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The definition of the relevant market . 3 Common Market or a substantial part thereof . 7 Abuses of owners of intellectual property rights . 13 An apprecciable effect on the trade between Member States. 15 Abuse of dominant position
1 Introduction

Article 82 of the EC Treaty prohibits the abuse of a dominant position in a substantial part of
the Common Market, if the abuse has an effect on trade between Member States. The basic
objective of Article 82 is to create the mechanism of control of the economic power of
enterprises operating in the Common Market. It is applicable if a dominant undertaking
abuses its market position, e.g. by means of unfair price practices, refusals of supply etc.
Article 81 prohibits agreements, decisions and concerted practices that affect the trade
between Member States and disturb competition in the Common Market while Article 82 of
the EC Treaty bans actions with similar consequences that represent abuse of economic power
at the disposal of enterprises, which have dominant position in the Common Market or a
considerable part thereof. The essential elements of Article 82 are set out in the first sentence:
“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 in so far as it may affect trade between Member States.” Dominant position can be a result of various factors. It can be acquired in a genuine market race, where one of the competitors, using legitimate tools, simply ‘wins the race’. The ownership of IPRs may also provide for a dominant position in a product the IPR is relating to. In Renault1 and Volvo v. Eric Veng2 the ECJ ruled that although Renault and Volvo, being owners of IPRs, could secure their exclusive rights and thereby obtain complete dominance, this alone did not justify the application of Article 82. Dominance alone is insufficient, since it is not the dominance, or even a monopoly, that is forbidden by Article 82, but its abuse.3 Unlike Article 81, Article 82 does not provide for any exemptions. Still, an undertaking can ‘escape’ the application of Article 82, by pleading that its conduct is objectively justified by legitimate commercial reasons. There is also no de minimis rule equivalent to that under Article 81.4 Article 82 sets out four essential elements: • one or more undertakings, • dominant position that is held in the common market or a substantial part thereof, • an abuse and • an effect on trade between Member States. The notion of undertaking is the same as under Article 81, therefore we will start with the second element, the establishment of dominance. 2 The establishment of dominance

1 Case 53/87, Renault [1988] ECR 6039. 2 Case 238/87, Volvo v. Eric Veng [1979] ECR 6211. 3 Goyder, 271. 4 Jones/Sulfrin, 255. A kind of such a rule might however be seen in the wording: “… which may affect the trade between Member States…”. Goyder, 265. The application of Article 82 requires the Commission (or a national court or competition authority) to prove that the undertaking, accused of illegal practices occupies a dominant position. Due to the lack of any formal definition of dominance, its ascertainment always requires a detailed economic analysis. Firstly, an economic analysis of the market has to be conducted in order to define the so-called relevant market, in which the undertakings in question operate. 2.1 The definition of the relevant market
As we have already seen above, in Chapter 6.3.3 of Part I, the relevant market comprises of:
• the product market, • the geographical market and sometimes also • the temporal market.
2.1.1 The product market

In principle, the assessment of the product market is based upon interchangeability. That is
the extent to which one product can be replaced in the market by another taking into account
its features, application or usefulness for a specified purpose.5 This issue should be examined
from the point of view of supply and demand. On the demand side the idea of
interchangeability requires some investigation of cross-elasticity of the product in question.
Cross-elasticity is high if the increase in the price of a product, e.g. pork, will lead to a
situation, where the majority of customers would decide to replace it with, e.g. beef. A high
degree of interchangeability indicates that examined products are part of the same market. If it
is difficult to obtain reliable data the Commission bases the analysis on other factors to state
whether products are really interchangeable. Among other, prices and physical features of
products are taken into account. The degree of interchangeability can also be influenced by
supply factors.
In United Brands6 a company exporting bananas, was accused of various illegal
practices in breach of Article 82. United Brands argued that bananas constitute part of a larger
market in fresh fruit and presented analyses proving that there is high cross-elasticity between
bananas and other fresh fruit. According to the Commission however, bananas constituted a
separate market partly because they met the food requirements of a material group of
consumers and partly because they have special features, due to which other kinds of fruit
cannot be considered as substitutes. The ECJ accepted the arguments presented by the
Commission, establishing that bananas form a product market separate from the fresh fruit
In Michelin, 7 the Commission initiated procedures against the Michelin group in connection
with the practice of discounts on tire sales. According to the
Commission, the discounts were aimed at the permanent binding of customers to the Michelin
brand and were therefore in violation of Article 81. The Commission ascertained that
Michelin had a dominant position in the market for tires for lorries, buses and similar vehicles,
which was to be considered as a separate market. Michelin argued that the definition of the
product market adopted by the Commission was arbitrary and that it had been created
artificially for the needs of the procedures. According to Michelin, the relevant product
5 Case 27/76, United Brands [1978] ECR 207. 6 Case 27/76, United Brands [1978] ECR 207. 7 Case 322/81, Michelin [1993] ECR 3461. market that should be referred to included also tires for passenger cars and vans as well as
retreads. The ECJ found that there was no elasticity of supply between tires for heavy vehicles
and tires for passenger cars due to material differences in the production technology,
equipment or tools necessary to manufacture them. The fact that the adaptation of light tire
production lines to the production of heavy tires and vice versa required material expenditure
of time and funds meant that these products were not similar enough to adapt their production
in the scope of varied market demand. Therefore, the Commission was right to assume that
the appropriate product market is the market of tires for lorries, buses and similar (heavy)
vehicles and exclude tires for passenger cars and vans from consideration.
The relevant product market can be very narrow. In Hugin v. Commission,8 the Commission
held Hugin guilty of the infringement of Article 82 because of the refusal to supply spare
parts for its cash registers to Lipton who competed with Hugin in servicing Hugin cash
registers. The Commission defined the relevant market as the market for spare parts for Hugin
cash registers necessary to independent repairers. However, Hugin maintained that the
relevant product market was the general market for cash registers and that it was a very
competitive market. The ECJ shared the view of the Commission.
2.1.2 The geographical market

In order to determine whether an undertaking occupies a dominant position it is also
necessary to define the geographical market. Some goods or services can be sold in an
unlimited area while others are available in a relatively small market as their more widespread
sales are difficult for technical or practical reasons. As a rule of thumb, the size of the market
is in inverse proportion to the products’ transportation costs relative to the value of the
product: a high value/low transportation cost-product will have a large geographical market
and vice versa.9 In Hilti v. Commission10 for example, the relevant geographical market was
the whole area of the European Community. But in most cases is the relevant geographical
market is much narrower.
Sometimes the relevant geographical market can be ascertained without complicated
economic analyses. In Napier Brown/British Sugar11 the Commission considered Great
Britain as the relevant the appropriate geographic market as the interested undertakings
operated in the market of sugar production and sales. It was ascertained that the import of
sugar into Great Britain is quite limited and has to be considered as a supplement to domestic
production rather than its alternative.

2.1.3 The temporal market

In some cases also the temporal factor should also be considered in the analysis of the market
under Article 82. It happens that an undertaking has material economic power in the market
only in a particular time period, e.g. when the competition of other entrepreneurs is smaller as
their products are available only seasonally. In addition, the time element plays an important
role in the definition of product markets when the technological development and changes in
8 Case 22/78, Hugin v. Commission [1979] ECR 1869.
9 Papasava, 304.
10 Case T-30/89, Hilti v. Commission [1991] ECR II-1439.
11 Napier Brown/British Sugar, [1988] OJ L 284/41.
consumer behaviour taking place with time influence the modification of borders between markets. 2.2 The assessment of market power

After the relevant market has been defined, the assessment of the market power of the undertaking
in question can take place, in order to determine, whether or not it occupies a dominant position in
that market. The relevant market and the dominance need to be defined on a case-by-case basis.
This means, that after establishing dominance of an undertaking in the relevant market in a certain
case, the undertaking’s position on the market must be investigated anew in other (pending of
future) cases, before either the Commission or the national authorities.12
Article 82 does not set out a procedure for declaring an undertaking to have a dominant
position. An undertaking is automatically dominant, if it satisfies the definition of dominance,
set out by the ECJ already as early as 1978 in the United Brands (UB) case.13 UB was a major
international producer of fruit, holding market shares of 40 to 45 percent in the relevant four
Member States. Its dominance in the market was not derived only from its market shares, but
also from the fact, that it was able to respond to variations in demand from its own resources.
It had also its own fleet, able to carry two thirds of his production. It was especially strong in
the trade in bananas, where it was the only firm to exploit the ‘Chiquita’ brand. Due to its
large investments, it had extensive refrigeration facilities, by which it was able to control the
timing of the ripening process. On the basis of the combined effect of those factors, the ECJ
described the concept of dominance as follows:
“The dominant position referred to in this article relates to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers.” In Hoffmann-La Roche (HLR),14 the turnover of HLR in the Common Market comprised 60 percent of the sales of vitamins worldwide. The HLR group had about 5,000 customers, including large multinationals, who placed large orders for the purchase of the whole range of vitamins produced. There were also fidelity-rewarding rebate schemes. In these circumstances, there was an overwhelming presumption of dominance on the basis of market share alone, for all vitamins, except the vitamin A, where the market share was lower. In establishing dominance, The ECJ relied upon the great disparity between the market share of HLR and its next largest competitor and upon the wide technical lead, HLR had over his competitors. Other factors that could be taken into account were the absence of real challenge in many of the markets and the fact that the HLR sales network was much higher developed than that of his competitors.15 In this case the ECJ extended the above definition of dominance: “Such a position [dominant position as described in United Brands] does not preclude some competition, which it does where there is a monopoly or a quasi-monopoly, but enables the undertaking which profits by it, if not to determine, at least to have an appreciable influence 12 Joined cases T-125 and 127/97, Coca-Cola [2000] ECR II-1733; Vogelaar, 7. 13 Case 27/76, United Brands [1978] ECR 207. 14 Case 85/76, Hoffmann-La Roche & Co. AG v. Commission [1979] ECR 461. 15 Goyder, 270. on the conditions under which that competition will develop, and in any case to act largely in disregard of it so long as such conduct does not operate to its detriment. (…) The existence of a dominant position may derive from several factors which, taken separately, are not necessarily determinative but among these factors a highly important one is the existence of very large market shares.” Even though the above definitions both are based upon a dominant supplier, dominance can occur on the buying side, as well.16 It follows from the case law that also an undertaking, having a statutory monopoly in the market, can be considered to have the dominant position under Article 82. In more frequent situations where regulations do not grant monopoly to any undertaking, the ECJ defines the dominant position on the basis of two types of evidence: − the market share possessed by the undertaking in question and − the presence of other factors promoting the dominance.
2.2.1 Market share

In assessment of dominance under Article 82, the market share of the undertaking in question
is the most important factor. Undertakings with a low market share generally do not have a
dominant position. In Metro II17 the ECJ held, that no dominance could arise, when a
supermarket chain had less than 10 percent of the general electronic equipment market for
leisure purposes, and less than 7 per cent of the colour television market.18 Generally
speaking, an undertaking, holding a market share of less than 25 per cent will probably not be
held to have a dominant position. Similarly, when its market share amounts to more than 50
percent, a company will be probably considered to have a dominant position, unless there is
another competitor on the market with a similar market share. In many cases, where the
market share of the undertaking in question is between 25 and 50 per cent, it will be important
to establish the market shares of its competitors, especially of the next largest. In BA/Virgin19
BA held a market share of 39.7 per cent, meanwhile the second largest held only 5.5 percent.
In combination with other factors, BA was held to have a dominant position.20
2.2.2 Other factors

As has been set out above, the market share is the most important, but not the only factor in
the assessing of dominance, which is a combination of several factors. Next to the market
share, the following factors are to be considered:
− the number and strength of the competitors, − their ability (forthcoming from unused capacities) to respond promptly to output or − entry barriers, which can be inherent in the nature of the market (e.g. legal barriers imposed by the EU or relevant Member States, large initial (sunk) investments) or 16 Case T-219/99, BA/Virgin ECR 2003 II-5917. 17 Case 75/84, Metro II [1986] ECR 3021. 18 Goyder, 272. 19 Case T-219/99, BA/Virgin [2003] ECR II-5917. 20 Goyder, 272-273. caused by the dominant undertaking (e.g. use of intellectual property rights, limited access to raw materials, closed distribution channels).
2.2.3 Dominance in small markets

The concept of dominance is not limited to large markets, but can also occur in relatively
small markets. In Hilti v. Commission,21 the CFI found that there was an abuse of dominance,
when a company, owning a patent and was required by national legislation to grant a license
right, demanded a fee that was six times higher than the fee, ultimately set by the Comptroller
of Patents. In Hugin v. Commission,22 dominance was established even in the very small
product market for Hugin cash registers.
2.2.4 ‘Superdominance’

The degree of dominance may vary from a slightly stronger position than the competitors
have, to an absolute dominance of a monopolist, who is operating on a certain market
completely alone. Article 82 does not distinguish between different categories of dominance.
Still, there were some cases, where the market share of the dominant undertaking was 90 per
cent or even higher. In such cases the ECJ established the requirement of 'special
responsibility', imposed upon such 'superdominant' undertakings. According to the ECJ, such
undertakings have a 'special responsibility' not to engage in practices such as predatory
pricing, excessive pricing and refusals to deal.23
2.3 Common Market or a substantial part thereof

The undertaking must hold a dominant position within the Common market or in a substantial
part of it. According to this requirement, local monopoly situations do not fall within the
ambit of Article 82. They might, however be relevant for the national competition law of the
Member States. Together with the criterion that the abuse should affect the trade between
Member States, it determines the boundaries of the Community jurisdiction.
The substantial part of the Common Market might correspond with the territory of a Member
state or even a part of it, e.g. the Southern part of Germany. Undertakings usually organize
their distribution systems on the national basis, which implies that they regard national
territories as separate markets. If national legislations also create different market conditions
in individual Member States this will also tend to establish them as separate markets. It may
also be important how easy or costly it is to transport goods in question. The lower the cost of
transportation of certain goods is in comparison with their price, the wider the geographical
market for those goods can be.24 In the Sugar Cartel case25 the ECJ held:
21 Case T-30/89, Hilti v. Commission [1991] ECR II-1439.
22 Case 22/78, Hugin v. Commission [1979] ECR 1869.
23 Case C-333/94 P, Tetra Pak International SA v. Commission [1996] ECR I-5951; joined cases C-395/96 P and
C-396/96 P Compagnie maritime Belge [2000] ECR I-1365.
24 Goyder, 274.
25 Joined cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73, Coöperatieve Vereniging "Suiker Unie" UA and
others v Commission
[1975] 1663; Jones/Sulfrin, 268.
“For the purpose of determining whether a specific territory is large enough to amount to 'a substantial part of the common market' within the meaning of [Article 82] of the Treaty the pattern and volume of the production and consumption of the said product as well as the habits and economic opportunities of vendors and purchasers must be considered.” In this case, the ECJ compared the volume of sugar production in the relevant Member States (Belgium, Luxembourg and Southern Germany) to that of the Community production and it established that each of those territories (markets) was a substantial part of the Common Market. The definition of a substantial part of the Common Market might depend on the nature of a certain market. In a number of transportation cases already small geographic areas were considered substantial, such as in passenger car ferry services. In the Holyhead cases26 Commission identified a as a substantial part of the Common Market the port of Holyhead, because this port provided one of the main links between two Member States (UK and Ireland) and was the most popular ferry route for passengers and cars between Great Britain and Ireland. 3.1 Introduction

Article 82 of the EC Treaty forbids the abuse of a dominant position. It does not define the
concept of abuse but gives a list of typical examples that is not exhaustive:27
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading (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. Already in Hoffmann-La Roche,28 the ECJ described abuse as follows: »The concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened and which, through recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.« The following principal categories of abuse can be derived from the case law:29 26 B&I Line Plc v. Sealink Harbours Lt. and Sealink Stena Ltd. [1992] 5 CMLR 255 and Sea Containers Ltd. v. Stena Sealink Ports and Stena Sealink Ltd. [1994] OJ L 15/8. 27 Goyder, 282. 28 Case 85/76, Hoffmann-La Roche [1979] ECR 461. • unfair pricing (e.g. excessive, predatory, discriminatory, and cross-subsidized pricing), rebate and discount schemes with anticompetitive features; • refusals to deal by a dominant undertaking or imposing unreasonable terms (e.g. tying • refusals to grant licenses of IPRs or other kind of abusive exploitation of IPRs; • refusal to grant access to essential facilities; • other abuses, such as abuse of legal proceedings or insisting upon unreasonable terms 3.2 Predatory pricing

Predatory prices are very low prices for goods or services on a temporary basis, which are
intended to drive competitors that cannot afford such prices, out of the market. As soon as
such competitors are driven out, the prices rise to ‘normal’ level, or because of the elimination
of competition, in many cases even higher. In the AKZO case,30 ECS was a small producer of
benzoyl peroxide (used as flour additive) in the UK that had a small market in the UK and
Ireland. It planned however to expand to other Member States, by marketing its product also
to the plastics industry, where the large Dutch company AKZO was the dominant market
player. AKZO had threatened ECS that it would apply substantial price cuts for several years,
that would put ECS out of business, if the latter would not abandon its intention to expand to
the plastics market. ECS complained to the Commission that adopted interim measures. It
issued a decision, stating, that AKZO’s predatory pricing infringes Article 82. In addition, the
Commission imposed a fine of 10 million ECUs. The ECJ upheld for the most part the
Commission’s decision, stating:
»Prices below average variable costs (that is to say, those which vary depending on the quantities produced) by means of which a dominant undertaking seeks to eliminate a competitor must be regarded as abusive. A dominant undertaking has no interest in applying such prices except that of eliminating competitors so as to enable it subsequently to raise its prices by taking advantage of its monopolistic position, since each sale generates a loss, namely the total amount of the fixed costs (that is to say, those which remain constant regardless of the quantities produced) and, at least, part of the variable costs relating to the unit produced.« The fine was however reduced to 7,5 million ECUs, because the issue was quite new and ECS had not lost substantial market share as a result of AKZO's conduct.31 3.3 Discriminatory pricing

Discriminatory pricing is an example of pricing, ‘incriminated’ in Article 82(c), where the
dominant undertaking applies different conditions to equivalent transactions with other parties
thereby placing them in a competitive disadvantage. In the United Brands case, United
was accused of charging discriminatory prices to its distributors in various Member
29 Goyder, 282. 30 Case C-6286, AKZO [1991] ECR I-3359. 31 Goyder, 287. States. In Germany and Denmark were the prices substantially higher than in the Benelux countries, meanwhile the costs were practically the same. United Brands claimed that the price differences resulted from a commercial decision as to what each part of the market could bear, but the Commission concluded that this was not an objective justification for the differences imposed. 3.4 Excessive pricing

Excessive prices are typical examples of unfair pricing, referred to in Article 82(a). In United
,32 the Commission’s view was that the prices of bananas in some national markets
were excessive. The Commission based its assumption on the (low) prices in Ireland. But the
ECJ refused to accept the Commission’s economic analysis, because the grounds for the high
prices in Ireland had not been sufficiently investigated. The ECJ held that a price is excessive,
when it has no reasonable relation to the economic value of the product supplied. According
to the ECJ, a detailed cost analysis was essential preliminary in every case, while the next step
is to compare the prices charged by the undertaking in question, with prices charged by its
competitors for the same product. In the United Brands case, the price difference was only 7
per cent, which evidence was insufficient for the conclusion, that the prices would be
3.5 Discounts and rebates

Granting discounts and rebates is another method to effectuate a discriminating pricing policy.
In the Hoffmann-La Roche case, 33 Hoffman-La Roche concluded exclusive or preferential
supply agreements with major industry purchasers, containing ‘fidelity rebates’. As a result,
those buyers were under pressure to buy the vitamins from La Roche. The Commission
imposed a large fine for infringement of [Article 82]. The Court reduced the fine but upheld
the Commission’s decision in its main elements. The Court agreed with the Commission that
the discounts given by Hoffmann-La Roche were ‘fidelity rebates’ and were abusive of a
dominant position as being equivalent to an exclusivity requirement. The Court distinguished
the ‘fidelity rebates’ granted by Hoffmann-La Roche from legitimate quantity discounts as
"This method of calculating the rebates differs from the granting of quantitative rebates, linked solely to the volume of purchases from the producers concerned in that the rebates at issue are not dependent on quantities fixed objectively and applicable to all possible purchasers but on estimates made, from case to case, for each customer according to the latter's presumed capacity of absorption, the objective which it is sought to attain being not the maximum quantity but the maximum requirements." In British Plasterboard v. Commission34 the abuse was found to consist of payment of rebates in return for dealers agreeing not to handle plasterboard supplied by Spanish suppliers. 32 Case 27/76, United Brands [1978] ECR 207. 33 Case 85/76, Hoffmann-La Roche & Co. AG v. Commission [1979] ECR 461. 34 Case T-65/89, BPB Industries Plc. and British Gypsum Ltd. v. Commission [1993] ECR II-389; Case C-310/93 P, BPB Industries Plc. and British Gypsum Ltd. v. Commission [1995] ECR I-865. Another case that concerned fidelity rebates was Michelin.35 Michelin had a strong position in the Dutch replacement tyre market for trucks and busses. It applied a fixed invoice and cash discount for early payment that applied equally to all dealers. The Commission found, that they were not infringing Article 82. In addition, Michelin offered a discount, linked to annual sales target, which was personal to each dealer. The target was fixed for each individual dealer by Michelin sales representative at the beginning of each year. The Commission had ruled that for the use of rebates to be acceptable under Article 82, they must be clear and defined on an objective basis. The sums payable to the dealers must be proportionate to the task they performed and the services they actually provided.36 The ECJ upheld the Commission’s decision for the most part. With respect to the Michelin’s system of target rebates it held: “As regards the application of [Article 82] to a system of discounts conditional upon the attainment of sales targets, such as described above, it must be stated first of all that in prohibiting any abuse of a dominant position on the market in so far as it may affect trade between member states [Article 82] covers practices which are likely to affect the structure of a market where, as a direct result of the presence of the undertaking in question, competition has already been weakened and which, through recourse to methods different from those governing normal competition in products or services based on traders ' performance, have the effect of hindering the maintenance or development of the level of competition still existing on the market. In the case more particularly of the grant by an undertaking in a dominant position of discounts to its customers the Court has held in its judgments of 16 December 1975 in joined cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73 Coöperatieve Vereniging ‘ Suiker Unie’ UA and others v Commission (1975) ECR1663 and of 13 February 1979 in case 85/76 Hoffmann-La Roche v Commission (1979) ECR 461 that in contrast to a quantity discount, which is linked solely to the volume of purchases from the manufacturer concerned, a loyalty rebate, which by offering customers financial advantages tends to prevent them from obtaining their supplies from competing manufacturers, amounts to an abuse within the meaning of [Article 82] of the Treaty. As regards the system at issue in this case, which is characterized by the use of sales targets, it must be observed that this system does not amount to a mere quantity discount linked solely to the volume of goods purchased since the progressive scale of the previous year ' s turnover indicates only the limits within which the system applies. Michelin NV has moreover itself pointed out that the majority of dealers who bought more than 3000 tyres a year were in any case in the group receiving the highest rebates. On the other hand the system in question did not require dealers to enter into any exclusive dealing agreements or to obtain a specific proportion of their supplies from Michelin NV, and that this point distinguishes it from loyalty rebates of the type, which the Court had to consider in its judgment of 13 February 1979 in Hoffmann-La Roche. In deciding whether Michelin NV abused its dominant position in applying its discount system it is therefore necessary to consider all the circumstances, particularly the criteria and rules for the grant of the discount, and to investigate whether, in providing an advantage not based on any economic service justifying it, the discount tends to remove or restrict the buyer ' s freedom to choose his sources of supply, to bar competitors from access to the market, to apply dissimilar conditions to equivalent transactions with other trading parties or to strengthen the dominant position by distorting competition.” 35 Case 322/81, Michelin I [1983] ECR 3461. 36 Goyder, 293. The Hoffmann-La Roche and Michelin cases established a general principle that a dominant supplier can give discounts that relate to efficiencies, e.g. discounts for large orders that allow the supplier to produce large batches of product, but cannot give discounts or incentives to encourage loyalty, that is for not purchasing from the competitors of the dominant supplier. In the BA/Virgin case37 BA had applied a commission scheme, providing a ‘performance reward’ to its travel agents for meeting or exceeding their previous year’s sales of BA tickets. In the Commission’s view were the commission schemes operated by BA very close in form to that condemned by the Court in the Michelin case, because they were clearly related to loyalty rather than efficiencies. According to the Commission, BA was using its commission scheme to directly reward loyalty. Travel agents were encouraged to remain loyal to BA rather than to sell their services to competitors of BA by being given incentives to maintain or increase their sales of BA tickets which do not depend on the absolute size of those sales. On appeal, the CFI upheld the Commission’s decision in its entirety. 3.6 Refusal to deal

One of the basic principles of contract law is that a party can freely chose with whom it will
deal and with whom not. On the other hand, if an undertaking, having a dominant position on
a market, refuses to deal with certain potential customers, such a refusal can constitute an
abuse under Article 82 of the EC Treaty. In the Commercial solvents case,38 the Commercial
Solvents Corporation
(CSC) was the dominant producer of intermediate chemical products
such as nitropropane and aminobutanol in the world. Both chemicals were used for the
manufacture of ethambutol, used as anti-tuberculosis drugs. A customer of CSC, Zoja,
purchased the chemicals through CSC’s Italian intermediary Istitito Chemioterapico Italiano
(ICI). At the end of 1970 CSC refused any further supplies to Zoja. The latter became unable
tom continue its production and complained to the Commission. The Commission established
an infringement of Article 82, imposed a fine and ordered an immediate resumption of
supplies. ICI and CSC appealed to the ECJ that shared the views of the Commission. It held:
However, an undertaking being in a dominant position as regards the production of raw material and therefore able to control the supply to manufacturers of derivatives, cannot, just because it decides to start manufacturing these derivatives (in competition with its former customers) act in such a way as to eliminate their competition which in the case in question, would amount to eliminating one of the principal manufacturers of ethambutol in the common market. Since such conduct is contrary to the objectives expressed in Article 3(f) of the Treaty and set out in greater detail in [Articles 81 and 82], it follows that an undertaking which has a dominant position in the market in raw materials and which, with the object of reserving such raw material for manufacturing its own derivatives, refuses to supply a customer, which is itself a manufacturer of these derivatives, and therefore risks eliminating all competition on the part of this customer, is abusing its dominant position within the meaning of [Article 82]. In this context it does not matter that the undertaking ceased to supply in the spring of 1970 because of the cancellation of the purchases by Zoja, because it appears from the applicants' own statement that, when the supplies provided for in the contract had been completed, the sale of aminobutanol would have stopped in any case.” 37 Case T-219/99, BA/Virgin ECR 2003 II-5917. Jones/Sulfrin, 440-446. 38 Joined cases 6-7/73, Commercial solvents [1974] ECR 223. In United Brands, the Commission found that UB infringed [Article 82] by refusing to continue supplies of Chiquita bananas to its Danish distributor Olesen from 10 October 1973 to 11 February 1975. These supplies were discontinued because the Olesen took part in an advertising campaign for competing bananas. As a consequence, Olesen has suffered considerable damage. The ECJ found, that the reaction of UB to Olesen's conduct was out of proportion to its alleged 'disloyalty' and ruled, that it was not permissible for an undertaking with a dominant position to cut off supplies to a long-standing distributor, as long as its orders had remained within the normal range.39 In BP v. the Commission40 the BP substantially reduced the supplies to the Dutch customer ABG, during the oil crisis in the mid seventies. Whilst the BP reduced its supplies to all customers in the Netherlands by about 12,7 percent average, the reduction of the supplies to ABG was by 73 percent. As a result, ABG had to buy additional quantities of fuel elsewhere. The Commission found that BP abused his dominant position, because the reduction of supplies to ABG was discriminatory, i.e. without an objective justification. The ECJ however, did not share the view of the Commission, since ABG was only an occasional customer. It held: “Since ABG 's position in relation to BP had been, for several months before the crisis occurred, that of an occasional customer, BP cannot be accused of having applied to it during the crisis less favourable treatment than that which it reserved for its traditional customers. Having regard to the general shortage of petroleum products during the period under review and the difficult position in which the whole of the Netherlands market was placed, the application to ABG by BP of a rate of reduction identical or very close to that applied to its traditional customers would have resulted in a considerable diminution of the deliveries which those customers expected.” A duty on the part of the supplier to apply a similar rate of reduction in deliveries to all its customers in a period of shortage without having regard to obligations contracted towards its traditional customers could only flow from measures adopted within the framework of the Treaty, in particular Article 103, or, in default of that, by the national authorities.” It clearly follows from the ECJ decision that not every refusal to deal constitutes an abuse under Article 82, but only refusals that have no objective justification and are thus discriminatory. 3.7 Abuses of owners of intellectual property rights

A dominant holder of IPRs is as a rule, not obligated to license his intellectual property rights.
The refusal to license therefore does not, in itself, constitute an infringement of Article 82.
For an abuse to exist, there must be additional abusive behaviour, and exceptional
circumstances must prevail.
In Parke & Davis v. Probel, 41 The dispute concerned a patent for chloramphenicol. Parke
was the holder of the patent for its production in the Netherlands and prevented the import of
chloramphenicol from Italy, where it could not be patented. Parke accused Probel of
39 Goyder, 298. 40 Case 77/77, Benzine en Petroleum Handelsmaatschappij BV and Others v. Commission [1978] ECR 1513. 41 Case 24/67 Parke Davis v. Centrafarm [1968] ECR 55. infringing his exclusive right in the Netherlands, by non-authorised import. The defendant argued, that Parke was abusing its dominant position. The ECJ ruled, that an exclusive enjoyment of a patent does not by itself constitute an infringement of Article 82. Similar was the decision in Sirena v. Eda,42 regarding the enjoyment of a trademark and in Volvo v. Feng43 regarding a registered design. In Magill, for example, the refusal to grant a license prevented the appearance of a new product, for which there was consumer demand. The refusal was not objectively justified and its effect was to reserve to the IPR holder a secondary market. The Magill case gave rise to a lot of controversy and the IMS Health case44 presented an opportunity for the ECJ to provide further clarity. The ECJ had to rule on the question under which circumstances a dominant intellectual property right holder might be forced to grant a licence to a competitor, pursuant to Article 82. The IMS Health case concerned a dispute between IMS Health and NDC Health, two competing US companies which both provide data on sales of pharmaceutical products and the health care sector. IMS Health supplied pharmaceutical companies with German regional sales data on pharmaceutical products, formatted according to a certain ‘brick structure’ where each brick corresponded to a certain geographical area. This structure was developed by IMS in collaboration with the pharmaceutical industry and has in practice become the industry standard for reporting sales data. In 2000 IMS discovered that certain competitors, including NDC Health, were using its copyright protected brick structure, and obtained preliminary injunctions from the German courts. NDC consequently filed a complaint to the European Commission based on Article 82 and the Commission ordered IMS to grant a copyright licence to NDC, This decision was later suspended by the President of the CFI. In addition, in July 2001, a German Court referred several questions to the ECJ for a preliminary ruling relating to the refusal by IMS to grant a licence to use its copyright-protected brick structure to NDC. The ECJ rendered its judgement in 2004. It held: “The answer to the second and third questions must, therefore, be that, for the purposes of examining whether the refusal by an undertaking in a dominant position to grant a licence for a brick structure protected by an intellectual property right which it owns is abusive, the degree of participation by users in the development of that structure and the outlay, particularly in terms of cost, on the part of potential users in order to purchase studies on regional sales of pharmaceutical products presented on the basis of an alternative structure are factors which must be taken into consideration in order to determine whether the protected structure is indispensable to the marketing of studies of that kind. The refusal by an undertaking which holds a dominant position and owns an intellectual property right in a brick structure indispensable to the presentation of regional sales data on pharmaceutical products in a Member State to grant a licence to use that structure to another undertaking which also wishes to provide such data in the same Member State, constitutes an abuse of a dominant position within the meaning of Article 82 EC where the following conditions are fulfilled: the undertaking which requested the licence intends to offer, on the market for the supply of the data in question, new products or services not offered by the owner of the intellectual property right and for which there is a potential consumer demand; the refusal is not justified by objective considerations; 42 Case 40/70 Sirena v. Eda, [1971] ECR 69. 43 case 238/87 Volvo v. Feng, [1988] ECR 6211. 44 Case C-418/01, IMS Health GmbH & Co. OHG v. NDC Health GmbH & Co. KG [2002] ECR I-5039. the refusal is such as to reserve to the owner of the intellectual property right the market for the supply of data on sales of pharmaceutical products in the Member State concerned by eliminating all competition on that market.” 3.8 Other forms of abuse

Next to the principal forms that were dealt with above, there are various other forms of abuse
that have been subject of Commission’s decisions, such as:
• acquisitions by dominant companies (Continental can45), • imposition of unreasonable terms (German Green Dot Scheme46), • discrimination on grounds of nationality (GVL,47 Corsica Ferries48) and • abuse of legal proceedings (ITT Promedia NV v. Commission49). 4 An apprecciable effect on the trade between Member States

Article 82 applies only if the abusive conduct affects the trade between Member States. This
requirement draws the jurisdictional borderline between the jurisdiction of the EU institutions
and the authorities of the Member States. It requires that an infringement of the EU
competition law should have a minimum level of cross-border effect within the Community.
This requirement is to be interpreted in the same way as under Article 81,50 which has been
discussed above, in Chapter 5 of Part II.
45 Case 6-72, Europemballage Corporation and Continental Can Company Inc. v Commission [1973] ECR 215. At the time of the case, the Merger Control Regulation 4064/89 was not yet in force. 46 Case IV D3/34493; Duales System Deutschland AG (DSD) [2001] OJ L 166/1. 47 Case 7/82, GVL v. Commission [1983] ECR 483. 48 Case C-18/93, Corsica Ferries 1994] ECR I-1783 49 Case T-111/96, ITT Promedia NV v. Commission [1998] ECR II-2937. 50 Jones/Sulfrin, 287.



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