Abuse of Dominance Flashcards

Question

Regarding Product Market Definition, what are the Three Types of Aftermarkets?

Answer 1

*System Markets*: * **Primary** and **Secondary Products** are **sold together** in the **same market**. *Dual Markets:* * **Primary** and **Secondary Products** are **sold separately** in **distinct markets**. *Multiple Markets:* * **Primary** and **Secondary Products** are **sold separately** in **multiple distinct markets**. ## Footnote P. 203-205. For Dual and Multiple Markets, Undertakings may be found to be dominant in an Aftermarket despite not being dominant in a Primary Market.

Answer 2

The geographic **area** wherein **competitive conditions** are: * **Sufficiently homogeneous**; and * **Sufficientnly distinguishable** from neigbouring areas. | This is likewise determined through the HMT. ## Footnote P. 206; Case CW/01122/01/14, *Ofcom Decision of 14 August 2018*, at [6.7(b)].

Answer 3

Data regarding **Customers' ability** to **switch Suppliers**, such as: * **Search costs** for products in other geographic areas; * **Consumers' willingness to travel** to obtain such products; * **Transportation costs** for products; and * **Product value** relative to transportation costs. ## Footnote P. 206; CMA Guidance, *Market Definition* (OFT403), at [4.5].

Answer 4

**Data** regarding **Suppliers' ability** to **compete**, such as: * **Ease of entry** for **foreign Suppliers**, and * **Import volumes** (or the **potential thereof**), at least if sufficiently large to indicate competition with domestic Suppliers. ## Footnote P. 206-207; CMA Guidance, *Market Definition* (OFT403), at [4.6]. That said, any data depending on new investment or time delays is not relevant to the exercise.

Answer 5

By observing the **Undertaking's conduct** and its **economic strength** based on: * **Market share**; * **Direct evidence**; * **Entry conditions**; and * **Buyer bargaining power**. ## Footnote P. 209. CMA Guidance, *Market Power* (OFT415), at [2.4]-[3.1]; Case CE/9742-13, *CMA Decision of 7 December 2016*, at [4.225]. In assessing Dominance,

Answer 6

It is **merely a step** rather than the end itself, **outlining** the **domain** within which an Undertaking **supposedly exercises Dominance**. ## Footnote P. 211; Case CE/9742-13, *CMA Decision of 7 December 2016*, at [4.8], [4.15], and [4.25].

Answer 7

Evidence of an Undertaking's **ability** to **act appreciably independently** of **competition**. | Alone, it is unlikely to be enough, and should be jointly considered. ## Footnote P. 211; *Generics v CMA* [2018] CAT 4, at [397]. An example would be profitably charging higher prices than competitors without losing market share.

Answer 8

While **no strict thresholds** exist, **persistently high** market shares, namely **~50% or greater**, **rebuttably indicate** Dominance. ## Footnote P. 212; *AKZO Chemie v Commission* (C-62/86) EU:C:1991:286, at [60]. This is among the most important evidential categories. Market share below ~40% indicates Dominance is unlikely, but this is not an absolute rule. See P. 214-215.

Answer 9

By adducing **evidence** that the **Undertaking's circumstances** are **exceptional**, namely because of: * The **market's features**; * The **nature** of **competition** therein; and * The **competitors'** and **customers'** **characteristics**. ## Footnote P. 213; *Aberdeen Journals v Director General* [2003] CAT 11, at [310]-[311]. Exceptional circumstances may include trade liberalisaton, bidding markets, and persistently successful innovation. In such circumstances, the claimant must prove Dominance without recourse to a presumption, with market share remaining an important, but not conclusive, consideration. See *National Grid v Ofgem* [2009] CAT 14, at [51].

Answer 10

The **existence** and **scale** of **Barriers to Entry** (BTEs) and a **market's degree** of **contestability** by **Challengers**. | This is otherwise called the Assessment of Potential Competition. ## Footnote P. 216.

Answer 11

* Sunk costs. * Buyer power. * Exclusionary behavior. * Regulatory complexity. * Direct network effects. * Indirect network effect. * Access to important inputs. * Economies of scale and scope. ## Footnote P. 217-224.

Answer 12

* **BTEs only apply** to **new firms**, thereby **allowing Incumbents** to charge **supra-competitive prices**; whereas * **CODBs apply** to **all firms** operating in a given market. ## Footnote P. 217.

Answer 13

Whether **facts** and **context** suggest there are **real**, **concrete possibilities** for a **Challenger** to **enter** the market and **compete** with an **Incumbent**. ## Footnote P. 217; *Generics v CMA* [2018] CAT 4, at [92].

Answer 14

* Historical **records of entry** by Challengers; * Documentary **evidence** of **plans to enter** the market; * **Evidence** of **Customers** being **bound** by long-term contracts; and * The **views** of **Challengers**, **Potential Challengers**, and **Incumbents**; and * **Challengers'** and **Potential Challengers'** **sophistication** and **ability to enter** the market. | This list is neither exhaustive nor comprehensive. ## Footnote P. 217; CMA Guidance, *Market Power* (OFT415), at [5.30]–[5.31].

Answer 15

It is where: * **Two** (or more) **independent Undertakings**: * **Achieve Dominance**; * By constituting a **collective entity** **vis-à-vis** their **competitors**, their **trading partners**, and **consumers**. ## Footnote P. 225; §18 -- CA 1998; *Compagnie Maritime v Commission* EU:C:2000:132, at [39].

Answer 16

When their **economic ties** give rise to a **connection** that **enables collective action appreciably independent** of Competitors, Customers, and Consumers. ## Footnote P. 225; *Compagnie Maritime v Commission* EU:C:2000:132, at [41]-[45]. Ties need not be strictly structural or economic; they may also arise from legal and commercial agreements, concerted practices, or tacit coordination between the parties.

Answer 17

**Marginally**. While **certain conduct** is presumptively **Abusive by nature**, **effect** is usually the **paramount consideration**. ## Footnote P. 231; *Intel v Commission* EU:T:2014:547, at [85]–[88].

Answer 18

**No**,° **unless** it is **formally published** to Competitors, Customers, or Consumers as **intended future action**, **causing** them to make **appropriate changes**.°° ## Footnote P. 232. ° *Irish Sugar* EU:T:1999:246, at [121]. °° *Royal Mail v Ofcom* [2019] CAT 27, at [346].

Answer 19

1. Would the **conduct** be **anticompetitive if implemented**? 2. Did its **mere publication deviate** from **competiton** on merits, and was it **likely** to **cause anticompetitive effects**? ## Footnote P. 233; *Royal Mail v Ofcom* [2019] CAT 27, at [308]. Exceptionally, the CMA deemed abusive the mere possibility of a threat to carry out an anticompetitive practice, even though it had not yet made, although this ought be confied to its facts. See Case 50951, *CMA Decision of 18 December 2020*, at [1.2] and [4.4].

Answer 20

* **Dominance Causation:** Causation between the **Undertaking's Dominance** and its **conduct**. * **Effects Causation:** Causation between the **Undetaking's conduct** and its **anticompetitive effects**. Both employ a **Counterfactual Analysis** (CFA). | The burden of proof for both falls on the Claimant. ## Footnote P. 235; *Socrates Training v Law Society* [2017] CAT 10, at [161]. A CFA establishes causation by showing that a more competitive outcome would have occurred absent the Undertaking's conduct.

Answer 21

The **use** of **Dominance** to make **conduct unnaturally effective relative** to its efficacy **absent Dominance**. ## Footnote P. 237; *Tetra Pak v Commission* EU:C:1996:436, at [27]. Causation is presumed in clearly Dominated markets (Own Markets), but not in other ones (Related Markets). See *AstraZeneca v Commission* EU:T:2010:266, at [267]. Likewise, in exceptional circumstances, Causation may be established across markets. See *Tetra Pak*.

Answer 22

Whether the alleged **anticompetitive effects** are **directly attributable** to the **Undertaking's conduct**. ## Footnote P. 239; *Post Danmark II* ECLI:EU:C:2015:651, at [47].

Answer 23

1. **What** the alleged anticompetitive effects **are**; 2. Their **magnitutde**; and 3. Their **probability** of **manifesting**. ## Footnote P. 240.

Answer 24

The use of **Dominance** to **impede Challengers’ entry** or **expansion** by **denying** them **access** to **inputs**, **Customers**, or **Consumers**. ## Footnote P. 240; *Streetmap v Google* [2016] EWHC 253 (Ch), at [62]–[63].

Answer 25

The alleged anticompetitive effects must be **reasonably likely** of manifesting. ## Footnote P. 240; *Streetmap v Google* [2016] EWHC 253 (Ch), at [66] and [88].

Answer 26

A probability that is **neither speculative nor concrete** in its degree of **certainty**, falling **true** on **the balance of probabilities**. ## Footnote P. 243; *Microsoft v Commission* EU:T:2007:289 at [561]. That said, real evidence that conduct already has (or has not) harmed competition must be accounted for. See *Streetmap v Google* [2016] EWHC 253 (Ch), at [88]-[89].

Answer 27

* In **Own Markets**, **any level** of magnitude is **sufficient**.° * In **Related Markets**, anticompetitive **effects** must be **appreciable**, i.e. more than insignificant.°° ## Footnote P. 246. ° *Post Danmark II* EU:C:2015:651, at [70]–[74]. °° *Achilles v Network Rail* [2019] CAT 20, at [121].

Answer 28

1. Market share. 2. Conduct's scope. 3. Practical evidence. 4. Conduct's duration. 5. Extent of competition in the market. 6. Terms and structure of the Undertaking's conduct. 7. Degree of Incumbent's intent to execute the conduct. ## Footnote P. 248.

Answer 29

**No**. An Exclusionary Effect **must staisfy** the **As Efficient Competitor Test** (AECT) to be deeded **anticompetitive**. ## Footnote P. 251. This is because competition on merits necessarily leads to less efficient firms being marginalised or forced out if they are unable or unwilling to match rivals’ prices or quality.

Answer 30

1. If an **equally efficient Competitor** can **effectively compete** on **price** with the **Dominant Undertaking**; then 2. The **latter’s conduct** is **unlikely** to have an **adverse impact** on **effective competition** and vice versa. ## Footnote P. 252; EC Abuse of Dominance Guidance, at [27]. Specifically, the conduct's intrinsic capacity to exclude Competitors is what is relevant. See *Intel v Commission* EU:C:2017:632, at [140].

Answer 31

1. It is **not always necessary** to **conduct** an AECT in all pricing cases. 2. There is **no class of cases** that **always demands** an AECT to identify anticompetitive behavior. 3. **Scale of entry** and status as a **universal service providers** can render an AECT **inappropriate**. 4. Where an **AECT** is deemed **inappropriate**, the Regulator **need not examine** the Defendant’s proposed **AEC assessment in detail**. ## Footnote P. 253-254; *Royal Mail v Ofcom* [2019] CAT 27, at [522]-[586]. The cited case does not nullify the importance of AECTs — they are valuable — but rather illustrates that they are not a silver bullet and must considered in the context of the given facts.

Answer 32

A show that the Dominant Undertaking's **conduct**: 1. **Creates efficiency gains** to **Consumers' benefit**; that 2. **Outweighs losses** to **competition** or **consumer welfare**; while 3. Being **necessary** to the **realization** of said gains; and 4. **Not eliminating effective competition**. | Natuarlly, the burden of proof falls on the Undertaking. ## Footnote P. 257; *Post Danmark I* EU:C:2012:172, at [41]–[42].

Answer 33

A **public service** deemed to be of **general interest** and **economic importance**, and which is **subject** to specific **regulatory frameworks**. ## Footnote Lecture Notes. Examples include healthcare, education, public transportation, social housing, and energy supply, among others.

Answer 34

The **Prohibition does not apply** to SGEIs **insofar** as it would **obstruct** the **Undertaking's performance**, in law or in fact, of its assigned tasks. | This is also the case for the Chapter 1 Prohibition. ## Footnote P. 260; §19(1)(b) -- CA 1998.

Answer 35

1. The **Undertaking was assigned** to perform a SEGI. 2. Applying the Chapter 2 **Prohibition would obstruct** its **performance** thereof under **economically acceptable conditions**. 3. The Undertaking's **conduct is necessary** to peform its task and is **proportionate**. 4. The Undertaking is **acting according** to the **relevant Regulator's policies**. ## Footnote P. 260; *Royal Mail v Ofcom* [2019] CAT 27, at [668].

Answer 36

* Refusal to Deal. * Margin Squeeze. * Exclusive Dealing. * Predatory Pricing. * Tying and Bundling. * Conditional Discounting.

Answer 37

An **agreement** wherein one **Undertaking** **promises** to **source all** or **most** its **inputs exclusively** from the **Dominant**, thereby **excluding rivals**. | It is prohibited by effect. ## Footnote P. 262; *Hoffmann-La Roche v Commission* EU:C:1979:36, at [89]. In certain contexts, like franchising, this is both normal and pro-competitive, namely because it aligns the parties' incentives, encourages Customer-specific investments, and affords certainty.

Answer 38

A **refusal** by a **Dominant Undertaking** to **provide inputs** to either: * An **existing Customer**; or * An **new Customer** that **needs them**. | It is prohibited by effect. ## Footnote P. 267; *Attheraces v British Horseracing* [2007] EWCA Civ 38, at [108].

Answer 39

When the **Refusal**: * **Distorts competition**; * Is **without objective justification**; and * Concerns a **Customer** that **abides** by **regular commercial practice**. ## Footnote P. 267; *Burgess v OFT* [2005] CAT 25, at [311(1)].

Answer 40

When the **Refusal**: * **Distorts competition**; * Is **without objective justification**; and * **Concerns inputs** that are **essential** to the Customer's **operation**. ## Footnote P. 269; *Microsoft v Commission* EU:T:2007:289, at [332]–[334]. If the Refusal concerns intellectual property, it must also be shown to prevent the emergence of new products for which there is potential demand.

Answer 41

The practice of **offering two** or more **products only**, or **less expensively**, as a **package** **rather** than offering them **separately**. | It is prohibited by effect. ## Footnote P. 271-272. T&B may be beneficial by overcoming double marginalization, improving quality control, and reducing search costs, production costs, and licensing costs.

Answer 42

* Pure Bundling. * Mixed Bundling. * Unrelated Supplementary Obligations. ## Footnote P. 272-273.

Answer 43

The **contractual** or **technical bundling** of a **Dominant Product** with a **Non-Dominant Product** by a Dominant Undertaking. ## Footnote P. 272; *Genzyme v OFT* [2004] CAT 4, at [485]. Dominant and Non-Dominant Products are also called Tying and Tied Products, respectively. Technical bundling entails making it costly or difficult to separate the two products.

Answer 44

The **price bundling** of a **Tying** and **Tied Product**, making them cheaper together than independently, by a Dominant Undertaking. ## Footnote P. 272.

Answer 45

The **sale** or license of a **Tying Product subject** to various **commercially unrelated obligations**. ## Footnote P. 272.

Answer 46

1. The **products** are **distinct**. 2. The **Undertaking** is **Dominant** in the **Tying Product market**. 3. The T&B **does not allow** Customers to **purchase** the **Tying** Product **without** the **Tied** Product. 4. The T&B **distorts competition**. 5. The T&B is **without objective justification**. ## Footnote P. 273; *Microsoft v Commission* EU:T:2007:289, at [842]–[863].

Answer 47

A **price reduction** based on the **volume** or **proportion** of **purchases** a **Customer** makes **from** a **Supplier**. | It is prohibited by effect. ## Footnote P. 278. This is also known as a rebate, and may be beneficial by diffusing economies of scale and scope to Customers, increasing certainty for Suppliers, and incentivzing productivity down the Distribution Chain.

Answer 48

It either **completely functions** as **Exclusive Dealing** or **only somewhat so**, meaning it: * **Tends** to **prevent** Customers from purchasing all or most of their inputs from Competitors; * Makes **market entry very difficult** or impossible for **Challengers**; and * Makes **choosing between Suppliers more difficult** for **Customers**. | The latter type is termed a Fidelity-Building Rebate. ## Footnote P. 278-284; Case 50236, *CMA Decision of 14 March 2019*, at [4.8]-[4.13].

Answer 49

* Retroactivity. * Long reference periods. * Wide scope relative to the product market. * Discriminatory discounting between Customers. * Leveraging non-contestible sales to increase contestible sales. * Discount thresholds equal to approximately 75% of a Customer’s demand. ## Footnote P. 278-288.

Answer 50

The **decreasing** of **prices** by a** Dominant Undertaking** to **distort competiton**, usually by: * **Bankrupting Competitors**; * **Deterring entry** by making the **market** seem **unprofitable**; or * **Deterring challenge generally** for fear of a **price war**. | It is prohibited by effect. ## Footnote P. 288-289. A short-term price decrease is unlikely to be deemed predatory becuase it may be a legitimate strategy for attracting customers, minimizing losses, launching promotions, etc. Therefore, predatory pricing usually occurs over the medium-to-long term.

Answer 51

* The relevant **Undertaking** must be **Dominant**. * It must have either: * **Charged** prices **below** **AVC / ACC**; or * **Charged** prices **below** **ATC / LRAIC and above AVC / ACC** intending to **distort competition**. * Its pricing is **without objective justification**. ## Footnote P. 291; *Aberdeen Journals v Director General* [2003] CAT 11, at [351]–[352]

Answer 52

* **Average Total Costs** (ATC): The average of all costs. * **Average Variable Costs** (AVC): The average of all costs that vary with output. * **Long-Run Average Incremental Costs** (LRAIC): The average of all costs incurred to produce a particular product. * **Average Avoidable Costs** (AAC): The average of short-run costs avoidable by not producing a discrete amount of additional output. ## Footnote P. 289-290. The difference between AVCs and AACs is merely one of timeframes, with the latter operating in the short term.

Answer 53

* **Timescale:** The relevant period is however long the alleged conduct may reasonably be expected to prevail. * **Object of Comparison:** Prices and costs should only be assessed regarding relevant, not all, products. * **Assessing Intention:** *Ex ante* internal documents are the best evidence for assessing intention. ## Footnote P. 291-299; *Aberdeen Journals v Director General* [2003] CAT 11, at [354]-[426]; Cardiff Bus, *OFT Decision of 18 November 2008*, at [7.158]-[7.206].

Answer 54

The **sale** of **inputs** by a **vertically-integrated Dominant Undertaking** to its **own** downstream **division** at **lower prices than** to its **downstream Competitors**. ## Footnote P. 300.

Answer 55

1. An **Upstream** and **Downstream** Market **exist**. 2. The **Upstream** Market **supplies** an **essential input** to the **Downstream** Market. 3. A **vertically-integrated Undertaking** is **Dominant** in the **Upstream** Market and **active** (or Dominant) in the **Downstream** Market. 4. The Dominant **Undertaking’s Upstream** and **Downstream pricing** leaves **insufficient margin** for an **efficient Downstream Competitor** to **operate profitably**. 5. The Dominant Undertaking’s pricing is **without objective justification**. ## Footnote P. 300; *Albion Water v WSRA* [2008] EWCA Civ 536, at [88]–[91].

Answer 56

* **Subject Matter:** Analysis concerns an **equally**, **not reasonably**, **efficient** Competitor. * **Extent of Competition:** The Competitor **need not** attempt to **displace**, **only duplicate**, the Dominant Undertaking's activities. * **Independence:** Margin Squeeze is an **independent cause of action**, not requiring such grounds as Predatory Pricing. ## Footnote P. 300; *Albion Water v WSRA* [2008] EWCA Civ 536, at [90]–[110].

Answer 57

* Unfair Pricing. * Discriminatory Pricing.

Answer 58

The charging of **excessive prices** relative to a **product's economic value**. ## Footnote P. 309. This is the most difficult charge to successfully prove, namely because proving whether and precisely to what degree a given price is unfair is an ambiguous exercise.

Answer 59

1. **Define** the **Counterfactual**. 2. **Benchmark** normal **competitive conditions** in the Counterfactual. 3. **Verify** the **benchmark's sufficiency**. 4. **Compare** factual and counterfactual **prices** to determine excessiveness. ## Footnote P. 310-315; *Flynn Pharma v CMA* [2018] CAT 11, at [92]-[287]. Excessiveness, and thereby unfairness, may either be in and of itself, relative to competing products, or both. Either one suffices, unless the Defendant presents evidence under the other, in which case, it too must be addressed.

Answer 60

Charging different prices to different Customers for the same Product. | It is prohibited by effect. ## Footnote P. 331.

Answer 61

1. A **Dominant Undertaking** applies **dissimilar** (or similar) **conditions** to **similar** (or dissimilar) **transactions** with Customers; 2. **Without objective justification**; 3. Thereby placing the **Discriminated Customer** at a **competitive disadvantage**. ## Footnote P. 332; *MEO v GDA* EU:C:2018:270, at [25]–[26]. Bear in the mind that an immediate disadvantage relatve to other Customers does not necessarily indicate that competition is distorted or is capable of being distorted; the effect must be more substantial and less transitory.

Answer 62

The **Agreement** will be **void**, **unless** the **offending provision(s)** can be **severed**. Accordingly: 1. If it can be **removed without needing** to **add** or **modify** the **remaining terms**; which 2. **Continue** to be **supported** by adequate **consideration**; and 3. Its **removal does not unacceptably** (for the Parties) **change** the Agreement's **character**, Then, the **Agreement** will be **spared**. ## Footnote P. 340; *EWS Railway v E.ON* [2007] EWHC 599 (Comm), at [27]–[29]. Financial penalties are also routinely imposed, and the CMA may order that the infringing conduct be modified or brought to an end. See §32-§33.

Abuse of Dominance Flashcards

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