Economic analysis has become crucial in the analysis of abuse of a dominant position, and will become even more important in the assessment of future abuse cases.
In order to show an abuse of a dominant position has taken place, two things must be proved: first, that the firm in question is dominant in the market; and second, that this dominance has been abused to the detriment of consumers. Economic analysis is central to both of these issues.
To establish dominance, a competition authority must first define the relevant market and then analyse the extent to which the firm has market power. If it is established that a firm is dominant, it is then necessary to analyse the effects of its conduct on competition, with a focus on whether the conduct is likely to harm consumers. Practices such as bundling, rebate schemes 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 to simply present theory on how conduct might have foreclosing effects on competition; empirical evidence is essential.
Many Article 82 cases involve claims that a dominant firm is engaged in conduct designed to extend its market power into an adjacent market. In such cases it is also necessary to consider whether there is a coherent economic theory that can explain how extending market power into the adjacent market might allow the dominant firm to increase its profits. Effects of alleged abusive conduct on industry-wide incentives to innovate and the interface between intellectual property and competition policy have also been a major issue in recent Article 82 investigations.
CRA has advised in a large number of cases involving the possible abuse of a dominant position at the European level, before the national competition authorities, and increasingly before national Courts. Our experience in Article 82 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. We have also supported companies such as Bacardi, Deutsche Telekom, AstraZeneca, Bus Eirrean, ENI, Tomra, SIS, and Airbus in their defence against alleged abuses. We are currently advising firms which have filed Article 82 complaints against Qualcomm related to licensing and other practices in the mobile phone industry. We have also worked on abuse of dominance cases in front of the competition authorities in Germany, Italy, UK, Ireland, Sweden, Bulgaria and South Africa.
We have often advised on Article 82 issues outside the confines of an official investigation. Typically working with a client's legal advisors, we assess whether a firm is likely to be found dominant by a regulatory authority 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 regulatory authorities on account of such dominance.