EU Discussion Paper on Exclusionary Abuses

1. EU Discussion Paperon Exclusionary Abuses Michael Albers European Commission DG Competition 54th Antitrust Law Spring Meeting Washington DC, 30 March 2006

2. EU abuse prohibition(Article 82 EC) • EU competition law prohibits firms holding a dominant position on a market to abuse their position • Enforceable by competition authorities and private plaintiffs before courts • Prohibition has two substantive elements: • Market power, and • Conduct European Commission - DG Competition

3. Market power element • Dominance: substantial market power • Attempt to monopolize not caught • Typology of dominant positions: • internal growth or • legal monopoly European Commission - DG Competition

4. Conduct element • Prohibition of all anti-competitive conduct: • unilateral conduct as well as agreements • no definitive list, may be exploitative, discriminatory or exclusionary conduct • Objective concept, no intent required • Typology of exclusionary abuses: • Increase dominance to monopoly • Discipline or eliminate aggressive rival • Leverage dominance onto another market European Commission - DG Competition

5. EU Discussion Paper • Covers market definition, dominance and exclusionary abuses • Depending on public consultation Commission guidelines may follow • Discussion Paper proposes • To focus on harm for consumer welfare • To apply more effects-based approach for abuse finding European Commission - DG Competition

6. New 3-step analysis for exclusionary abuses • Does conduct have capability to foreclose? • Non-price and price based conduct • Does conduct have a likely or actual market distorting foreclosure effect? • Does a defence apply? • Efficiencies European Commission - DG Competition

7. 1st step: Capability to foreclose?Non-price based conduct • Single branding („exclusive dealing“) • e.g. obligation to purchase all or significant part of requirements from dominant firm? • Tying • e.g. distinct products? • e.g. independent demand for tied product? • Refusal to start supplying • e.g. input indispensable? European Commission - DG Competition

8. 1st step: Capability to foreclose?Price based conduct • Predatory pricing, loyalty rebates, mixed bundling (“bundled rebate”): • In general, only conduct excluding “as-efficient competitors” is likely to harm consumers • Price-cost test: price of dominant firm below a certain cost benchmark? (safe harbour) European Commission - DG Competition

9. 2nd step: Market distorting foreclosure effect? • Investigate incidence (market coverage, selective foreclosure) and market characteristics (network effects, scale economies etc.) • Foreclosure presumptions may apply European Commission - DG Competition

10. 3rd step: Defences? • In particular efficiencies: • Same conduct can be both efficiency-enhancing and restrictive • Consistent with other competition rules (Art. 81(3) and EU Merger Regulation) • 4 conditions: efficiencies, indispensability, consumer pass-on, competition not eliminated European Commission - DG Competition

11. Summary • Objective of Article 82 is to protect consumer welfare • Effects based approach for assessing conduct of dominant firms • Exclusionary conduct may lead to foreclosure of rivals • 3-step analysis of (i) capability to foreclose, (ii) market distorting foreclosure effect and (iii) defences for abuse finding European Commission - DG Competition