The National Competition Commission (“NCC”) has permanently stayed two cases concerning the alleged abuse of a dominant position by two new technology companies owing to a lack of evidence. Being all too aware of the damage that could be caused to companies that operate in these markets and make large investments in the research and development of new products, the Council of the NCC took a cautious stance in both cases.
The Council’s decision of 26 February 2013 (case S/0354/11) sets out some guidelines that will no doubt prove helpful for the analysis of future cases in the IT databases sector. The complainant (a company) criticises the decision of another company, operating in the software and database development market, to stop manufacturing products that were compatible with its own. The complainant argued that, considering the other company’s position in the database market, such refusal to supply would mean it would be forced out of the enterprise server market.
In its decision, the Council stated that it had not been proved that the accused company had a dominant position in the market. The Council stated that the definition of the relevant market must be particularly well-founded in an abuse of dominant position case. In these cases, excessively narrow markets cannot be defined without fully justifying this definition. In relation to the existence of a dominant position, the Council also stressed that holding a high market share is not sufficient to conclude that a company has a dominant position. Other factors, such as the existence of entry barriers to the market that prevent other operators from attacking the position of the alleged dominant company, must be demonstrated. In this case, the Council proved to be particularly demanding with the required standard to prove that an undertaking has a dominant position.
The Council also reiterated that the general rule is that companies have the freedom to contract, including companies that have a dominant position. Only under certain circumstances will it be possible to force an undertaking to contract. In cases where supply is denied it must be demonstrated that (i) the refused input is essential to compete; (ii) the refusal will probably eliminate effective competition in the market; and (iii) the refusal is likely to cause significant harm to consumers. In this case, the NCC was very strict when analysing the fulfilment of the requirements, stating that a conduct could only be considered abusive if the refused product or service was absolutely essential to operate in the market.
On the other hand, in its decision of 14 March 2013 (Case S/0322/11), the NCC analysed if the licensing system applied by a software manufacturer and, in particular, the restrictions on the subsequent transfer of licences granted to users could be considered as an abuse of a dominant position. The NCC analysed how these restrictions could foreclose the creation of a second-hand market for these products. In this decision, the Council of the NCC considered that these restrictions were proportionate and justified by the objective to combat counterfeiting and piracy.
Additionally, the Council stated that even when it holds a dominant position, a company must be free to design a distribution system that can be adapted to the different needs of each customer. However, the existence of different channels for marketing different products cannot be considered as a discriminatory measure and is therefore not abusive.
Both decisions seem to imply that the Council of the NCC has adopted a more rigorous approach towards the requirements for declaring the existence of a dominant position and its abuse, at least in markets where innovation and large investments play an important role.