Article 82 of the Treaty Establishing the European Community

Article 82 of the Treaty establishing the European Community is aimed at preventing undertakings who hold a dominant positionin a market from abusing that position. It provides that,

(1) Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States."

(2) 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.

Dominance

First it is necessary to determine whether a firm is dominant, or whether it behaves "to an appreciable extent independently of its competitors, customers and ultimately of its consumer." [C-27/76 "United Brands Continental BV v. Commission" [1978] ECR 207] Under EU law, very large market shares raise a presumption that a firm is dominant, [C-85/76 "Hoffmann-La Roche & Co AG v. Commission" [1979] ECR 461] which may be rebuttable. ["AKZO" [1991] ] Where a firm has a dominant position, it has "a special responsibility not to allow its conduct to impair competition on the common market". ["Michelin" [1983] ]

Market definition

Market shares are determined with reference to the particular "relevant market" in which the firm and product in question is offered.

Market definition refers to the delineation of this relevant market. It can be an important or complex part of a competition case under Article 82. If the market is defined too widely then it will contain more firms and supposedly substitutable products, preventing a finding of a dominant position. If the market is defined too narrowly then there might be an incorrect presumption that the company is dominant.

Abuse

Abusive conduct is usually organised under different categories, from those in Article 82, and more. As was stated in "Continental Can" [1973] the categories are not closed.

Price exploitation

Under Article 82(2)a) "directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions" is considered abusive. Price exploitation is one example. It is difficult to prove at what point a dominant firm's prices become "exploitative" and this category of abuse is rarely found. In one case however, a French funeral service was found to have demanded exploitative prices, and this was justified on the basis that prices of funeral services outside the region could be compared. [ [http://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!CELEXnumdoc&numdoc=61987J0030&lg=en C-30/87] "Corinne Bodson v. SA Pompes funèbres des régions libérées" [1987] ECR 2479]

Limiting production

Under Article 82(2)b), "limiting production, markets or technical development to the prejudice of consumers" is considered an abuse by a dominant undertaking. An example was found in "Porto di Genova" [1991] , where a shipping port refused to raise expenditure and update technology. This limited the amount of cargo that the port could deal with to the detriment of some of its users.

Price discrimination

Price discrimination falls under Article 82(2)c), whereby an abuse is "applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage". An example of this could be offering rebates to industrial customers who export your company's sugar, but not to Irish customers who are selling their goods in the same market as you are in. ["Irish Sugar" 1999]

Tying

Under Article 82(2)d) "tying" is defined as "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." Tying one product into the sale of another can be considered abuse too, being restrictive of consumer choice and depriving competitors of outlets. This was the alleged case in "Microsoft v. Commission" [ [http://europa.eu.int/jurisp/cgi-bin/gettext.pl?lang=en&num=79958777T1904%20R0201_2&doc=T&ouvert=T&seance=ORD&where=() Case T-201/04] "Microsoft v. Commission" Order, 22 December 2004] leading to an eventual fine of €497 million for including its Windows Media Player with the Microsoft Windows platform. A refusal to supply a facility which is essential for all businesses attempting to compete to use can constitute an abuse. One example was in a case involving a medical company named "Commercial Solvents". ["Commercial Solvents" [1974] ] When it set up its own rival in the tuberculosis drugs market, Commercial Solvents was forced to continue supplying a company named Zoja with the raw materials for the drug. Zoja was the only market competitor, so without the court forcing supply , all competition would have been eliminated.

Predatory pricing

Predatory pricing is a controversial category. This is the practice of dropping prices of a product so much that in order one's smaller competitors cannot cover their costs and fall out of business. The Chicago School holds predatory pricing to be impossible, because if it were then banks would lend money to finance it. However in "France Telecom SA v. Commission" [Case T-340/03 "France Telecom SA v. Commission"] a broadband internet company was forced to pay €10.35 for dropping its prices below its own production costs. It had "no interest in applying such prices except that of eliminating competitors" ["AKZO" [1991] para 71] and was being crossed subsidised to capture the lion's share of a booming market.

ee also

*Article 81
*European Community competition law

Notes