Articles 8 and 9 of the Law on Protection of Competition (9121/2003) prohibit any abuse of a dominant position held by one or more operators in a market. In order to clarify how it intends to implement these articles, the Competition Authority recently issued an instruction outlining what constitutes a dominant position and how abuse of a dominant position is assessed.

Dominant position

According to the Law on Protection of Competition, a 'dominant position' is a position of economic power occupied by an undertaking or group of undertakings which hinders effective competition and empowers the undertaking or group to act independently from competitors, clients and end consumers.

Under the new instruction, the assessment of whether an undertaking occupies a dominant position is based on:

  • the market position of the dominant undertaking and its competitors. Market share provides a useful first indication of the market structure and the relative importance of the various undertakings active on the market. Dominance is unlikely to be declared if the undertaking's market share is below 40% in the relevant market. However, cases may exist in which a dominant undertaking's market share is below that threshold, but competitors are not in a position to constrain its conduct – for example, where they face serious capacity limitations;
  • the constraints imposed by the credible threat of future expansion by actual competitors or entry by potential competitors (eg, an undertaking can be deterred from increasing its prices if competitor expansion or entry is likely, timely and sufficient); and
  • the constraints imposed by the bargaining power of the undertaking's customers (ie, countervailing buying power). Countervailing buying power may result from the customers' size, commercial significance and ability to switch quickly to competing suppliers, promote new entry or vertically integrate.

Anti-competitive foreclosure

The Competition Authority will intervene under Article 9 of the Law on Protection of Competition where convincing evidence indicates that the allegedly abusive conduct of a dominant undertaking is likely to lead to anti-competitive foreclosure. The term 'anti-competitive foreclosure' is used to describe a situation in which effective access of actual or potential competitors to supplies or markets is hampered or eliminated as a result of the dominant undertaking's conduct, whereby the dominant undertaking is likely to be in a position to increase prices to the detriment of consumers.

The Competition Authority considers the following factors to be generally relevant to such an assessment:

  • the positions of the dominant undertaking and its competitors, customers and suppliers;
  • the conditions in the relevant market;
  • possible evidence of actual foreclosure; and
  • direct evidence of any exclusionary strategy.

The authority analyses exclusionary conduct based on price and intervenes only when the conduct may cause unfair suppression of competition. The authority examines economic data relating to cost and sales prices – in particular, whether the dominant undertaking is engaging in below-cost pricing – in order to determine whether even a hypothetical competitor that was as efficient as the dominant undertaking would be likely to be foreclosed by the conduct in question. This requires the availability of sufficiently reliable data. Where available, the authority will use the cost data of the dominant undertaking itself. If such information is unavailable or unreliable, the authority may decide to use the cost data of competitors or other comparable reliable data.

Objective necessity and efficiencies

In enforcing Article 9, the authority will also examine claims put forward by a dominant undertaking that its conduct is justified. A dominant undertaking may justify its conduct by demonstrating that its conduct is objectively necessary or produces substantial efficiencies which outweigh any anti-competitive effects on consumers. In this context, the authority will assess whether the conduct in question is indispensable and proportionate to the goal allegedly pursued by the dominant undertaking.

Specific forms of abuse

The instruction provides for the specific forms of abuse detailed below.

Exclusive dealing

A dominant undertaking may try to foreclose its competitors by preventing them from selling to customers through use of exclusive purchasing obligations or rebates, together referred to as 'exclusive dealing'.

Tying/conditioned sale and bundling

'Tying' usually refers to situations where customers that purchase one product (the tying product) are also required to purchase another product (the tied product) from the dominant undertaking. Tying can take place on a technical or contractual basis.

'Bundling' usually refers to the way products are offered and priced by the dominant undertaking. In pure bundling, the products are sold jointly in fixed proportions. In mixed bundling – often referred to as a multi-product rebate – the products are also made available separately, but the sum of the prices when sold separately is higher than the bundled price.

Predation

In line with its enforcement priorities, the authority will generally intervene where there is evidence showing that a dominant undertaking engages in predatory conduct by deliberately incurring losses or forgoing profits in the short term, so as to foreclose or be likely to foreclose one or more actual or potential competitors with a view to strengthening or maintaining its market power, thereby causing consumer harm.

Refusal to supply and margin squeeze

The existence of an obligation to be supplied by the dominant undertaking, even for a fair price, may undermine undertakings' incentives to invest and innovate, and thereby possibly harm consumers.

For further information on this topic please contact Anisa Kuqi or Jonida Skendaj at Boga & Associates by telephone (+355 4225 1050) or email (akuqi@bogalaw.com or jskendaj@bogalaw.com). The Boga & Associates website can be accessed at www.bogalaw.com.

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