Abuse of dominanceDefinition of abuse of dominance
How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?
The concept of abuse is not specifically defined in the Competition Act. However, section 10(2) of the Competition Act provides a non-exhaustive list of conduct that may constitute abuse of a dominant position:
- directly or indirectly imposing an unfair purchase or selling price or other unfair trading condition on any supplier or customer;
- limiting or controlling production, market outlets or market access, technical or technological development or investment, to the prejudice of consumers;
- refusing to supply to a particular enterprise or group or category of enterprises;
- discriminating by applying different conditions to equivalent transactions with other trading parties;
- forcing conditions in a contract that have no connection with the subject matter;
- predatory behaviour towards competitors; and
- buying up a scarce supply of resources where there is no reasonable commercial justification.
MyCC has indicated in its MyCC Dominance Guidelines that it will use an effects-based approach to assess exclusionary practices (see question 11).
The Competition Act does not prohibit a dominant enterprise from engaging in conduct that is a reasonable commercial response to market entry or conduct by a competitor.Exploitative and exclusionary practices
Does the concept of abuse cover both exploitative and exclusionary practices?
Yes. The Chapter 2 prohibition covers both exploitative practices (eg, unfair prices or trading terms) and exclusionary conduct (eg, predatory conduct, refusal to supply or exclusive dealing).
According to the MyCC Dominance Guidelines, MyCC is only concerned with exploitative or excessive pricing if there is unlikely to be competition in the market to constrain the dominant enterprise (see question 22).
Exclusionary conduct is conduct that prevents equally efficient competitors from competing and will be assessed in terms of its effects on the competitive process and not its effects on competitors.
So, even if an enterprise is dominant it should not be stopped from engaging in competitive conduct that benefits consumers even if inefficient competitors are harmed. MyCC will use an effects-based approach as used elsewhere in assessing a potential abuse of a dominant position. By adopting this approach, MyCC will ensure that conduct that benefits consumers will not be prohibited and, therefore, ensure that enterprises have the incentives to compete on merits. Adopting an effects-based approach ensures good economic outcome consistent with the aims of the Competition Act. In any event, it is very unlikely that dominant enterprises would not know the likely effect on competition from their actions.
In general, in assessing whether the effect of exclusionary conduct is an abuse or not, MyCC will use two main tests for assessing anti-competitive effects: first, whether the conduct adversely affects consumers and second, whether the conduct excludes a competitor that is just as efficient as the dominant enterprise.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?
In order to constitute an infringement of the Chapter 2 prohibition, the enterprise must be in a dominant position. There can be abuse even where there is no causal link between the dominant position and conduct in question. MyCC is likely to follow jurisprudence in other countries where it is not necessary that the dominant position, the abuse and the effects occur in the same market, as indicated in the MyCC Dominance Guidelines. For example, a dominant enterprise that sells an essential input to buyers in a downstream market refuses to supply those buyers when it establishes a subsidiary in the downstream market to compete with them. See also question 18.Defences
What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?
In contrast to the Chapter 1 prohibition (similar to article 101 of the Treaty on the Functioning of the European Union), the Chapter 2 prohibition does not allow a defence based on efficiency gains. There is also no power to grant an exemption from abuse of dominance.
However, similar to the position in the EU, a dominant enterprise can protect its own commercial interest in the face of competition from existing competitors and new entrants. Section 10(3) of the Competition Act allows a dominant enterprise to take any step that has reasonable commercial justification or represents a reasonable commercial response to the market entry or market conduct of a competitor. For example, a dominant enterprise may meet a competitor’s price even though the price may be below cost (in the short term).