COMPETITION • EUROPEAN LAW • ABUSE OF DOMINANT POSITION
The supervisory authorities consider that when a dominant undertaking adopts “normal competitive behavior”, its activities are not reprehensible. When assessing the abnormality of the undertaking’s behavior, the EU courts apply a proportionality test based on a rule of reason: the action of the dominant undertaking is regarded as “abnormal” if it goes beyond what is necessary to protect its legitimate interests. The fact that an undertaking is in a dominant position cannot deprive it of its entitlement to protect its own commercial interests when they are attacked if the protection is based on criteria of economic efficiency and consistent with the interests of consumers.
The undertaking in a dominant position must demonstrate that its conduct is objectively necessary or that the exclusionary effect produced may be counterbalanced or outweighed by advantages in terms of efficiency that also benefit consumers. However, strategies that are legitimate in themselves may become abusive if pursued in conjunction with practices going beyond the protection of commercial interests and the abusive nature of the conduct does not disappear merely because it is the standard practice in a particular sector. The extent of the anticompetitive effect is also taken into account. Where a substantial share of the demand remains satisfied or there are alternative sources for consumers, there is no abuse. On the contrary, the partial foreclosure of the market cannot be justified by showing that the contestable part of the market is still sufficient to accommodate a limited number of competitors. Using a “rule of reason” eventually results in reducing the freedom of action of the dominant undertaking in proportion to the level of its power of dominance. The greater the power of the dominant undertaking in respect of the market on which it operates, the more its autonomy of behavior is reduced.
The Commission has tried to rationalize its assessment and adopted a Notice intended to be used as guidance when applying Article 102 to abusive exclusionary conduct. The dominant undertaking may justify its conduct by demonstrating that it is objectively necessary or that it produces efficiencies which outweigh its restrictive effects. To demonstrate the reality of efficiencies, the dominant undertaking must establish with a sufficient degree of probability and on the basis of verifiable evidence that four cumulative conditions are fulfilled, i) the efficiencies result from the conduct in question, ii) there are no less anticompetitive alternatives to the conduct that are capable of producing the same efficiencies, iii) the efficiencies outweigh any negative effects on competition and consumer welfare in the affected markets; and the conduct does not eliminate effective competition, by removing all or most existing sources of actual or potential competition.
