Business Contracts

Under Article L. 420-2 of the Commercial Code, “the abusive exploitation by an undertaking or group of undertakings of a dominant position on the domestic market or a material part thereof is prohibited. Such abuses may include refusal to sell, tying or discriminatory conditions of sale, as well as the termination of established commercial relations on the sole ground that the trading partner refu …

Abuse of dominant position

Under Article L. 420-2 of the Commercial Code, “the abusive exploitation by an undertaking or group of undertakings of a dominant position on the domestic market or a material part thereof is prohibited. Such abuses may include refusal to sell, tying or discriminatory conditions of sale, as well as the termination of established commercial relations on the sole ground that the trading partner refuses to accept unjustified commercial terms”.

However, this list of practices is not exhaustive. The desire to acquire customers does not authorize all forms of behavior, especially on the part of an undertaking which, by virtue of its dominant position , has a special responsibility not to undermine effective, undistorted competition on the market. In a recent case, the Competition Authority considered that “even if the role of a competition authority is first and foremost to protect the competitive conditions of free price setting by market players, and not to be a regulator of prices and price increases, it cannot be ruled out that, in certain circumstances, when an undertaking in a dominant position has, in the absence of regulation or control of its prices, sufficient leeway to impose commercial terms which are unfair given the legal and economic context in which they are implemented, it may assess the undertaking's pricing policy, and sanction it in accordance with the rules on abuse of a dominant position” .

An undertaking in a dominant position is therefore not free to adopt any pricing policy it likes. It is not allowed to align itself with a competitor's prices in order to drive it out of the market , to adopt price-fixing  or predatory pricing strategies aimed at eliminating a competitor from the market , to charge excessively high  or excessively low prices , to introduce offers that create a price squeeze , or to impose unfair prices .

As with restrictive agreements, any undertaking, agreement or contractual clause relating to a practice prohibited by Article L. 420-2 is null and void (Art. L. 420-3, Commercial Code), and fraudulent participation in an abusive practice is punishable by four years' imprisonment and a fine of EUR 75,000 (Art. L. 420-6, Commercial Code).

Dominant position concerns a position  of economic strength enjoyed by an undertaking, which enables it to  prevent effective competition being maintained on the relevant market,  by affording it the power to behave to an appreciable extent  independently of its competitors, its customers and ultimately of  consumers, ECJ Case 27/76 United Brands Company, Judgment of 14 February 1978, LawLex200400002980JBJ

Competition Authority decision No. 18-D-17 of 20 September 2018, LawLex201800001372JBJ.

CA Paris, 7 May 1997, LawLex200200003233JBJ.

Competition Council Decision No 99-D-45 of 30 June 1999, LawLex200002829JBJ: the policy of a supplier in a dominant position, which has the object and effect of limiting the commercial freedom of its wholesalers and retailers and restricting competition between them by imposing a minimum resale price, is contrary to Article L. 420-2.

Competition Council Decision No 94-D-30 of 24 May 1994, LawLex200200003059JBJ, noting that prices below average variable costs or below average total costs, if established as part of a predatory strategy, are predatory prices constituting an abuse of a dominant position; No. 07-D-39 of 23 November 2007, LawLex200700001915JBJ.

Cass. com., 4 December 2001, LawLex200002236JBJ: the implementation of a pricing system that bears no reasonable relation to the cost of the service provided, constitutes an abuse of a dominant position.

Cass. com., 9 June 2021, LawLex202100003697JBJ: the offer by an undertaking in a dominant position of prices 15% to 30% below costs in order to win the most important contracts, which would have enabled new market entrants to develop, regardless of the profitability of the transaction, characterizes its intention to eliminate competition and is characterized as a policy aimed at protecting its dominant position.

Competition Council Decision No 04-D-48 of 14 October 2004, LawLex200400002369JBJ, holding that the practice of price squeezing, whereby an often vertically integrated operator sets both retail rates on a market and the rate for an intermediate service necessary for access to the retail market, and does not leave sufficient space between the two rates to enable a competitor to cover its other costs linked to the provision of the retail service, constitutes an abuse of a dominant position; Cass. com, 3 March 2009, LawLex200900000932JBJ, specifying that a price squeeze has an anticompetitive effect if a potential competitor who is as efficient as the dominant vertically-integrated undertaking responsible for the practice can only enter the downstream market by incurring losses.

See Cass. com., 7 July 2021, LawLex202100004874JBJ, specifying that a price increase, which consists in the fixing of a price, is only unfair, and therefore abusive, if the price is in itself unfair, unless the undertaking in a dominant position breaches the agreement binding it to its customer in order to impose an untimely price increase.

Business Contracts

30. Abuse of dominant position

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

30. Abuse of dominant position

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise