What is meant by a dominant position?
Abuse of dominant position is prohibited both on the basis of Section 7 of the Competition Act and Article 102 of the Treaty on the functioning of the European Union. The provisions are similar by content and interpreted in a uniform way, i.e. from the undertaking’s point of view, it makes no difference which set or rules are applied.
Under Section 4 of the Competition Act, a dominant position shall be deemed to be held by one or more [1] business undertakings or an association of business undertakings, who, either within the entire country or within a given region, hold an exclusive right or other dominant position in a specified product market so as to significantly control the price level or terms of delivery of that product, or who, in some other corresponding manner, influence the competitive conditions on a given level of production or distribution.
A dominant position manifests itself as a de facto possibility to prevent effective competition on the market and to behave in a manner independent of competitors, customers and suppliers. A dominant undertaking does not encounter a sufficient amount of competitive pressure, and a significant amount of the market power of the undertaking is thus related to the dominant position. Market power may be defined as the possibility of the undertaking to profitably maintain prices that are higher than the competed level, or to profitably limit production or quality below the competed level. A business undertaking may hence use its market power without directly and significantly loosing its market share to the competitors. A dominant undertaking may also harm the competitive process in other ways, for example by creating entry barriers or slowing down innovations.
[1] A dominant position may in some instances be jointly held by more than one undertaking without any of them holding a dominant position individually. In practice, the existence of collective dominance requires that there are financial ties between the undertakings which enable them to adopt the same market behaviour and hold a dominant position in relation to other undertakings. See Case C-497/99 P, Irish Sugar v Commission ([2001] ECR p. I-05333) and Joined cases C-395/96 P and C-396/96 P, CMB, CMBT and Dafra-Lines v Commission ([2000] ECR p. I-1365).
How to define the so-called relevant markets?
Relevant markets
The analysis of the competitive pressure faced by an undertaking takes place within a specific framework. For this purpose, the product and geographical markets that are relevant for the case will be defined. In order to define the relevant market, it is examined which products compete or may compete with the products under investigation and hence curtail the use of market power.
The substitutability of demand and supply have to be considered when the relevant market is defined. The substitutability of demand is the most direct and efficient factor which restricts the independent behaviour of undertakings on the market. The undertaking cannot significantly influence the prices and terms of delivery if the business partners may easily switch to substitutive products or are able to obtain the products from suppliers acting elsewhere.
When substitutability is assessed, it is examined which products consumers consider substitutive of the product in question and from which geographical markets buyers may purchase the substitutes. In practice, when the substitutability of demand is assessed, a hypothetical test is used to see if a 5-10 per cent price increase would result in a switch to replacing products to the extent that the price increase would become unprofitable [2]. The probability of substitution of demand may be affected by technical impediments related to switching products, costs incurred from switching, and the time elapsing in switching.
The substitutability of supply is considered in the determination of the relevant market in instances where its impacts may be as direct as those of the substitutability of demand. When substitutability is assessed, it is examined whether other suppliers could increase or otherwise adjust their production or their distribution channels so as to be able to manufacture competing products and offer these options for sale in the market.
For example different paper grades are not usually interchangeable with each other from the point of view of supply. However, if paper companies may adapt their production process to manufacture different paper grades relatively fast and without major additional costs, the substitutability of supply refers to a wider market definition.
[2] The test is known by the names "Hypothetical monopolist test" and "SSNIP test" (Small but Significant, Non-transitory Increase in Price).
Existence of dominance
After the relevant markets have been defined, it is possible to assess the market power of the undertaking on these markets. The point of departure for the assessment is often the market share of the undertaking. However, the market share is not the sole or decisive factor in finding a dominant position, and a specific market share limit cannot be imposed on the creation of a dominant position. The market power that manifests itself on specific relevant markets and the assessment of potential dominance is frequently based on the examination of several factors.
It is possible to draw conclusions on the degree of concentration of the market from differences in the undertakings’ market shares, however. The wider the difference in market shares between the two biggest undertakings and the more dispersed the market shares of other competitors, the more likely the possibility that the one having the higher market share possesses significant market power.
However, the importance of high market shares may be undercut by the deflation trend of the market shares, the bargaining power of the customers, fluctuations in market shares resulting from lump purchases infrequently made, substitutability of demand and supply, rapid technological progress or the competitive benefits of major competitors.
An undertaking may possess a large amount of market power, even if its market share is small. An undertaking’s market power may be further strengthened and its independent position reinforced by its economic and financial strength, the available free capacity, vertical integration, the width of the selection and other synergy benefits.
For example, economic and financial strength appearing as a low debt-equity ratio may offer the undertaking better possibilities to use different means of competition such as investments or pricing. An undertaking possessing a large amount of free capacity may react to entry by increasing production and introducing so many new products that entry is no longer profitable because prices have decreased.
Factors restricting the market power of undertakings
When market power is assessed, it will also have to be considered to what extent the existing and potential competitors, and customers and suppliers, can curtail the use of the market power of an undertaking. Even an undertaking with a high market share cannot price above the competed level, if it is likely that the customers will switch to using the more inexpensive products of competing undertakings sufficiently quickly and to a sufficiently large extent. The mere threat that a competing undertaking is expanding its business or a potential competitor will enter the market may limit the use of market power by the undertaking.
The expansion or entry of a business may be considered likely if it is sufficiently profitable. In this context, the barriers to expansion and entry, and the reactions, and risks and costs of failure of the allegedly dominant undertaking and its competitors will have to be assessed. Typical entry barriers include major economies-of-scale or claims on capital, different immaterial rights, heavily differentiated products and restraints in the access to the distribution channels.
The assessment of bargaining power deals with whether the customers or suppliers have such a strong position in relation to a potentially dominant undertaking that they can limit its anti-competitive conduct by influencing the terms of the trading relationship. This entails that it is possible for customers or suppliers to choose whom they conduct business with. It should be noted however that bargaining power is not considered to create sufficient competitive pressure in situations where it only benefits its user without the benefits extending to other market actors and ultimately consumers.
Forms of abuse of dominant position
A dominant position or the achievement thereof is not prohibited by the law, whereas the abuse of dominant position is prohibited. Special obligations are imposed on an undertaking in a dominant position as regards its trading partners and competitors. Several forms of abuse of dominant position exist and they can be classified in different ways depending on the angle from which they are examined.
Under Section 7 of the Competition Act, an abuse may, in particular, consist in:
- directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions
- limiting production, markets or technical development to the prejudice of consumers
- applying dissimilar conditions to equivalent transactions with other trading partners, thereby placing them at a competitive disadvantage
- or 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 connections with the subject of such contracts.
The list of examples of the forms of abuse in the Competition Act is not exhaustive, however. In addition, the various forms of abuse often exist as overlapping combinations: for example, the abuse of dominant position may consist of both application of the prize-squeeze, refusal to deal and discrimination.
It is not decisive which paragraph of the list of examples in Section 7 is considered to be violated but what impacts the conduct of a dominant undertaking has had for effective competition. The ECJ has found in its Michelin decision that a dominant undertaking has a special responsibility not to allow its conduct to impair genuine undisturbed competition on the market[3].
[3] Case 322/81, Michelin I, ([1983] ECR 3461, para 57)
Types of abuse of dominant position related to pricing
Other types of abuse of dominant position
Predatory pricing
Predatory pricing refers to a situation in which an undertaking in a dominant position exposes itself to loss on purpose or forfeits profit in the short term to foreclose the existing or potential competitors from the market. In assessing whether losses have incurred to a dominant undertaking that could have been avoided, the point of departure may be the average avoidable costs. The ECJ found in case AKZO that a dominant undertaking has no benefit from the use of such prices, as each sales event produces loss, unless the purpose is to oust the the competition in order to raise prices [4].
In its case, Tetra Pak appealed the decision by the Court of First Instance e.g. on the grounds that not enough attention had been paid to its possibility of recouping losses [5]. The Court dimissed the claim, however, and stated that in the circumstances of the case, elimination of competition could be deemed the purpose of the pricing practiced by the undertaking without further proof that the undertaking concerned had a realistic chance of recouping its losses.
This view has been confirmed in a more recent Wanadoo case in which the ECJ found that demonstrating the possibility of recouping losses cannot be deemed a precondition for the finding of predatory pricing [6].
In case Deutsche Post AG (COMP/35.141), the Commission found the undertaking guilty of predatory pricing in the market for parcel services. According to the Commission, Deutsche Post AG cross-subsidised its activities in the parcel service market by renevue obtained from the monopoly operations, and was hence able to offer parcel services below the incremental costs incurred.
Harm may accrue to consumers from below-the-cost pricing if the pricing is maintained in a relatively long term, hence enabling the foreclosure of a relatively efficient competitor from the market, or if the conduct may be seen to decrease the likelihood of competitors from entering into competition.
[4] Case 62/86, Akzo Chemie v Commission, ([1991] ECR, p. I-3359, para 71).
[5] Case C-333/94, Tetra Pak International SA v Commission ([1996] ECR, p. I-5951).
[6] Case C-202/07 P, France Télécom SA v Commission, ([2009] ECR, p. I-2369).
Price-squeeze
The price-squeeze means that a vertically integrated undertaking active on more than one production level weakens the position of its competitor in the end product market for a significant amount of time by overpricing an intermediary product. By using the price-squeeze, the undertaking weakens the position of its competitors or prevents their entry into the market by favouring its own business unit. An indication of a price-squeeze is the margin between the undertaking's wholesale price and retail price when it is so small that a relatively efficient competitor cannot obtain a regular profit on the market. It should be noted in price-squeeze cases that the excessiveness of such pricing is tied to the existence of the price squeeze and not the exact size of the price difference. It is hence not necessary to show that the prices would in themselves signal abuse because they are excessively high or mean predatory pricing [7].
In its decision Napier Brown/British Sugar [8], the Commission considered that British Sugar had abused its dominant position when it attempted to drive Napier Brown out of the sugar retail market in the United Kingdom. British Sugar was in a dominant position both in the industrial sales of sugar and in the retail market. When Napier Brown sought to expand its operations from the wholesale of sugar into the retail market, British Sugar decreased the margin between the wholesale and retail prices of sugar so low that Napier Brown, which was as efficient as British Sugar in the packaging and distribution of sugar, was unable to obtain a sufficient margin from its own sales to enable it to continue to operate.
The price-squeeze has special significance in the network industries, such as the telecommunications and energy markets, in which the entry of competing undertakings depends on their ability to lease transmission network resembling a natural monopoly.
The price-squeeze in the telecommunications sector has been assessed e.g. in the Deutsche Telekom case [9], in which the Commission found that Deutsche Telekom had abused its dominant position by charging a wholesale price from the tele network services that was higher than the retail price it collected from its own end users. In this situation, even an efficient competitor cannot operate profitably because in addition to the tele network charges other costs will incur e.g. from marketing, invoicing, debt collection etc. Not even the fact that the prices of Deutsche Telekom were regulated eliminated the abuse, because regulation did not prevent it from making independent pricing decisions that would have eliminated the price-squeeze or diminished it.
Another example of a price-squeeze is case Telefónica [10], handled by the European Commission. Telefónica had a distinct dominant position, as it was the only Spanish telecommunications operator that had a nation-wide fixed telephone network, and it was uneconomical to duplicate Telefónica's local access network. Telefónica had built the local access network in the cover of a long-runing monopoly, so it was able to finance its investments by monopoly pricing. The Commission's decision established the margin between Telefónica's retail prices and the prices for wholesale broadband access at both the national and regional levels was insufficient to cover the costs that an operator as efficient as Telefónica would have to incur to provide retail broadband access.
In similar decisions concerning the domestic telecom operators Elisa Communications Oyj, Salon Seudun Puhelin Oy and Turun Puhelin Oy, the FCA previously had made proposals to prohibit the abuse of dominant position and to impose a penalty payment. The Competition Council ordered in a matter involving Elisa Communications Oyj (diary no 150/690/1999) that the company pay penalties in the amount of FIM 25 million. In the cases involving Salon Seudun Puhelin Oy and Turun Puhelin Oy, the Supreme Administrative Court confirmed the decisions of the Competition Council (diary nos 14/690/2000 and 15/690/2000) on the imposition of penalties amounting to FIM one million and FIM 3,5 million on the undertakings.
[7] Cf. e.g. the judgement in case C-52/09, Konkurrensverket v TeliaSonera Sverige AB, ([2011] ECR, p. 0).
[8] Commission decision IV/30.178, Napier Brown v British Sugar, OJ [1988] L 284, 19.11.1988.
[9] Case C-280/08 P, Deutsche Telekom v Commission ([2008] ECR, p. II-477).
[10] COMP/38.784 – Wanadoo España v Telefónica 4.7.2007. Pending at the General Court of the European Union, case T-336/07.
Excessive pricing
An undertaking in a dominant position shall not charge excessively high prices from its products. Generally speaking, the threshold for intervening with excessive pricing has been set relatively high, and it has often been typical of the cases that the costs used as a point of comparison for the pricing have been open to interpretation. Additionally, it has been found in domestic case-law in particular that the purpose of competition law is not the imposition of a specific price level i.e. price-regulation. Excessive pricing is often related to high entry barriers or barriers to expansion, because it is usually not possible for the undertakings to maintain an unreasonably high price level otherwise.
The assessment of excessive pricing can be made in two stages by first investigating the relation of the undertaking's income to the costs, and if this gives rise to further investigations, abuse may be stated for example by assessing the price level on an absolute level, in relation to the competing products in the same relevant market, or by using the pricing of another comparable relevant market as a gauging rod. The assessment of pricing on an absolute level may mean for example the comparison of the profitability of a dominant undertaking to the profitability of other undertakings. In the final assessment, the relation of pricing to the economic value of the product will also be taken into consideration.
In the case United Brands, the ECJ dismissed the Commission’s decision insofar as the Commission had found that United Brands had abused its dominant position by collecting excessively high prices for the Chiquita bananas in Germany, Denmark and the Benelux countries. The ECJ considered the Commission’s analysis and assessment of facts deficient and found that when excessive pricing is assessed, not only a price comparison but a detailed cost structure analysis is needed. In this context, the Commission had for the first time referred to the two-stage method of assessment of excessive pricing [11].
According to the Competition Council’s decision on Helsinki Energy (diary no 151/690/1999), the arguments presented by the FCA were not sufficient to prove that the case would have involved excessive pricing referred to in the Competition Act. The Competition Council found in its decision that it is not the main concern of the competition authorities to intervene with excessive pricing but instead to safeguard sound and effective economic competition primarily by removing any impediments to competition and hence securing the functioning of the market mechanism and the economic self-steering capacity of the market. The Competition Council further found that the its among the essential elements of excessive pricing referred to in the Competition Act that the prices collected by the undertaking concerned exceed the generally acceptable level.
[11] Case United Brands, ([1978] ECR, p. 207).
Price discrimination
As a means of abuse of dominance, price discrimination refers to the treating of customers in a dissimilar manner without a cost-based or lawfully acceptable reason from a competition law viewpoint. Price discrimination may involve collecting dissimilar prices from the same product or collecting the same price from different products. When price discrimination is examined, a distinction can be made between vertically integrated undertakings hence having an interest to supplant competitors in the downstream market and ones which have no such interest.
In case Irish Sugar [12], the Court of First Instance found that the undertaking had sought to restrict the trade between the Member States to protect the high price level in the Irish market. Irish Sugar was found to have treated its own customers unfairly e.g. by granting special border rebates to the retailers located between the borderline area between Ireland and Northern Ireland. The purpose of the rebates was to decrease the import of cheaper sugar intended for retail sugar market from Northern Ireland to Ireland. Additionally, Irish Sugar granted import rebates to customers who imported sugar outside of Ireland and hence discriminated against customers who supplied to the Irish market alone.
[12] Case United Brands, ([1978] ECR,p. 207).
Rebate systems
As a rule, an undertaking in a dominant position is obliged to deliver products to its customers on similar conditions. However, an undertaking may collect dissimilar prices for objectively justifiable reasons which may be approved from a competition law viewpoint. Acceptable rebates may include volume rebates based on purchasing volumes, and rebates that are based on cost-savings to the seller. But volume rebates may also imply an abuse of dominant position, if they are not based on genuine cost-savings or other clear principles of discount and if the rebates are used in a manner discriminating a group of customers. It is prohibited to use rebates to artificially distort competition between different-sized customers [13].
[13] Cf. for example decisions on the leasing markets of subscriber lines (356/07/KR; 355/07/KR; 354/07/KR and 189/07/KR), in which the Market Court deemed the volume rebates of local operators to be discriminatory, as the purchasing volumes has been set so high that they were unattainable by the service operators and could only be effectively reached by the local operator’s own service operator.
The rebate practices of a dominant undertaking may be particularly harmful for effective competition if they have foreclosure effects such as tying. Tying impacts often appear in practices that offer customers forceful incentives to engage in business with a supplier of a product or service and that create artificial purchasing loyalty towards the seller.
In case Hoffman-La Roche [14], the ECJ prohibited loyalty rebates, the granting of which was tied to the condition that, for a specified reference period, the appropriate contracting partner would cover its entire need for vitamins and at any rate a major part of it by deliveries from Hoffmann-La Roche. According to the Court, the act of a dominant undertaking tying buyers – even if at their request – so as to commit them to buying or promising to buy from the said undertaking all the products they need or a majority thereof shall be considered abuse of dominant position, independent of whether the said obligation is imposed as such or whether discounts are obtained as a result of it.
The Commission has issued two decisions on the Michelin rebate systems. In the first case, the ECJ, like the Commission, found prohibited so-called target-discounts to retailers the size of which was based on the sales volumes of each individual retailer in the previous year. The discount percentages and sales targets were not confirmed in writing but they were orally negotiated in the beginning of of each year. The discount system forced the retailers to remain loyal to Michelin particularly at the end of the year because not to achieve the objectives meant losing the rebates [15].
In another Michelin case, the ECJ like the Commission found prohibited the discount system directed at the Michelin retailers: the discount volumes were based on sales volumes realized, and they were counted only a year after the first purchases. The discount system caused uncertainty to the retailers on the volumes of the forthcoming rebates and tied the retailers to obtain their products from Michelin [16].
[14] Case 85/76, Hoffman-La Roche v Commission ([1979] ECR, p. 461).
[15] Case 322/81, Michelin I, ([1983] ECR, p. 3461, para 57).
[16] Case T-203/01, Michelin II, ([2003] ECR, p. II-4071).
Refusal to supply
Generally speaking, based on freedom of contract, business undertakings are free to choose their contracting partners and to use their property freely. In practice, this may also imply the possibility not to engage in business relations with some actors. The threshold for imposing a supply obligation is high, because imposing the obligation may weaken the incentives of both the dominant undertaking and competitors to invest and innovate, which causes harm to consumers.
In the case of a dominant undertaking, refusal to supply products may take the form of abuse of dominant position. Refusal to supply typically restricts competition in situations in which a dominant undertaking competes with the buyer in the aftermarket from whom it denies supply.
The criteria for a prohibited refusal to supply may be fulfilled when a dominant undertaking ceases deliveries to a customer or refuses an agreement with a potential customer. Refusal to supply may take the form of a direct refusal or an indirect refusal when such demands are set regarding pricing or other terms that is already known that the opposing side cannot accept them.
Discontinuing deliveries to old customers is more easily considered abuse than refusing to supply a new customer. Further, the right to refuse to supply a new customer is usually limited if the company sells the same product to other actors in the same position.
For example, a medical company called Commercial Solvents refused to deliver aminobutanol, an essential ingredient of a drug used in the treatment of tuberculosis, to an Italian medical manufacturer called Zoja. Commercial Solvents occupied a dominant position in the production of aminobutanol and had its own subsidiary ICI which competed in the same downstream markets as Zoja. The ECJ held that the conduct of Commercial Solvents was particularly harmful for competition because it would have eliminated the only serious competition which the subsidiary ICI would have faced in the downstream market. After the ECJ’s decision, it has been found in case-law that the refusal of a dominant undertaking to supply products to a competitor operating in a downstream market constitutes an abuse of dominant position if the activities would result in the elimination of competition on the market [17]. An example of domestic case-law is case SNOY, in which the Market Court found SNOY guilty of abuse of dominance by refusing to submit telephone subscriber information for the electronic telephone catalogue service by Eniro Oy [18].
The same question has often come up in a slightly different form in cases involving so-called key position or so-called essential facilities. These may include ports, air fields, and electricity and telecom networks. It is typical of such fields that the dominant incumbent may prevent competition by refusing to supply a resource to competitors that is extremely difficult or uneconomical to reproduce and that is essential for supplying a specific product or service. In such cases, the authorities have found it justified to force undertakings in a dominant position to offer to the competitors a bottleneck resource classified as a key commodity.
In practice, this has resulted in similar claims in many other fields. For example, in the well-known Oscar Bronner case [19], the publisher of a daily newspaper, Oscar Bronner, demanded access into the home delivery system of a competitor called Mediaprint which was considerably bigger than Bronner. However, the ECJ held that such a home delivery system was not a bottleneck product in the same way as a port, for example. The Court held that there were other ways already exploited by Oscar Bronner to have products delivered. The Court also held that Oscar Bronner was unable to show that building a competing distribution system was impossible or uneconomical. The Court hence held that the activities of Mediaprint would not have led to the elimination of competition.
In the more recent Microsoft case, the conditions for imposing a supply obligation have been further specified. In order to consider an input objectively necessary, it is not required that refusal to supply is liable to eliminate all competitive factors from the market. What is significant is that the refusal may eliminate or is liable to eliminate all effective competition from the market. It should be specified in this regard that it is not sufficient to find for the existence of such competition that the competitors of a dominant undertaking remain marginally in the market in certain narrow market segments [20].
In the light of the above-mentioned cases, what is critical are the impacts of the conduct of a dominant undertaking on competition - not an individual competitor or competitors. In some cases, it may be justified to oblige a dominant undertaking to deliver to its competitors a product expressly seen as a key position if there is a threat that competition will be eliminated without such a measure. In some cases, however, undertakings in a dominant position may also have objectively justifiable grounds for refusing to supply which are also acceptable from a competition law viewpoint. In the case-law, justifiable grounds include the customer’s insolvency and capacity problems.
[17] Joined cases 6/73 ja 7/73, Istituto Chemioterapico Italiano S.p.A. and Commercial Solvents Corporation v Commission, ([1974] ECR, p. 223).
[18] Decision of the Market Court, Diary nos 281/05/KR and 293/05/KR.
[19] Case C-7/97, Oscar Bronner, ([1998] ECR, p.I-7791).
[20] Case T-201/04, Microsoft v Commission, ([2007] ECR, p. II-3601, paras 428 and 560-563).
Tying
Tying is defined as a dominant undertaking selling one product only on the condition that the buyer also purchases a different product from the supplier or another seller appointed by the supplier. The first product is called a tying product and the second one a tied product. If tying is not objectively justified from the point of view of the product’s characteristics or commercial purpose, an abuse of dominant position may be involved.
If the buyers normally obtain the product from separate markets, the products are different from the buyer’s perspective. Whereas the buying of shoes and shoe-laces or a new car and tyres is a commonly prevailing and acceptable practice, which is also backed up by technical expediency reasons. Tying is hence not involved.
Tying may be achieved in many different ways. The most obvious way is the contract clause where the supplier requires the buyer to purchase the tied product as well, as a condition to the delivery of the tying product. However, tying may be implemented in other ways. For example, a supplier may refuse to deliver the tying product without the tied product. Further, the claim to use the supplier’s components as a condition of guarantee may have a tying nature. Different pricing practices may also have a tying effect: prices and rebates may be determined so that the buyer will be left with no other rational choice than to obtain both or all the products needed from the supplier.
The major negative impact resulting from tying to competition is that it may result in the foreclosure of the market for the tied product from competitors. Sometimes, however, there may be objectively justifiable grounds for tying. For example, some technical equipment may only function in the best possible way if it uses parts which are optimized for the particular purpose. Furthermore, in some cases economies-of-scale and thereby cost-savings may be obtained by tying two products together. As a rule, tying is more to the detriment than benefit of competition.
A classic example of tying is case Hilti. Hilti is a tool manufacturer who had demanded that customers who purchase its patented nail guns also purchase their nails exclusively from Hilti. The European Commission considered this abuse of dominant position and imposed a fine of 6 million euros on Hilti. In its appeal, Hilti found that the Commission was wrong in its view according to which nail guns and nails formed their own distinct markets instead of one undivided entity. The Court of First Instance held, however, that the markets were separate and that independent manufacturers of consumables should in normal circumstances be able to manufacture products for the equipment manufactured by others. Like the Commission, the Court of First Instance also held the arguments relating to product safety as artificial [21].
Another know example of tying is related to the multifaceted case Tetra Pak II. Tetra Pak had demanded that customers to whom it supplied equipment used for the packaging of liquid or semi-liquid food products also purchase from it the cartons which were required for manufacturing the liquid-packages. The Commission found that it is not usual to tie the products in question to each other and no technological considerations can be found for it either. The Court of First Instance confirmed the Commission’s finding about the separate markets and about Tetra Pak being guilty not only of tying but also of predatory pricing to eliminate competition. Noteworthy in the Court’s judgement is the finding that although there may exist a natural connection between the products or they would appear together in commercial usage, their tied selling still may, depending on the context, imply an abuse of dominant position [22].
[21] Case T-30/89, Hilti v Commission ([1991] ECR, p. II-1439).
[22] Case C-333/94 P, Tetra Pak International v Commission, ([1996] ECR, p. I-5951).
Exclusive sales or exclusive purchasing agreements
An exclusionary sales agreement refers to an arrangement whereby the manufacturer grants a certain dealer the sole right to sell a product on a certain area. In an exclusive purchasing agreement, the buyer commits to buying a specific product from a one particular dealer only.
The common idea in the different exclusive agreements is to create an obligation or an incentive, as a result of which the buyer makes all its purchases on a specific market from one dealer alone. For an undertaking in a dominant position, such arrangements often have impacts which are harmful to competition, particularly in situations in which de facto and potential competitors cannot compete impartially for the entire demand of an individual customer. The necessity of a dominant undertaking as an obligatory trading partner may be due to for example the end-users' preferences or capacity restraints of other suppliers.
The exclusive agreements of a dominant undertaking are not prohibited automatically and in all circumstances but it is often highly likely that they have the nature of abuse of dominant position depending on the context in which they are applied.
last modified 12/28/2012