Abuse of dominance

Definition of abuse of dominance

How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?

Holding or acquiring a dominant position is not unlawful under UK competition law. A dominant company only infringes the Chapter II Prohibition or article 102 TFEU if it ‘abuses’ its dominance to restrict competition. ‘Abuses’ fall into two main categories - conduct that ‘exploits’ customers directly (eg, charging excessive prices) and conduct that ‘excludes’ competitors from the market.

Certain types of conduct are categorised as ‘by nature’ infringements. Unless they are objectively justified, these forms of conduct are treated as infringing the Chapter II Prohibition without needing to show any anticompetitive effect, albeit an analysis of the relevant circumstances may be required. Following the Court of Justice ruling on Intel, the category of ‘by nature’ abuses is narrow. CMA guidance confirms that the ‘likely effect’ of a dominant undertaking’s conduct is generally more important than its ‘specific form’ (OFT 402, paragraph 5.2).

For other types of conduct, case law establishes a need to show that anticompetitive effects are reasonably likely and the High Court has held that actual effects on the market is ‘a very relevant consideration’ (Streetmap v Google). Moreover, the assessment of whether conduct is abusive should be looked at ‘in the round’, rather than seeking to identify on a narrow basis whether conduct is different from ‘normal competition’ (National Grid, Court of Appeal judgment, paragraphs 40 to 41).

Exploitative and exclusionary practices

Does the concept of abuse cover both exploitative and exclusionary practices?

Yes.

Link between dominance and abuse

What link must be shown between dominance and abuse? May conduct by a dominant company also be abusive if it occurs on an adjacent market to the dominated market?

As a general matter, the Chapter II Prohibition requires some link between an undertaking’s dominant position and its abusive behaviour.

In Flybe the OFT considered a theory of harm whereby Flybe was alleged to have entered a new route - on which it was not dominant - to strengthen its position on a separate market where it was dominant. The OFT stated that conduct on a non-dominated market could be abusive, provided that:

  • the conduct took place on ‘closely associated markets’ and is likely to protect or strengthen the position on the dominated market; or
  • the conduct produces effects on the non-dominated market, provided special circumstances exist, in particular ‘the existence of sufficiently proximate associative links between the markets in question’.

The OFT noted, however, that the case law on how closely linked the markets must be is not well developed. In the earlier case of Burgess & Sons v OFT, the CAT set out the principle that ‘a dominant firm may be found to have committed an abuse in a neighbouring market in which it is not dominant if there are close links between the two associated markets.’

Defences

What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?

It is a defence for a dominant undertaking to show that its conduct was ‘objectively justified’, even if it restricted competition (OFT 402, paragraph 5.3). This applies both to ‘by nature’ abuses and other types of conduct. The dominant undertaking bears the burden of showing an objective justification.

Objective justifications are assessed in line with EU law. In Streetmap v Google the High Court observed that ‘it is open to the dominant undertaking to show that any exclusionary effect on the market is counter-balanced or outweighed by advantages that also benefit consumers’. These advantages or efficiencies may consist of ‘technical improvements in the quality of the goods’, not just ‘economic considerations in terms of price or cost’.

The undertaking must also show that the conduct is ‘proportionate’ to achieving its objective. In other words, the conduct must be ‘indispensable and proportionate’ to the goal pursued, such that there are ‘no less anti-competitive alternatives to the conduct that are capable of producing the same efficiencies’ (Streetmap v Google).

See also the exemptions from abuse of dominance rules (see question 5).