An abusive practice is a unilateral restrictive practice that occurs from the illicit use by a company of the significant economic power it holds in a certain market.
Unlike agreements and decisions of business associations, where two or more economic agents are involved in an anticompetitive practice, the abuse of a dominant position, as a rule, is carried out by a single operator. With relevant market power, this company can exploit other companies or consumers and exclude potential competitors. Exceptionally, two or more companies may jointly have and abuse their collective market power.
Identifying a company with a dominant position
We face a dominant position when a company holds such a relevant place on the market that it does not need to worry about the other economic agents' reactions whenever it takes decisions in terms of commercial policy. It can adopt all kinds of behaviour, regardless of its competitors, suppliers, or even consumers.
This dominant position may result from the characteristics of the company itself — market share or financial capacity, for example — or from the aspects of the market — barriers to entry or expansion, network effects, or legislation.
The mere significant size of a company or even the holding of a dominant position is not anticompetitive or forbidden by the Competition Law. For this to apply, the company must behave in an abusive manner.
When are we facing a practice of abuse of a dominant position?
Whenever a company can, for example:
- Impose unfair conditions;
- Squeeze margins;
- Practice predatory pricing;
- Refuse to supply goods or services;
- Discriminate against other companies.
Within the practice of abuse of a dominant position, there are two categories. In the first one, called abuse by exploitation, the dominant company exploits the power it exercises on the market to the detriment of other economic agents. With this type of abuse, it is common to have situations where the prices are excessive, unfair contractual conditions, or discrimination.In a second category — abuse by exclusion — the dominant company seeks to exclude potential competitors or prevent their development through behaviour such as predatory prices, margin squeeze, or refusal to supply.
The Competition Law includes yet another anticompetitive practice — the abuse of economic dependence. This occurs when a company illegally uses the power it holds over another company that is dependent on it because there is no alternative market in which to sell those specific goods or services. For this practice to be forbidden, it must be likely to affect the functioning of the market or the structure of competition.