Abuse of a dominant position

The European Commission's recent Guidance paper on the application of Article 82 (now Article 102) seeks to embrace a more economics-based approach - focused on the effect, rather than form, of the alleged abusive behaviour.

The European Commission's recent Guidance paper on the application of Article 82 (now Article 102) places economic analysis centre-stage in the assessment of abuse cases, and seeks to focus the analysis on the likely effects of a given practice on consumers.

In order to show that abuse of a dominant position has taken place, it is necessary to establish dominance and then show that this has been abused to the detriment of consumers. Economic arguments and evidence are central to both of these issues.

Even if dominance is established, it is then necessary to analyse the effects of the alleged abusive conduct on competition - typically one of the most complex and disputed parts of the analysis.

Practices such as bundling, discounts and refusal to supply can be either pro- or anti-competitive, even when carried out by a dominant firm, so careful economic analysis of the actual effects of the conduct in each specific case must be carried out. It is not enough simply to present theory on how conduct might have harmed competitors: it is essential to carry out an analysis of the likely effect on final consumers, corroborated by empirical evidence.

In many Article 102 cases it is imperative to consider the dynamic effects of the dominant firm's practices, and of the likely reaction by competitors. Analysis of the effects of the alleged abusive conduct on industry-wide incentives to innovate and the interface between intellectual property and competition policy have become major issues in recent Article 102 investigations.

CRA has advised in a large number of cases involving the possible abuse of a dominant position at the European level and before national competition authorities.

Our recent experience in Article 102 cases includes:

• Successful advice to Sun Microsystems, AOL, the CCIA (Computer and Communication Industry Association) and others in their complaints against Microsoft to the European Commission, leading to the Commission's landmark decision in 2004, which was upheld in 2007 by the European Court of First Instance
• Advice to firms which have filed Article 102 complaints against Qualcomm related to licensing and other practices in the mobile phone industry
• Advice to Intel in the first decision on loyalty rebates taken by the European Commission after the new Guidance on Article 82 (now Article 102) was issued in late 2008
• Economic support to Janssen-Cilag (an originator pharmaceuticals company) in its response to predatory pricing allegations in the French pharmaceutical market
• Advice to ENI on the investigation by the European Commission on refusal to invest in gas infrastructure
• Advice to the complainant (Messageries Lyonnaises de Presse) in a loyalty rebates investigation in the French press distribution market. In January 2009 the French competition authority found that the rebates were anti-competitive
• Expert economic support to Comair in its complaint against South African Airways alleging anti-competitive conduct in the South African domestic airline market
• Expert economic support to Mittal Steel against allegations of excessive prices in South Africa

We have also supported many other companies in their defence against alleged abuses in proceedings brought by competition authorities or in private antitrust litigation cases. Such companies include Bacardi, Deutsche Telekom, AstraZeneca, Bus Eireann, Tomra, SIS, Airbus, and SNCF.

We often advise on Article 102 issues outside the confines of an official investigation. This typically entails working with a client's legal advisors to assess whether a firm is likely to be found dominant by a competition authority or court and, if so, whether its current conduct might constitute an abuse of a dominant position and how its future conduct is likely to be restricted by the authorities on account of such dominance.

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