Commission rethinks policy on abuse of a dominant position

The Commission published a 72-page discussion paper yesterday on the application of Article 82 of the EC Treaty, the Article that prohibits the abuse of a dominant market position. It is seeking comments by 31st March 2006.

The Commission says its discussion paper is designed to promote a debate as to how EU markets are best protected from dominant companies’ exclusionary conduct, conduct which risks weakening competition on a market.

The paper sets out a possible methodology for the assessment of some of the most common abusive practices, such as tying, and rebates and discounts. Other forms of abuse, such as discriminatory and exploitative conduct, will be the subject of further work by the Commission in 2006.

Competition Commissioner Neelie Kroes said:

“I will rigorously enforce the Treaty’s prohibition on abusive conduct. Dominant companies should be allowed to compete effectively. Putting this policy objective into a consistent legal and economic framework is an ambitious project, but it is worthwhile for the clarity it will give to companies and their advisers.

"Our fundamental aim is to ensure that the EU’s powers to intervene against monopoly abuses are applied consistently and effectively, not only by the Commission but also by national competition agencies and courts throughout the EU which also now apply EU competition law. This discussion paper is the first step, and I want a wide discussion before taking a firm view on the proposals in the paper and before deciding how best to apply the results of these discussions.”

The proposed framework

The paper describes a general framework for analysing abusive exclusionary conduct by a dominant company. Where a dominant company is present on a market, competition on that market is already weak. The concern of the competition rules is therefore to prevent conduct by that dominant company which risks weakening competition still further, and harming consumers, whether that harm is likely to occur in the short, medium or long term.

For price-based conduct, such as rebates, the paper sets out arguments as to whether only that conduct which would risk the exclusion of equally efficient competitors should be considered as abusive.

The paper also considers whether efficiencies should be taken into account under Article 82, and, if so, how. If taken into account the claimed efficiencies would have to outweigh the restrictive effect of the conduct in question.

The Commission wants to concentrate its resources on those anti-competitive practices that are most likely to cause harm to consumers. As a result it has recently increased its enforcement activities against cartels. The proposals made in the discussion paper on Article 82 would in a similar way imply a strong focus on those abuses of dominant positions most likely to harm consumers.