European Competition Law provides a wide-ranging review of the European rules relating to competition: restrictive agreements, abuse of a dominant position, impact of intellectual property rights, procedure, merger control, State aid.

European Competition Law

Article 102 TFEU prohibits “any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it”. A dominant position can be individual or collective since the text indicates “one or more undertakings”. Although in all likelihood the authors of the Treaty did not intend to regulate oligopolistic market situations, the EU authorities are now able to do so.

Abuse of an individual or collective dominant position

According to the letter of the Treaty, only the abuse of a dominant position is prohibited but not the dominant position itself . However, from an economic viewpoint, it is market power and consequently the dominant position that needs to be kept in check; the abuse is relevant insofar as it reveals such a position. 

In practice, the purpose and the requirement for control have been inversed; initially (according to the legal texts) a dominant position was the requirement for an abuse to be subjected to control. Then (according to case law) the abuse became the condition for control that in fact related to the dominant position. Sanctions were no longer triggered by abusive behavior, which could be avoided by complying with the legal rules but rather by the market situation, which might be inevitable. Therefore, control was gradually losing its prescriptive character when a same behavior could be held to be either abusive or lawful depending on the size of the undertaking and the structure of the market .

Lastly the courts reverted to a position which would ensure more legal certainty for undertakings. All behavior by a dominant undertaking is not abusive. In order to be prohibited, behavior must be abnormal, i.e. beyond what is necessary to protect the legitimate interests of the undertaking in question. The economic criterion has then been re-introduced within the test for proportionality itself. Initially assessed with regard to the intrinsic characteristics of the dominant undertaking's behavior - certain practices at the time being considered as abusive per se -, exceeding its legitimate interest are now assessed based on the effects of its behavior on the market.

Since dominant position is dependent on the market definition adopted by the supervisory authorities, the Commission's assessment of the existence of a dominant position, and hence of the abuse thereof, may be challenged on the grounds of an erroneous delimitation of the relevant market. Case T-691/14 Servier, Judgment of 12 December 2018, LawLex201900001337JBJ: noting that two essential elements  the Commission's reasoning  i.e  market shares and the existence of substantial economic rents, is called into question by the erroneous definition of the relevant market, and therefore it could not conclude that the undertaking in question held a dominant position and was able to behave, to an appreciable extent degree, independently of its competitors, customers and consumers, and on that basis "in the absence of a dominant position, the issue of abuse of that position becomes entirely irrelevant".

See Case 6/72 Europemballage Corporation and Continental Can Company v Commission [1973] ECR 215, LawLex200400002771JBJ: "the question of the link of causality […] which […] has to […] exist between the dominant position and its abuse, is of no consequence, for the strengthening of the position of an undertaking may be an abuse and prohibited under Article [102] of the treaty, regardless of the means and procedure by which it is achieved, if it has the effects mentioned above [..., i. e. that only undertakings remain in the market whose behavior depends on the dominant one]".

Scope of the prohibition

Article 102 TFEU does not provide a definition of a dominant position. Legal commentators usually distinguish two different definitions of a dominant position. The first, known as “static”, looks first to the state of the market and identifies a position of dominance from the absence of competition. The second is called “dynamic” and does not directly refer to the market situation but defines the dominant position in terms of an economic power, with the market share held by the undertaking remaining an essential criterion but not constituting an exclusive indication thereof. EU law employs the dynamic definition. The Commission defines the dominant position of an undertaking as follows: “a firm or group of firms would be in a position to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers” .

The dominant position of an undertaking is simply the legal translation of its market power, which itself is a reflection of the degree of elasticity of supply and demand: the more consumer demand is insensitive to variations in price (inelasticity of demand) and the more difficult it is for other offerors to adapt their production to meet the same need (inelasticity of supply) then the greater the market power of the undertaking in question will be. This is directly related to the market share held by that undertaking. Elasticity of supply and demand will be weaker the greater the market share of the undertaking, as consumers will find it more difficult to turn to other products in cases of prices rises instigated by the monopoly-holder. In other words, the market share held by the undertaking is an indirect means of measuring elasticity. It is therefore not surprising to have elasticity mentioned in the definition of the relevant market.

See EC Commission Notice No 97/C 372/03 of 9 December 1997 on the definition of relevant market for the purposes of Community competition law, at pt 10; Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461, LawLex200400002971JBJ; Case 322/81 Michelin v Commission [1983] ECR 3461, LawLex200400002959JBJ; Case 311/84 CBEM v CLT and IPB [1985] ECR 3261, LawLex200400002951JBJ.

European Competition Law

135. Abuse of an individual or collective dominant position

136. Scope of the prohibition

137. Dominant position and market power