Abuse of dominanceDefinition of abuse of dominance
How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?
There is no legal definition of abuse of dominant position. Nonetheless, a definition can be structured considering the legal framework that applies to dominance. As stated above, dominance is defined in section 5 of the article 45 of the Decree 2153 of 1992 as the possibility of ‘determining, directly or indirectly, the conditions of a market’. Therefore, it is inferred that an abuse of dominant position is a unilateral conduct of a firm that, having the possibility of determining the conditions of the market, incurs on the behaviours listed in article 50 of Decree 2153 of 1992 or limits competition on the terms of article 1 of Law 155 of 1959.
The general antitrust prohibition was sued for unconstitutionality under the argument that it gives arbitrariness to SIC and the Constitutional Court conditioned its application. It stated that the term ‘practice’ must be understood as an agreement, act, or a conduct of abuse of dominant position pursuant to Decree 2153 of 1992. The Court also clarifies that terms processes and systems, which must be interpreted and applied, in relation to the normative subsystem to which they belong - conformed by Law 155 of 1959, Decree 2153 of 1992, and the Law 1340 of 2009.
The SIC has interpreted this decision broadly and considers it has the power of punishing conducts that are not pre-established in the Decree 2153 of 1992. In fact, in recent decisions the SIC has punished conducts under article 1 of Law 155 of 1959 without referring to any preestablished conduct.Exploitative and exclusionary practices
Does the concept of abuse cover both exploitative and exclusionary practices?
According to the SIC, the regime of abusive practices can be classified into exploitative abuses and exclusionary abuses. Both are defined in the SIC’s Resolution 5403 of 2013. In this sense, exploitative abuses are those conducts deployed to appropriate part of the income of its customers, while exclusionary abuses are those conducts that limit the competition by forcing competitors to leave the market. However, article 50 of the Decree 2153 of 1992 does not differentiate between conducts that are exploitative or exclusionary.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 it was previously stated, in order to study an abuse of dominant position, it is necessary to find first a dominant position by the rules of market definition considering all factors of the market. Hence, there is no possibility of determining that there was an abuse of dominant position if a dominant position is not accredited first. Nevertheless, it is possible that the conduct of a dominant undertaking is considered abusive even if it occurs on an adjacent market. Precisely, sections 2,4, and 6 of article 50 of Decree 2153 of 1992 are intended to protect upstream and downstream markets from abusive conducts made by dominant firms of other levels of the value chain. In the same manner, section 3 ibidem can also be considered as abusive when it occurs in an adjacent market.
Considering aftermarkets, the SIC has recognised that a dominant position in the principal market is enough to consider an abuse of dominance in its related market or aftermarket. For instance, in the SIC Resolution 444 of 2013, the authority ruled that the dominance of Naturgy (formerly Gas Natural Fenosa) in the natural gas distribution service market (100 per cent of the market shares), was enough to investigate an abuse of dominance in its complementary market of periodic review of natural gas networks, even if Naturgy’s presence in the complementary market was not significant. In this sense, any abuse of dominance in a complementary market could be investigated if the firm is dominant in the principal market.
The elements that must concur for an abuse of dominance aimed at reinforcing market power in an aftermarket are: (i) the existence of a market in which the agent has a dominant position; (ii) the existence of a related market or aftermarket that has a direct and consequential relationship with the dominated market; and (iii) that the agent who holds the dominant position uses its power to obtain a competitive advantage or eliminate competition in a market other than the dominated one.Defences
What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?
There are no exemptions for the application of antitrust regulations in abuse of dominance cases.
However, defences can be structured considering the specific elements required to configure an abuse of dominant position. Hence, article 50.1 (predatory pricing), article 50.4 (discriminatory sales), and article 50.4 (regional predatory pricing) cannot be applied when it is shown that there was no intention to prevent the entry or expansion of competitors, and thus, there is a lack of intent.
Also, the efficiencies produced by a conduct that was considered as abusive, can constitute a defence, since article 3 of the Law 1340 of 2009 establishes that one of the purposes of SIC’s actions is ‘to ensure the efficiency in the market’. By way of example, the SIC has pronounced that exclusive dealing is not per se illegal, since it can produce efficiencies within the market. In Resolution 31434 of 2011, the SIC stated that exclusivity can bring efficiencies such as the reduction of stock costs and risk prevention costs associated with future sales uncertainty, and free riding, for example, when competitors take advantage of sizable investments made by manufacturers to produce their product.