

Mission Organization Chart Statutes Activities Plan Strategy Contacts National Legislation European Community Notification of Mergers Merger Decisions Other Cases and Decisions Non-notification cases Competition Authority European Commission Responsibilities National Bilateral Multilateral OECD WTO UNCTAD	FAQs WHAT IS A DOMINANT POSITION? It is the power that an undertaking has to behave independently of its competitors, suppliers and customers in defining its commercial strategy. This means that, in taking decisions on commercial policy, the undertaking has a market position of such importance that it need not concern itself with the reactions of other economic agents. A significant market share frequently indicates a dominant position: what it is important to determine is whether an undertaking has market power. Thus, a dominant position permits an undertaking to exercise its market power unilaterally. IS IT PROHIBITED TO HAVE A DOMINANT POSITION? No, what is prohibited is to abuse it. WHAT IS “ABUSE OF A DOMINANT POSITION”? It is an undertaking's improper use of its market power when this results in the exclusion of competitors from the market through the creation of artificial entry barriers (e.g. denial of access to essential infrastructure) or results in a significant and artificial rise in costs for rivals (e.g. through discrimination or contract conditions that are difficult to meet), or when that power is reflected in practices that impose excessive prices. WHAT PROVISIONS IN THE LAW GOVERN THIS LEGAL FIGURE? At a national level it is Article 6 of the Competition Law (Law No. 18/2003 of 11 June); the article refers to a series of examples of possible abuses and is applied by the Competition Authority. When the behaviour in question affects trade between member-states of the European Community, Article 82 of the Treaty establishing the European Community is applicable ; it is applied by the Competition Authority or the European Commission. WHAT TYPES OF BEHAVIOUR CAN BE CONSIDERED AS ABUSES OF A DOMINANT POSITION? There are two main forms of abuse: by exploitation and by exclusion. Examples of abuses by exploitation are excessive prices, unfair contractual conditions or discrimination. Examples of abuses by exclusion are a refusal to supply, predatory pricing or a margin squeeze. The case history of Community courts considers that an undertaking in a dominant position has a special responsibility in its relationship with other economic agents. Thus, certain behaviour adopted by an undertaking without a dominant position may be irrelevant from the perspective of the rules on competition, whereas the same behaviour, when adopted by an undertaking in a dominant position, may constitute an illegal act if competitors are excluded. It is important to mention that present-day principles are concerned with the effects of these practices on competition and the impact that they have on the market. They do not seek to protect competitors. WHAT IS TO BE UNDERSTOOD BY “DENIAL OF ACCESS TO AN ESSENTIAL NETWORK OR INFRASTRUCTURE”? It refers to an undertaking's refusal to allow a competitor access to an essential element for the latter's business. As a rule, the essential element corresponds to physical infrastructure, such as the conduits of a capillary telecommunications system or the energy distribution network. But it may equally involve something intangible, e.g. a source of essential knowledge for production or the object of an intellectual property right. HOW IS IT PROVED THAT AN UNDERTAKING HAS COMMITTED AN ABUSE OF A DOMINANT POSITION? It is necessary to assess the circumstances of each case, though it is certain that the Competition Law and Article 82 of the Treaty establishing the European Community prohibit the abusive exploitation of a dominant position, where the object or effect is to prevent, distort or restrict competition. In the first place, it must be proved that the undertaking holds a dominant position as a result of its own characteristics (market share, financial capacity or vertical integration) and/or the characteristics of the market (barriers to entry or expansion, network effects or legislation). In the second place, it is necessary to discover the effects that this practice has had on the market. It is not necessary that a competitor has actually been “driven out” of the market (i.e. has closed down) but only that it has been harmed. Furthermore, the dominant undertaking is not always required to have intended to abuse its position. It is enough that the objective result of its behaviour involves a loss of well-being or damage to the economy and society. This reflects the “special responsibility” of undertakings in a dominant position, which are obliged to pay special attention to the way in which they behave in the market. WHERE CAN I CONSULT THE BEST-KNOWN DECISIONS ON THE ABUSE OF A DOMINANT POSITION? At the website of the Directorate General for Competition of the European Commission: http://ec.europa.eu/comm/competition/antitrust/cases/index.html WHAT CAN AN UNDERTAKING DO WHEN IT HAS BEEN FOUND GUILTY OF ABUSE OF A DOMINANT POSITION? It can accept the decision and pay the fine that has been imposed. The find applicable can amount to a maximum of 10% of the previous year's turnover. If it does not agree, it can appeal against the decision to the Lisbon Commercial Court, when the ruling is handed down by the Competition Authority, or to the Court of First Instance of the European Communities, when the European Commission delivers the decision.

FAQs

WHAT IS A DOMINANT POSITION?

It is the power that an undertaking has to behave independently of its competitors, suppliers and customers in defining its commercial strategy. This means that, in taking decisions on commercial policy, the undertaking has a market position of such importance that it need not concern itself with the reactions of other economic agents. A significant market share frequently indicates a dominant position: what it is important to determine is whether an undertaking has market power. Thus, a dominant position permits an undertaking to exercise its market power unilaterally.

IS IT PROHIBITED TO HAVE A DOMINANT POSITION?

No, what is prohibited is to abuse it.

WHAT IS “ABUSE OF A DOMINANT POSITION”?

It is an undertaking's improper use of its market power when this results in the exclusion of competitors from the market through the creation of artificial entry barriers (e.g. denial of access to essential infrastructure) or results in a significant and artificial rise in costs for rivals (e.g. through discrimination or contract conditions that are difficult to meet), or when that power is reflected in practices that impose excessive prices.

WHAT PROVISIONS IN THE LAW GOVERN THIS LEGAL FIGURE?

At a national level it is Article 6 of the Competition Law (Law No. 18/2003 of 11 June); the article refers to a series of examples of possible abuses and is applied by the Competition Authority.

When the behaviour in question affects trade between member-states of the European Community, Article 82 of the Treaty establishing the European Community is applicable ; it is applied by the Competition Authority or the European Commission.

WHAT TYPES OF BEHAVIOUR CAN BE CONSIDERED AS ABUSES OF A DOMINANT POSITION?

There are two main forms of abuse: by exploitation and by exclusion. Examples of abuses by exploitation are excessive prices, unfair contractual conditions or discrimination. Examples of abuses by exclusion are a refusal to supply, predatory pricing or a margin squeeze.

The case history of Community courts considers that an undertaking in a dominant position has a special responsibility in its relationship with other economic agents. Thus, certain behaviour adopted by an undertaking without a dominant position may be irrelevant from the perspective of the rules on competition, whereas the same behaviour, when adopted by an undertaking in a dominant position, may constitute an illegal act if competitors are excluded.

It is important to mention that present-day principles are concerned with the effects of these practices on competition and the impact that they have on the market. They do not seek to protect competitors.

WHAT IS TO BE UNDERSTOOD BY “DENIAL OF ACCESS TO AN ESSENTIAL NETWORK OR INFRASTRUCTURE”?

It refers to an undertaking's refusal to allow a competitor access to an essential element for the latter's business. As a rule, the essential element corresponds to physical infrastructure, such as the conduits of a capillary telecommunications system or the energy distribution network. But it may equally involve something intangible, e.g. a source of essential knowledge for production or the object of an intellectual property right.

HOW IS IT PROVED THAT AN UNDERTAKING HAS COMMITTED AN ABUSE OF A DOMINANT POSITION?

It is necessary to assess the circumstances of each case, though it is certain that the Competition Law and Article 82 of the Treaty establishing the European Community prohibit the abusive exploitation of a dominant position, where the object or effect is to prevent, distort or restrict competition.

In the first place, it must be proved that the undertaking holds a dominant position as a result of its own characteristics (market share, financial capacity or vertical integration) and/or the characteristics of the market (barriers to entry or expansion, network effects or legislation).

In the second place, it is necessary to discover the effects that this practice has had on the market. It is not necessary that a competitor has actually been “driven out” of the market (i.e. has closed down) but only that it has been harmed. Furthermore, the dominant undertaking is not always required to have intended to abuse its position. It is enough that the objective result of its behaviour involves a loss of well-being or damage to the economy and society. This reflects the “special responsibility” of undertakings in a dominant position, which are obliged to pay special attention to the way in which they behave in the market.

WHERE CAN I CONSULT THE BEST-KNOWN DECISIONS ON THE ABUSE OF A DOMINANT POSITION?

At the website of the Directorate General for Competition of the European Commission:
http://ec.europa.eu/comm/competition/antitrust/cases/index.html

WHAT CAN AN UNDERTAKING DO WHEN IT HAS BEEN FOUND GUILTY OF ABUSE OF A DOMINANT POSITION?

It can accept the decision and pay the fine that has been imposed. The find applicable can amount to a maximum of 10% of the previous year's turnover.

If it does not agree, it can appeal against the decision to the Lisbon Commercial Court, when the ruling is handed down by the Competition Authority, or to the Court of First Instance of the European Communities, when the European Commission delivers the decision.