. Nor is there language in Article 82 which would suggest that, in
order to show coercion, customers need to be forced to use the tied product.
The harmful effects on consumers from tying WMP (also) derive from undermining the structure of
competition in media players which is liable to result in deterrence of innovation and eventual
reduction in choice of competing media players. Inasmuch as tying risks foreclosing competitors,
24
it is immaterial that consumers are not forced to purchase or use WMP. As long as consumers
automatically obtain WMP - even if for free - alternative suppliers are at a competitive
disadvantage. This is because no other media player vendor can guarantee content and software
developers similar platform ubiquity. Content providers and software developers who know that
WMP is present on all Windows client PCs (more than 90% of the market) will provide Microsoft
with a competitive advantage by developing content and applications primarily to WMP.
Held: The Court observes that it cannot be disputed that, in consequence of the impugned
conduct, consumers are unable to acquire the Windows client PC operating system without
simultaneously acquiring Windows Media Player, which means that the condition that the
conclusion of contracts is made subject to acceptance of supplementary obligations must be
considered to be satisfied.
4. the practice in question forecloses competition
GR: the foreclosure effect for competing vendors (is) demonstrated by the bundling of a separate
product with the dominant product.
Microsoft case: users can obtain third party media players through the Internet, sometimes for
free and as such, it should NOT be assumed that tying Windows Media Player constitutes conduct
which by its very nature is liable to foreclose competition.
The Commission, therefore, examined more closely the actual effects which the bundling had
already had on the streaming media player market and also the way in which that market was
likely to evolve. And it found that tying in this specific case has the potential to foreclose
competition so that the maintenance of an effective competition structure is put at risk.
The Commission found that tying [Windows Media Player] with the dominant Windows makes
[Windows Media Player] the platform of choice for complementary content and applications which
in
turn [creates a risk of] foreclosing competition in the market for media players. This has spillover
effects on competition in related products such as media encoding and management software
(often
server-side), (and) also in client PC operating systems for which media players compatible with
quality content are an important application’.
Held: The Commission was correct in its analysis of foreclosure. It is clear that owing to the
bundling, Windows Media Player enjoyed an unparalleled presence on client PCs throughout the
world, because it thereby automatically achieved a level of market penetration corresponding to
that of the Windows client PC operating system. No third-party media player could achieve such a
level of market penetration. As Windows Media Player cannot be removed by users from the
package consisting of Windows and Windows Media Player, the third-party media player could
never be the only media player on the client PC. The pre installed Media Player thus makes users
less likely to use alternative media players as they already have an application which delivers
media streaming and playback functionality. In addition, the presence of several media players on
the same client PC
creates a risk of confusion on the part of users and an increase in customer support and testing
costs.
The Commission was correct to find that ‘the market for streaming media players is characterised
by significant indirect network effects or, to use the expression employed by Mr. Gates, on the
existence of a “positive feedback loop”. … That expression describes the phenomenon where, the
greater the number of users of a given software platform, the more there will be invested in
developing products compatible with that platform, which, in turn reinforces the popularity of that
platform with users. The Court considers that the Commission was correct to find that such a
phenomenon existed in the present case and to find that it was on the basis of the percentages of
installation and use of media players that content providers and software developers chose the
technology for which they would develop their own products.
5. tying was not objectively justified
25
Held: Microsoft has not demonstrated the existence of any objective justification for the abusive
bundling of Windows Media Player with the Windows client PC operating system. The Court rejects
Microsoft’s argument that the integration of media functionality in Windows is indispensable in
order for software developers and internet site creators to be able to continue to benefit from the
significant advantages offered by the ‘stable and well-defined’ Windows platform. In its decision
the Commission did not interfere with Microsoft’s business model in so far as that model includes
the integration of a streaming media player in its client PC operating system. The Commission
expressly states that Microsoft retains the right to offer a bundle of the Windows client PC
operating system and Windows Media Player as long as at the same time a version of that system
without Windows Media Player is available. Additionally, Microsoft’s argument that the removal of
media functionality from the system would undermine standardisation, and create problems to the
detriment of consumers, software and Internet site developers, cannot be accepted.
NOTE 1: The Court acknowledged the rapid evolution of the industry and the possibility that, with
time, separate products may be regarded as forming a single product. Note that the finding of two
product markets was considered at the point of time when the Commission took its decision.
Note that although the Court did not engage in a detailed analysis of consumer harm, it took
notice of the impact of bundling and market foreclosure on consumer choice.
The code removal remedy, under which Microsoft was ordered to offer an unbundled version,
came under criticism from the US Department of Justice which argued that it went beyond what
was necessary or appropriate to protect consumers and risked protecting competitors, rather than
competition. The Commission’s Guidance Paper elaborates on the analysis of tying and bundling in
paras 47–62.
NOTE 2: Streaming media players and client PC operating systems involve different industry
structures as can be seen from the fact that in the media player market, there still remain some
competitors to Microsoft (RealNetworks and Apple), while in the client PC operating system
market, Microsoft`s competitors are insignificant. The price points of the two products are
different too, in so far as media players are often distributed for less than USD 30 or for free,
while client PC operating systems are generally not.
Microsoft applies different SDK licensing agreements to Windows (Platform SDK License
Agreement) and Windows Media Technologies (for example Windows Media Player SDK and
Windows Media Format SDK). SDK stands for Software Developer`s Kit and is a set of programs
used by a computer programmer to write applications compatible with a particular product.
Compared to the Platform SDK, Microsoft applies more restrictive licensing conditions to the
Windows Media Technologies SDKs. For example, the standard term of the Windows Media Format
SDK is one year.
(d) DISCRIMINATORY BEHAVIOR/PRICE DISCRIMINATION/DISCRIMINATION
Section 15 PCA. It shall be prohibited for one or more entities to abuse their dominant position by
engaging in conduct that would substantially prevent, restrict or lessen competition xxx
or sellers of the same goods or services, where such customers or sellers are contemporaneously
substantially
Provided, That the following shall be considered permissible price differentials:
(1) Socialized pricing for the less fortunate sector of the economy;
(2) Price differential which reasonably or approximately reflect differences in the cost of
(3) Price differential or terms of sale offered in response to the competitive price of payments,
(4) Price changes in response to changing market conditions, marketability of goods or services,
or volume;
26
Note:
Article 102 Treaty on the Functioning of the European Union (TFEU)
may affect trade between Member States. Such abuse may, in particular, consist in: xxx
(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby
placing them at a competitive disadvantage;
Questions:
1. Does the entity have a dominant position?
2. Are its customers or sellers trading on similar terms and conditions?
3. Did the entity set prices or other terms or conditions that are unreasonably discriminatory?
4. Did this result in the customer or seller being placed in a competitive disadvantage?
5. Is there a reason for such discrimination?
Elements:
1. Entity has a dominant position
2. Customers or Sellers are trading on similar terms and conditions
3. Entity sets prices or other terms or conditions that are unreasonably discriminatory
4. Customers or sellers placed on competitive disadvantage because of the unreasonable
discrimination
Valid: Permissible price differentials

1. socialized pricing
2. differences in the cost of manufacture, sale, or delivery
3. competitive price of payments, services or changes in the facilities furnished by a competitor
4. changing market conditions, marketability of goods or services, or volume
(d) DISCRIMINATORY BEHAVIOR/PRICE DISCRIMINATION/DISCRIMINATION

Case T-301-04 Clearstream Banking AG v Commission
Background:
Clearstream International SA (‘CI’), which has its principal office in Luxembourg, is a holding
company and the parent company of Clearstream Banking AG (‘CBF’), established in Frankfurt am
Main (Germany), and of Clearstream Banking Luxembourg SA (‘CBL’). The Clearstream group
provides clearing, settlement and custody services in relation to securities. CBL and Euroclear
Bank SA (‘EB’), established in Brussels (Belgium), (at the time of the decision) are the only
international central securities depositories (currently) operating in the European Union. CBF is
the central securities depository in Germany and (currently) the only bank having the status of a
securities depository bank.
The Commission found CBF and CI to have abused their dominant position by, among other
things, refusing to provide cross-border clearing and settlement services to Euroclear Bank SA
(‘EB’) for more than two years, and by applying discriminatory prices to EB. According to the
Commission, the refusal to supply lasted over an unreasonable period of time and harmed
innovation and competition in the provision of cross-border secondary clearing and settlement
services.
Specifically, the Commission found that CBF:

-refused to supply primary clearing and settlement services for registered shares by denying
direct access to Cascade RS and discriminating against EB in relation to the supply of those
services; xxx for almost two years, the applicants refused to provide EB with the same services as
those they supplied rapidly to other comparable customers in equivalent situations; (Note:
Cascade is a computerized system which allows for the entry and matching of settlement
instructions and is also the settlement platform for such instructions. Cascade RS (Registered
Shares) is a subsystem of Cascade which allows CBF’s customers to enter the specific data
required by the registration and
deregistration process for registered shares.)
27
— applied discriminatory prices to EB for primary clearing and settlement services, by charging
them, for equivalent services, prices higher than those charged to other comparable customers
(the CSDs and ICSDs which still carry out cross-border transactions), without an objective
justification.
Q: When is a parent company presumed to exercise control over its subsidiary, thereby liable for
the acts of its subsidiary?
A: When a parent company holds 100 per cent of the capital of a subsidiary which has committed
an
infringement, there is a rebuttable presumption that the parent company exercises decisive
influence over the conduct of its subsidiary and that they therefore constitute a single undertaking
for the purposes of competition law. It is for the parent company to rebut that presumption by
adducing evidence to establish that its subsidiary was independent.
xxx since CI holds 100% of the capital of CBF, it is for it to adduce evidence of independent
behaviour by CBF such as to rebut that presumption, and it has failed to do so. They did not in
fact deal in their written pleadings with whether the subsidiary CBF had decided and/or decided
independently upon its own conduct on the market rather than carrying out the instructions given
to it by the parent company.
Nor did they dispute the Commission’s statement that in its business publications Clearstream
presents itself as a single entity and, second, that the facts set out in the contested decision show
that CI influenced the behaviour of CBF, which did not therefore act independently, and even that
CI occasionally acted on behalf of its German subsidiary.
CI argues that the Commission never found that CI was an undertaking occupying a dominant
position on the relevant market. The Court ruled that this is based on the false assumption that CI
has not been held to have committed any infringement. CI itself was found to have committed an
infringement, by virtue of the economic and legal ties linking it to CBF which enabled it to
determine CBF’s conduct on the market.
Q: How does the court exercise its power of judicial review on the definition of product market?
A: In so far as the definition of the product market involves complex economic assessments on
the part of the Commission, it is subject to limited review by the Court. The Court will assess
whether the Commission based its assessment on accurate, reliable and coherent evidence which
contains all relevant data and is capable of substantiating the conclusions drawn from it.
‘[F]or the purposes of investigating the possibly dominant position of an undertaking on a given
product market, the possibilities of competition must be judged in the context of the market
comprising the totality of the products or services which, with respect to their characteristics, are
particularly suitable for satisfying constant needs and are only to a limited extent interchangeable
with other products or services. Moreover, since the determination of the relevant market is useful
in assessing whether the undertaking concerned is in a position to prevent effective competition
from being maintained and to behave to an appreciable extent independently of its competitors
and its customers, an examination to that end cannot be limited solely to the objective
characteristics of the relevant services, but the competitive conditions and the structure of supply
and demand on the market must also be taken into consideration.
‘The concept of the relevant market implies that there can be effective competition between the
products or services which form part of it and this presupposes that there is a sufficient degree of
interchangeability between all the products or services forming part of the same market in so far
as a specific use of such products or services is concerned.
‘The applicants’ claim that viewing matters from the point of view of the intermediary depositories
conflicts with some earlier Commission decisions is irrelevant. The present case can be
distinguished from the facts of the cases relied upon by the applicants. In any case, it must be
noted that the Commission is required to carry out an individual appraisal of the circumstances of
each case, without being bound by previous decisions concerning other undertakings, other
28
product and service markets or other geographic markets at different times. In the present case
the Commission did not make a manifest error of assessment when holding that the relevant
market was the provision by
CBF, to intermediaries, of primary clearing and settlement services in respect of securities issued
under German law, over which CBF has a de facto monopoly and is therefore an indispensable
commercial partner.’
Q: How does the court view the concept of abuse?
A: The concept of abuse is an objective concept. The conduct of an undertaking in a dominant

position may be regarded as abusive even in the absence of any fault.
‘Consequently, the applicants’ argument that they did not pursue an anti-competitive objective is
irrelevant to the legal characterization of the facts. In that context, proving that it was the
applicants’ objective to postpone the grant of access in order to prevent a customer and
competitor of the Clearstream group from providing its services effectively may reinforce the
conclusion that there is an abuse of a dominant position but is not a condition for such a finding.’
The effect does not necessarily relate to the actual effect. For the purposes of establishing an
infringement of Article 102 TFEU, it is sufficient to show that the abusive conduct of the
undertaking in a dominant position tends to restrict competition or, in other words, that the
conduct is capable of having that effect.
In order to find the existence of an abuse within the meaning of Article 102 TFEU, ‘the refusal of
the service in question must be likely to eliminate all competition on the market on the part of the
person requesting the service, such refusal must not be capable of being objectively justified, and
the service must in itself be indispensable to carrying on that person’s business. According to
settled case-law, a product or service is considered necessary or essential if there is no real or
potential substitute. With regard to the condition of elimination of all competition, it is not
necessary, in order to establish an infringement of [Article 102 TFEU], to demonstrate that all
competition on the market would be eliminated, but what matters is that the refusal at issue is
liable to, or is likely to, eliminate all effective competition on the market. It is for the Commission
to establish such a risk of the elimination of all effective competition.
In the present case, the Commission decided that the applicants had a de facto monopoly with
regard to the provision of primary clearing and settlement services on the relevant market and
that EB could not duplicate the services which it was requesting. Furthermore, it found that EB
offered its customers a single point of access to a large number of securities markets and
therefore an innovative secondary clearing and settlement service, on a European scale.
According to the Commission, access to CBF was indispensable to EB in order to be able to

provide those cross-border secondary clearing and settlement services, and the applicants’ refusal
to provide it with primary clearing and settlement services for registered shares hindered EB’s
capacity to provide comprehensive, pan-European and innovative services. Alternative indirect
access to central a securities depository which EB could have used was not a viable alternative as
it posed a number of disadvantages in the form of longer deadlines, greater risk, higher costs and
potential conflicts of interest. The long period of time in which access was refused was
unreasonable and unjustifiable.
NOTES:
The concept of abuse is an objective concept. When the intention of the dominant company is
found, ‘the demonstration of the existence of an objectively abusive behaviour is made easier.’
Accordingly, whereas lack of intent is irrelevant for the finding of abuse, the finding of intent may
reinforce the conclusion that there was an abuse. On the issue of refusal to supply, there is no
need to establish that all competition was eliminated but that all effective competition was
eliminated.
Q: What does Article 102(c) refer to (Section 15 PCA (d) for our purposes)?
29
A: Article 102(c) TFEU refers to abuse consisting in ‘applying dissimilar conditions to equivalent
transactions with other trading parties, thereby placing them at a competitive disadvantage’.
‘Thus, according to the case law, an undertaking may not apply artificial price differences such as
to place its customers at a disadvantage and to distort competition.
Q: For purposes of this case, are the central securities depository (CSD) and the international
central securities depository (ICSD) 2 different markets?
A: According to Clearstream, these groups differ in the nature of the services requested, differ in
their business models, transaction volume, and the attributable costs. The Commission argues
that ICSDs and the CSDs constitute two groups of comparable customers. As the securities issued
under German law are concerned, the non-German CSDs and the ICSDs operate at the same level
and require the same primary services from Clearstream. Subsequently, the Court found that
Commission did not commit an error of assessment in its finding that the applicants applied
discriminatory prices to EB.
Q: What are the requirements for finding of prohibition of discrimination under Article 102(c)
TFEU?
A: The prohibition of discrimination in Article 102(c) TFEU requires not only the finding that the
behaviour is discriminatory, but also that it causes a competitive disadvantage—in other words, it
hinders the competitive position of some of the business partners of that undertaking in relation
to the others.
‘In that regard, there is nothing to prevent discrimination between business partners who are in a
relationship of competition from being regarded as abusive as soon as the behaviour of the
undertaking in a dominant position tends, having regard to the whole of the circumstances of the
case, to lead to a distortion of competition between those business partners. In such a situation, it
cannot be required in addition that proof be adduced of an actual quantifiable deterioration in the
competitive position of the business partners taken individually.
In the present case, the application to a trading partner of different prices for equivalent services
continuously over a period of five years and by an undertaking having a de facto monopoly on the
upstream market could not fail to cause that partner a competitive disadvantage.’
NOTE:
Q: Is there any justification?
A: None. No presence of permissible price differentials, such as:
1. socialized pricing
2. differences in the cost of manufacture, sale, or delivery
3. competitive price of payments, services or changes in the facilities furnished by a competitor
4. changing market conditions, marketability of goods or services, or volume
(E) IMPOSING RESTRICTIONS/REBATES/DISCOUNTS

engaging in conduct that would substantially prevent, restrict or lessen competition xxx
competition substantially
Provided, That nothing contained in this Act shall prohibit or render unlawful:
agreements (such as those) which give each party the right to unilaterally terminate the
agreement; or
Elements:
1. There is a lease or contract for sale or trade of goods or services
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2. Restrictions are imposed on said lease or contract
a. concerning where, to whom, or in what forms goods or services may be sold or traded,
or
b. Imposing conditions not to deal with competing entities,
3. The object or effect of the restrictions is to prevent, restrict or lessen competition substantially
Valid:
(1) franchising, licensing, exclusive merchandising or exclusive distributorship agreements that
give each party the right to unilaterally terminate the agreement;
(e) IMPOSING RESTRICTIONS/REBATES/DISCOUNTS

Case 85-76 Hoffmann-La Roche & Co v Commission cont…
ISSUE: The Commission argued that exclusivity terms (contract to obtain supplies exclusively
from
Roche) and fidelity rebates, which were part of Roche’s network of agreements with large
purchasers of vitamins, amounted to an abuse of a dominant position.
DISCUSSION: ‘An undertaking which is in a dominant position on a market and ties purchasers—
even if it does so on their request—by an obligation or promise on their part to obtain all or most
of their requirements exclusively from the said undertaking abuses its dominant position …
whether the
obligation in question is stipulated without further qualification or whether it is undertaken in
consideration of a grant or rebate. The same applies if the said undertaking, without tying the
purchaser by a formal obligation, applies, either under the terms of agreement concluded with
these
purchasers or unilaterally, a system of fidelity rebates, that is to say, discounts conditional on the
customer’s obtaining all or most of its requirements—whether the quantity of its purchases being
large or small—from the undertaking in a dominant position.’
‘Obligations of this kind to obtain supplies exclusively from a particular undertaking, whether or
not they are in consideration of rebates or of the granting of fidelity rebates intended to give the
purchaser an incentive to obtain his supplies exclusively from the undertaking in a dominant
position, are incompatible with the objective of undistorted competition within the [internal]
market, because—unless there are exceptional circumstances which may make an agreement
between undertakings … permissible—they are not based on an economic transaction which
justifies this burden or benefit but are designed to deprive the purchaser of or restrict his possible
choices of sources of supply and to deny other producers access to the market. The fidelity
rebate, unlike quantity rebates exclusively linked with the volume of purchases from the producer
concerned, is designed through the grant of a financial advantage to prevent customers from
obtaining their supplies from competing producers. Furthermore the effect of fidelity rebates is to
apply dissimilar conditions to equivalent transactions with other trading parties in that two
purchasers pay a different price for the same quantity of the same product depending on whether
they obtain their supplies exclusively from the undertaking in a dominant position or have several
sources of supply. Finally these practices by an undertaking in a dominant position and especially
on an expanding market tend to consolidate this position by means of a form of competition which
is not based on the transactions effected and is therefore distorted.’
Q: The contract between Roche and most of it purchasers contained an “English Clause” under
which the customer, if he obtains from competitors offers at prices which are more favourable
than those under their contracts with Roche may ask Roche to adjust its prices to said offers; If
Roche does not comply with this request, the customer, in derogation of his contract to obtain his
requirements exclusively from Roche, is entitled to get his supplies from the said competitor
without, for that reason, losing the benefit of the fidelity rebates provided for in the contracts in
respect of the other purchases already effected or still to be effected by him from Roche.
A: An ‘English clause’ in a contract does not remove the discrimination resulting from the fidelity
rebates. On the contrary, such a clause had provided Roche with information about market
31
conditions and the pricing strategies of its competitors and aggravated the exploitation of its
dominant position in an abusive way.
NOTES:
Fidelity rebates are objectionable when they stimulate customers to tie themselves to the
dominant
undertaking and create de facto exclusivity. Such rebates weaken the structure of competition in
the
market, strengthen the market power of the already dominant undertaking and act as a barrier to
entry. It is therefore irrelevant that the tied undertaking willingly entered into the agreement and
is
benefiting in the short term from the rebates.
The Court of Justice distinguished between a quantity (volume) rebate and a fidelity rebate which
is
designed to prevent customers from obtaining their supplies from competing producers. The latter
was held abusive when it led purchasers to obtain all or most of their requirements exclusively
from
the said undertaking.
(g) MONOPSONY
engaging in conduct that would substantially prevent, restrict or lessen competition
and other marginalized service providers and producers.
Monopsony exists when there is a single buyer of a good or service. (GEORGE STIGLER, THE
THEORY OF PRICE 216-18 (1987))
The classical theory of monopsony envisions a market with only one buyer that uses its power to
reduce the quantity purchased, thereby reducing the price that the monopsonist has to pay.
(Roger D. Blairt & Jeffirey L. Harrison, CORNELL LAW REVIEW, Vol. 76:297-298)
Elements:
1. The buyer has a dominant position
2. The buyer directly or indirectly imposes unfairly low purchase prices
3. Goods or services are procured from marginalized service providers and producers
Two main theories commonly used to examine buyer power and appraise its effects
1. The Monopsony model generally refers to a single purchaser of an input that faces perfectly
competitive sellers. A monopsonist can artificially withhold demand and procure input at a price
below competitive levels. Under the monopsony model, the distortion which stems from
monopsony power is assumed to lead to higher production costs and possible wasteful
expenditure. The restrictive assumptions at the base of this model limit its application in practice.
2. Bargaining theory provides a more applicable model for the analysis of buyer power. According
to the model, lower prices are obtained through the threat of shifting demand, rather than the
actual withholding of demand. Price is negotiated bilaterally and applies to the parties to the
agreement rather than to the whole market. Unlike monopsony power, the effects of bargaining
power on welfare are less certain and vary depending on market realities.
(g) MONOPSONY
Case COMP/M.5046 Friesland Foods/Campina
The Commission appraised a merger between the two largest dairy cooperatives in the
Netherlands. One of the affected markets was the market for the procurement of conventional raw
milk in the Netherlands. The Commission concluded that the merged entity will benefit from very
32
large market shares and will be able to exercise buyer power when dealing with the fragmented
upstream suppliers. The Commission noted that: ‘When assessing the impact of a concentration in
an upstream market such as the procurement of raw milk, it is necessary to first analyse whether
the increase of buyer power in upstream markets may significantly impede effective competition,
as it appears to be the case here, by creating or strengthening a dominant position. It should be
clarified whether the increased buying power of the notifying parties could have a detrimental
effect on competition, by enabling the new entity to obtain lower prices from farmers by reducing
its purchase of raw milk, which would in turn lead to lower output also in the downstream markets
and thus harm consumer welfare.’
(h) UNFAIR PRICING.

suppliers or consumers, provided that prices that develop in the market as a result of or due to a
prices;
Article 102 Treaty on the Functioning of the European Union (TFEU)

may affect trade between Member States.Such abuse may, in particular, consist in:
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading
conditions;
Elements:
1. Entity has a dominant position
2. Entity imposed unfair purchase or selling price
Justification:
Prices result of or due to:
1. superior product or process,
2. business acumen, or
3. legal rights or laws
(h) UNFAIR PRICING

Case 27/76 United Brands v Commission
FACTS: In a Commission Decision, United Brands (UBC) was found to have infringed Article 102
TFEU by abusing its dominant position in the market for bananas. Among the different abuses, the
Commission investigated claims that UBC charged excessive and discriminatory prices for its
‘Chiquita’ brand bananas to its customers in Belgium, Luxembourg, Denmark and Germany. UBC
challenged the decision before the Court of Justice and argued that it had not charged
discriminatory or unfair prices. The Court of Justice accepted the Commission’s finding on
discriminatory pricing but rejected its economic analysis of excessive pricing.
HELD: Article 102 TFEU applies to excessive pricing and may result in the finding of abuse when
the dominant undertaking charges a price which is excessive, having no reasonable relation to the
economic value of the product supplied. ‘This excess could, inter alia, be determined objectively if
it were possible for it to be calculated by making a comparison between the selling price of the
product in question and its cost of production, which would disclose the amount of the profit
margin; however the Commission has not done this since it has not analysed UBC’s costs
structure. The questions therefore to be determined are whether the difference between the costs
actually incurred and the price actually charged is excessive, and, if the answer to this question is
in the affirmative, whether a price has been imposed which is either unfair in itself or when
compared to competing products.’
33
Working out the production costs may raise great difficulties, yet in this particular case ‘the
production costs of the banana do not seem to present any insuperable problems’. The
Commission was therefore expected at the very least to require UBC to produce particulars of all
the constituent elements of its production costs.
The Commission’s comparison between prices charged by UBC in different Member States can in
principle provide the basis for a finding of excessive pricing. In this case, however, the
Commission failed to conduct a proper comparison of prices while taking all circumstances into
account.
NOTE: The Court of Justice establishes a two-tiered test. First the Commission should engage in
cost analysis. Then, after establishing an unacceptable gap between costs and price, the actual
price needs to be held unfair. The Court of Justice acknowledged that economic theorists may
provide additional ways to determine whether the price of a product is unfair. The Court accepted
in principle that comparing prices between different Member States may be used to establish
excessive pricing.
In Case 395/87 Ministère Public v Jean-Louis Tournier [1989] ECR 2521, the Court of Justice
indicated that when a dominant undertaking charges higher fees for its services in one Member
State than in others, then ‘where a comparison of the fee levels has been made on a consistent
basis, that difference must be regarded as indicative of an abuse of a dominant position. In such a
case it is for the undertaking in question to justify the difference by reference to objective
dissimilarities between the situation in the Member State concerned and the situation prevailing in
all the other Member States.’
In Case 30/87 Corinne Bodson v SA Pompes Funèbres des Régions Libérées [1988] ECR 2479, the
Court of Justice assessed the fairness of the price charged by an undertaking which held an
exclusive concession for funeral services in a particular area, by comparing these charges with
other areas in which the undertaking did not hold a dominant position.
- EU Competition Law, An Analytical Guide to the Leading Cases, Fifth Edition, Ariel Ezrachi
(i) PREJUDICIAL LIMITATION

(i.) Limiting production, markets or technical development to the prejudice of consumers,

provided that limitations that develop in the market as a result of or due to a superior product or
process, business acumen or legal rights or laws shall not be a violation of this Act:
Article 102 TFEU:

substantial part of it shall be prohibited as incompatible with the internal market insofar as it may
affect trade between Member States. Such abuse may, in particular, consist in: …
(b) limiting production, markets or technical development to the prejudice of consumers;
(i) PREJUDICIAL LIMITATION (Refusal to Supply)

Joined Cases C-241/91P & 242/91 PRTE & ITP v Commission (‘Magill’)
FACTS: Magill TV Guide Ltd (Magill) wanted to introduce a new television publication which would
provide a comprehensive weekly television guide in Ireland. To do so, it required the consent of
the television stations, among them RTE and ITP, who owned the copyrights for the relevant
information. Although at the time, the companies provided third parties with information on a
daily basis, they refused to provide Magill with a weekly listing of programmes. The Commission
found the refusal to constitute an abuse of Article 102 TFEU. RTE and ITP applied for the
annulment of the Commission’s decision. Following the General Court dismissal of the appeal, the
companies appealed to the Court of Justice.
34
HELD: ‘So far as a dominant position is concerned, it is to be remembered at the outset that
mere ownership of an intellectual property right cannot confer such a position.’ (para 46)
However, in this case, the television stations are the only source of information relating to the
listings of their programmes and therefore hold a dominant position by reason of their de facto
monopoly over the information. As such they are in a position to prevent effective competition on
the market in weekly television magazines in the areas concerned. (para 47)
A refusal to grant a licence, even if it is the act of an undertaking holding a dominant position,
cannot in itself constitute abuse of a dominant position. Nonetheless, the exercise of an exclusive
right by the proprietor may, in exceptional circumstances, involve abusive conduct. (paras 49, 50)
In the present case, the refusal to provide information by relying on national copyright provisions
prevented the appearance of a new product, a comprehensive weekly guide to television
programmes, which the television companies did not offer and for which there was a potential
consumer demand. There was no justification for such refusal which constitutes an abuse under
Article 102(2)(b) TFEU. (paras 51–5)
By their conduct, the television companies reserved to themselves the secondary market of
weekly television guides by excluding all competition on that market. (para 56) The General Court
did not err in law in holding that the appellants’ conduct was an abuse of a dominant position.
Notes: The case demonstrates the possible tension between the protection granted to intellectual
property rights and competition law. Note that mere ownership of an intellectual property right
does not necessarily establish the existence of a dominant position.

Case C-7/97 Oscar Bronner GmbH Co KG v Mediaprint
FACTS: Oscar Bronner GmbH & Co KG (Bronner) was the publisher of the Austrian daily
newspaper Der Standard. Bronner wanted to use the nationwide home- delivery service for daily
newspapers which was owned by the Mediaprint group and operated for the distribution of its own
newspapers. Although there were a number of regional or local networks, Mediaprint’s network
was the only nationwide network in Austria. Mediaprint refused to provide Bronner with access to
its delivery system. Bronner applied to the national Austrian court for an order requiring
Mediaprint to refrain from abusing its alleged dominant position on the market and to allow
Bronner access to its
nationwide home-delivery service for daily newspapers. A preliminary reference from the Austrian
court.
HELD: In order to assess whether the refusal by Mediaprint to allow access to the single
nationwide home-delivery scheme in Austria constitutes an abuse of a dominant position, one
needs to consider the indispensability of this scheme for the distribution of newspapers. It is
undisputed that other methods of distributing daily newspapers, although maybe less
advantageous for the distribution of certain newspapers, exist. These include distribution by post
and through sale in shops and at kiosks. (paras 42–4)
Moreover, it does not appear that there are any technical, legal or even economic obstacles which
prevent other publishers of daily newspapers from establishing a second nationwide home-
delivery scheme. The fact that the small circulation prevents a publisher from setting up, alone or
with others, a second nationwide home-delivery scheme does not make the access to existing
nationwide home-delivery scheme indispensable. For this to be considered indispensable it is
necessary to establish at the very least that that the creation of a second nationwide home-
delivery scheme with a circulation comparable to that of the daily newspapers distributed by the
existing scheme is not economically viable. (paras 45, 46)
Note: The Court referred to the exceptional circumstances in Magill which were not found in this
case. There, (1) the refusal to supply concerned a product which was indispensable for carrying
on the business in question, (2) the refusal prevented the appearance of a new product for which
35
there was a potential consumer demand, (3) the refusal was likely to exclude all competition in
the secondary market, and (4) it was not justified by objective considerations. (paras 39–41)
In his opinion, AG Jacobs commented on the careful balancing of conflicting considerations which
is required before interfering with a dominant undertaking’s freedom to contract: ‘In the long term
it is generally pro- competitive and in the interest of consumers to allow a company to retain for
its own use facilities which it has developed for the purpose of its business. ... the incentive for a
dominant undertaking to invest in efficient facilities would be reduced if its competitors were,
upon request, able to share the benefits. Thus the mere fact that by retaining a facility for its own
use a dominant undertaking retains an advantage over a competitor cannot justify requiring
access to it. ... It is on the other hand clear that refusal of access may in some cases entail
elimination or substantial reduction of competition to the detriment of consumers in both the short
and the long term. ... In assessing such conflicting interests, particular care is required where the
goods or services or facilities to which access is demanded represent the fruit of substantial
investment. That may be true in particular in relation to refusal to license intellectual property
rights.’ (paras 57, 61, 62)

FACTS: An action for annulment of Commission decision Comp/C-3/37.792 in which the

Commission found Microsoft to have infringed Article 102 TFEU by refusing to supply
interoperability information to its competitors and by tying its Windows Media Player to its
operating system. The Commission found Microsoft’s refusal to supply to infringe Article 102(b)
TFEU by limiting technical development to the prejudice of consumers. The Commission ordered
Microsoft to license on reasonable and non-discriminatory terms the relevant interoperability
information to its competitors. It noted that, on balance, the possible negative impact of an order
to supply on Microsoft’s incentives to innovate is outweighed by its positive impact on the level of
innovation of the whole industry (including Microsoft). Microsoft appealed the decision and
argued, among other things, that refusal to supply interoperability information cannot constitute
an abuse of a dominant position within the meaning of Article 102 TFEU because (i) the
information is protected by intellectual property rights (or constitutes trade secrets), and (ii) the
criteria established in the case-law which determine when an undertaking in a dominant position
can be required to grant a license to a third party are not satisfied in this case.
Held: It follows from the Magill, IMS Health and Bronner judgments that a refusal by a dominant
undertaking ‘to license a third party to use a product covered by an intellectual property right
cannot in itself constitute an abuse of a dominant position within the meaning of [Article 102
TFEU]. It is only in exceptional circumstances that the exercise of the exclusive right by the owner
of the intellectual property right may give rise to such an abuse.’
‘It also follows from that case-law that the following circumstances, in particular, must be
considered to be exceptional: in the first place, the refusal relates to a product or service
indispensable to the exercise of a particular activity on a neighboring market; in the second place,
the refusal is of such a kind as to exclude any effective competition on that neighboring market;
in the third place, the refusal prevents the appearance of a new product for which there is
potential consumer demand.’
Indispensability
The Commission was right to conclude that in order to be able to compete viably with Windows
workgroup server operating systems, competitors’ operating systems must be able to interoperate
with the Windows domain architecture on an equal footing with those Windows systems. The
Commission did not err in its analysis when it found that the information concerning the
interoperability with the Windows domain architecture was indispensable.
Elimination of all effective competition

‘In the contested decision, the Commission considered whether the refusal at issue gave rise to a
“risk” of the elimination of competition on the work group server operating systems market.
Microsoft contends that that criterion is not sufficiently strict, since according to the case-law on
the exercise of an intellectual property right the Commission must demonstrate that the refusal to
36
license an intellectual property right to a third party is “likely to eliminate all competition”, or, in
other words, that there is a “high probability” that the conduct in question will have such a result.
The Court finds that Microsoft’s complaint is purely one of terminology and is wholly irrelevant.
The expressions “risk of elimination of competition” and “likely to eliminate competition” are used
without distinction by the [Union] judicature to reflect the same idea, namely that [Article 102
TFEU] does not apply only from the time when there is no more, or practically no more,
competition on the market.
If the Commission were required to wait until competitors were eliminated from the market, or
until their elimination was sufficiently imminent, before being able to take action under [Article
102 TFEU], that would clearly run counter to the objective of that provision, which is to maintain
undistorted competition in the common market and, in particular, to safeguard the competition
that still exists on the relevant market. In this case, the Commission had all the more reason to
apply [Article 102 TFEU] before the elimination of competition on the work group server operating
systems market had become a reality because that market is characterized by significant network
effects and because the elimination of competition would therefore be difficult to reverse. … Nor is
it necessary to demonstrate that all competition on the market would be eliminated. What
matters, for the purpose of establishing an infringement of [Article 102 TFEU], is that the refusal
at issue is liable to, or is likely to, eliminate all effective competition on the market. It must be
made clear that the fact that the competitors of the dominant undertaking retain a marginal
presence in certain niches on the market cannot suffice to substantiate the existence of such
competition.’
Preventing the appearance of a new product

‘It must be emphasised that the fact that the applicant’s conduct prevents the appearance of a
new product on the market falls to be considered under [Article 102(b) TFEU], which prohibits
abusive practices which consist in “limiting production, markets or technical developments to the
… prejudice of consumers”.’
‘The circumstance relating to the appearance of a new product, as envisaged in Magill and IMS
Health … cannot be the only parameter which determines whether a refusal to license an
intellectual property right is capable of causing prejudice to consumers within the meaning of
[Article 102(b) TFEU]. As that provision states, such prejudice may arise where there is a
limitation not only of production or markets, but also of technical development.’
‘It was on that last hypothesis that the Commission based its finding in the contested decision.
Thus, the Commission considered that Microsoft’s refusal to supply the relevant information
limited technical development to the prejudice of consumers within the meaning of [Article 102(b)
TFEU]) and it rejected Microsoft’s assertion that it had not been demonstrated that its refusal
caused prejudice to consumers. ‘The Court finds that the Commission’s findings at the recitals
referred to in the preceding paragraph are not manifestly incorrect.’
‘Thus, the contested decision rests on the concept that, once the obstacle represented for
Microsoft’s competitors by the insufficient degree of interoperability with the Windows domain
architecture has been removed, those competitors will be able to offer work group server
operating systems which, far from merely reproducing the Windows systems already on the
market, will be distinguished from those systems with respect to parameters which consumers
consider important …’
‘It must be borne in mind, in that regard, that Microsoft’s competitors would not be able to clone
or reproduce its products solely by having access to the interoperability information covered by
the contested decision. Apart from the fact that Microsoft itself acknowledges in its pleadings that
the remedy prescribed by Article 5 of the contested decision would not allow such a result to be
achieved … it is appropriate to repeat that the information at issue does not extend to
implementation details or to other features of Microsoft’s source code. … The Court also notes that
the protocols whose specifications Microsoft is required to disclose in application of the contested
decision represent only a minimum part of the entire set of protocols implemented in Windows
work group server operating systems.’
37
‘Nor would Microsoft’s competitors have any interest in merely reproducing Windows work group
server operating systems. Once they are able to use the information communicated to them to
develop systems that are sufficiently interoperable with the Windows domain architecture, they
will have no other choice, if they wish to take advantage of a competitive advantage over
Microsoft and maintain a profitable presence on the market, than to differentiate their products
from Microsoft’s products with respect to certain parameters and certain features.
‘It must be borne in mind that the implementation of specifications is a difficult task which
requires significant investment in money and time.’ Microsoft’s assertion that its refusal did not
cause prejudice to consumers is unfounded. ‘It is settled case-law that [Article 102 TFEU] covers
not only
practices which may prejudice consumers directly but also those which indirectly prejudice them
by impairing an effective competitive structure. In this case, Microsoft impaired the effective
competitive structure on the work group server operating systems market by acquiring a
significant market share on that market.’
The absence of objective justification

Microsoft relied as justification for its conduct solely on the fact that the technology concerned
was covered by intellectual property rights. This argument cannot be accepted. The protection of
the technology by intellectual property rights cannot constitute objective justification within the
meaning of Magill and IMS Health. Microsoft did not sufficiently establish that if it were required to
disclose the interoperability information that would have a significant negative impact on its
incentives to innovate.
NOTE:
The General Court upheld the Commission’s finding that Microsoft abused its dominant position by
refusing to provide interoperability information. At three distinct levels, the judgment eroded the
threshold for intervention that was established in previous cases:
[1] The Court held that the circumstances relating to the appearance of a new product, as
envisaged in Magill and IMS Health, ‘cannot be the only parameter which determines whether a
refusal to license an intellectual property right is capable of causing prejudice to consumers within
the meaning of [Article 102(b) TFEU].’ It thus used Article 102(b) TFEU to ‘import’ innovation into
the equation.
This ‘internal’ expansion tips the balance of the carefully crafted list of exceptional circumstances
in the Magill and IMS cases and lowers the threshold for finding an abusive refusal to license.
[2] The Court widened the notion of indispensability. Earlier cases were based on the absence of a
potential or actual substitute which was objectively indispensable. Yet, in Microsoft, although
access to the market might have been technically possible, the Court found that Microsoft’s
refusal eliminated the economic viability of such entry. It thus broadened the concept of
indispensability to take account of economic viability.
[3] The Court lowered the threshold for intervention by eroding the requirement for elimination of
all competition in the secondary market. It held that it is not ‘necessary to demonstrate that all
competition on the market would be eliminated. What matters … is that the refusal at issue is
liable to, or is likely to, eliminate all effective competition on the market.’
More generally note the General Court’s findings where as part of the assessment of consumer
harm, the General Court held that Microsoft impaired competition by acquiring a significant
market share. This statement controversially treats the mere attainment of significant market
share as anticompetitive and stands at odds with an effects-based approach.
In its Guidance Paper the Commission makes reference to the Microsoft judgment and states that:
‘The Commission considers that consumer harm may, for instance, arise where the competitors
that the dominant undertaking forecloses are, as a result of the refusal, prevented from bringing
innovative goods or services to market and/or where follow-on innovation is likely to be stifled.’
With respect to objective justification the General Court made it clear that protection of the
technology by intellectual property rights cannot constitute objective justification. The Court
38
explained that if the mere fact of holding intellectual property rights could in itself constitute
objective justification, the refusal to license could never be considered to constitute an
infringement of Article 102 TFEU.
Powers & Functions of the Philippine Competition Commission (PCC) (Sec. 12)
❖ Original & primary jurisdiction over the enforcement & implementation of the provisions
of the PCA, & its implementing rules & regulations
❖ Conduct inquiry, investigate, hear & decide or institute civil or criminal proceedings: (VIP)
➢ motu proprio
➢ verified complaint
➢ referral by the concerned regulatory agency
❖ Monitor market & compliance, & consult to understand market behaviour
❖ Specific enforcement powers upon finding of anti-competitive agreement or abuse of dominant
position:
➢ issuance of injunctions
➢ requirement of divestment
➢ disgorgement of excess profits
❖ Upon order of the court, undertake inspections of business premises & other offices, land &
vehicles (VIP)
❖ Conduct administrative proceedings, impose sanctions, fines or penalties
❖ Deputize
❖ Intervene in administrative & regulatory proceedings
❖ Act as the official representative of the Philippine government in international competition
matters
❖ Promote capacity building & the sharing of best practices with other competition-related bodies
❖ Advocate pro-competitive policies of the government
❖ Charging reasonable fees to defray the administrative cost of the services rendered
❖ Issue:
❖ subpoena (duces tecum & ad testificandum), summon witnesses, administer oaths, interim
orders (show cause orders, cease & desist orders) ❖ adjustment or divestiture orders IF:
➢ there is no equally effective behavioural remedy; or
➢ any equally effective behavioural remedy would be more burdensome
❖ advisory opinions & guidelines, & submit annual & special reports to Congress
Fines & Penalties

Sec. 29. Administrative Penalties.
(a) Administrative Fines after due notice & hearing
(b) Failure to Comply With an Order of the Commission
For each violation AND for each day of violation until compliance
(c) Supply of Incorrect or Misleading Information. –
Elements:
1. Supply of incorrect or misleading information
2. In any document, application or other paper filed with or submitted to the Commission
3. It was done intentionally or negligently
(d) Any other violations
Note: Please see PCC MEMORANDUM CIRCULAR NO. 21-001 PCC Memorandum Circular No. 21-
001:
Adjusting the Schedule of Fines for Violations of the Philippine Competition Act (PCA), of the 2017
Rules of Procedure of the Philippine Competition Commission, and the Rules of Merger Procedure
https://www.phcc.gov.ph/wp-content/uploads/2021/01/PCC-MC-21-001_Adjustment-of-
Fines_25Jan2021.pdf
Enforcement - Abuse of Dominant Position

A. Fact Finding & Preliminary Inquiry (Sec. 31, PCA)
1. motu proprio, or upon the filing of a verified complaint
39
2. Terminate fact finding & preliminary inquiry by issuing a resolution:
a. ordering closure of inquiry if no violation or infringement is found; or
b. to proceed, on the basis of reasonable grounds, to conduct of a full administrative
investigation
i. after due notice & hearing, issue an order for the temporary cessation or
desistance from the performance of certain acts which would result in a
material
& adverse effect on consumers or competition in the relevant market if not
stopped;
ii. If the evidence warrants, file before the DOJ criminal complaints for
preliminary investigation & prosecution before the proper court. The DOJ shall
conduct such preliminary investigation in accordance with the Revised Rules
of Criminal Procedure.
3. The preliminary inquiry shall, in all cases, be completed by the Commission within ninety
(90) days from submission of the verified complaint, referral, or date of initiation by the
Commission, motu proprio, of the same.
B. Power to Investigate & Enforce Orders & Resolutions. (Sec. 33) –administering oaths, issuing
subpoena duces tecum & summoning witnesses, & commissioning consultants or experts
C. Contempt (Sec. 38) - misconduct in the presence of the Commission in its vicinity as to
seriously interrupt any hearing, session or any proceeding before it; summary punishment by:
1. imprisonment not exceeding thirty (30) days or
2. a fine not exceeding one hundred thousand pesos (P 100,000.00), or
3. Both
D. Writ of Execution (Sec. 40) – issued upon the finality of its binding ruling, order, resolution,
decision, judgment, or rule or regulation
E. Non-Adversarial Remedies (Sec. 37)
1. Binding Ruling
a. no prior complaint or investigation has been initiated
b. doubt as to whether a contemplated act, course of conduct, agreement, or decision, is in
compliance with, is exempt from, or is in violation law
c. request the Commission, in writing, to render a binding ruling
d. the ruling is for a specified period
e. based on substantial evidence
f. 90 days to abide by the ruling
g. shall not be subject to administrative, civil, or criminal action unless the applicant fails to
comply with PCA
2. Show Cause Order

a. motu proprio or on written complaint under oath by an interested party
b. Commission shall issue & serve upon such entity or entities
i. a written description of its business conduct complained of,
ii. a statement of the facts, data, & information
iii. a summary of the evidence thereof
an order requiring the said entity or entities to show cause, within the period therein
fixed, why no order shall issue requiring such person or persons to cease & desist
from continuing with its identified business conduct, or pay the administrative fine
therein
specified, or readjust its business conduct or practices
3. Consent Order
b. At any time prior to the conclusion inquiry
c. No admission of violation
d. Submit a written proposal for the entry of a consent order, specifying:
i. the payment of an amount within the range of fines provided under the PCA
ii. compliance report
iii. payment of damages to any private party/parties who may have suffered injury
iv. Other terms
40
4. Monitoring of Compliance. –compliance is monitored; a certification or resolution of compliance
or non-compliance may issued upon motion of an interested party
5. Inadmissibility of Evidence in Criminal Proceedings. – The request for a binding ruling, the show
cause order, or the proposal for consent order; the facts, data, & information therein contained or
subsequently supplied by the entity or entities concerned; admissions, oral or written, made by
them against their interest; all other documents filed by them, including their evidence
presented in the proceedings before the Commission; & the judgment or order rendered thereon;
shall not be admissible as evidence in any criminal proceedings arising from the same act subject
of the binding ruling, show cause order or consent order against such entity or entities, their
officers, employees, & agents.
F. Appeals of the Decisions of the Commission (Sec. 39)

1. To the Court of Appeals
2. appeal will stay the order, ruling or decision sought to be reviewed only upon order by
the
Court of Appeals
3. the Commission shall be included as a party respondent to the case
G. Jurisdiction of the Regional Trial Court (Sec. 44) – all criminal & civil cases; principal place of
business of the entity/entities whose business act or conduct constitutes the subject matter of a
case, or where juridical entity conducts its principal place of business, where defendant is charged
in
the capacity of director, officer, shareholder, employee, or agent of a juridical entity who
knowingly
& willfully authorized the commission of the offense charged.
H. Private Action (Sec. 45)–any person who suffers direct injury by reason of any violation of this
Act
may instituted a separate & independent civil action after the Commission has completed the
preliminary inquiry
Forbearance (Sec. 28)

1. for a limited time if:
a. Enforcement is not necessary
b. Forbearance will not impede competition
c. Forbearance is consistent with public interest & the benefit & welfare of the consumers
2. public hearing needed
3. order to be made public
4. conditions may be attached
5. order may be withdrawn if condition needing forbearance ceases
6. applies only to Anti-Competitive Agreements & Abuse of Dominant Position
7. ex ante procedure which must be initiated by concerned entities prior to an investigation by the
Commission or the relevant office
Note: For the Implementing Rules and Regulations (IRR) of the Philippine Competition Act, see
https://www.phcc.gov.ph/wp-content/uploads/2016/04/RA-10667-Implementing-Rules-and-
Regula
tions-1.pdf
41
42

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ABUSE OF DOMINANT POSITION

Communication from the Commission

4. Are there objective justification and efficiencies? (Section 15)

5. If the dominance is abused, or if the dominant entity/entities is/are engaged in exclusionary

SEC. 29. Administrative Penalties. –

First offense: Fine of up to One Hundred Million Pesos (P100,000,000.00);

6. Are there non-adversarial remedies? (Section 37)

SEC. 37. Non-Adversarial Remedies. – As an implementing and enforcement policy, the

ARTICLE 102 TFEU

Such abuse may, in particular, consist in:

Note: Please see https://eur-lex.europa.eu/legal-

Note: See IRR for other criteria:

NOTE: market share ≥ 50% = rebuttable presumption of market dominant position

SEC. 15. Abuse of Dominant Position

Provided, That the following shall be considered permissible price differentials:

Factors in determining the market:

SOME FACTS TO CONSIDER:

CONCLUSION: banana is a product market on its own

Q: Does UBC have a dominant position in the market for bananas?

Dominant position … is ‘a position of economic strength enjoyed by an undertaking which enables

Q: Did UBC abuse its dominant position?

A: Yes. UBC abused its dominant position by:

Q: For purposes of investigating the possible dominant position of an undertaking on a given

Q: What is geographic market?

COMPAGNIE MARITIME BELGE TRANSPORTS ET. AL. V COMMISSION

NOTE: A shipping conference, also known as a liner conference, is an association of several

Recap Main Questions

(a) PREDATORY PRICING/PREDATION

Elements of predatory pricing/predation:

Other General Defenses:

(a) PREDATORY PRICING/PREDATION

Q: Does AKZO have a dominant position?

(b) IMPOSING BARRIERS/BARRIERS TO ENTRY OR EXPANSION

Other General Defenses:

Barriers to Expansion or Entry, and Potential Competition

(b) IMPOSING BARRIERS/BARRIERS TO ENTRY OR EXPANSION

Questions to consider when determining the issue of barriers to entry:

Factors to consider in the soda industry:

(c) TYING & (f) BUNDLING

(c) TYING & (f) BUNDLING

Case T-201/04 Microsoft Corp v Commission

(c) TYING & (f) BUNDLING

What are the products of Microsoft and of its competitors?

What gave rise to the investigation?

What are the necessary conditions for a finding of abusive tying?

The necessary conditions for a finding of abusive tying are:

4. the practice in question forecloses competition

5. tying was not objectively justified

(d) DISCRIMINATORY BEHAVIOR/PRICE DISCRIMINATION/DISCRIMINATION

Valid: Permissible price differentials

(d) DISCRIMINATORY BEHAVIOR/PRICE DISCRIMINATION/DISCRIMINATION

Specifically, the Commission found that CBF:

Q: How does the court view the concept of abuse?

A: The concept of abuse is an objective concept. The conduct of an undertaking in a dominant

According to the Commission, access to CBF was indispensable to EB in order to be able to

(E) IMPOSING RESTRICTIONS/REBATES/DISCOUNTS

(e) IMPOSING RESTRICTIONS/REBATES/DISCOUNTS

(h) UNFAIR PRICING.

Article 102 Treaty on the Functioning of the European Union (TFEU)

(h) UNFAIR PRICING

(i) PREJUDICIAL LIMITATION

(i.) Limiting production, markets or technical development to the prejudice of consumers,

Article 102 TFEU: