Abstract
The economic literature on antitrust compliance has concentrated on cartels as the most serious competition law violation. There are, however, infringements of competition law in form of an abuse of a dominant position which have not yet been considered in detail in the economics literature on antitrust compliance. This chapter examines how a comprehensive antitrust compliance programme should deal with abusive behaviour. In a first step, such a programme should determine whether the firm under consideration holds a dominant position. This requires the definition of the relevant antitrust market and the assessment of the competitive conditions in this market. If the firm is found to be dominant, the second step of a compliance programme has to ensure that no exploitative or exclusionary practices are employed. While for exploitative abuses screens similar to those in cartel cases can be used, no simple and reliable screens for exclusionary behaviour have been devised yet. Instead, the “no economic sense” test that has been suggested as an administrable rule to identify exclusionary behaviour could be applied. Roughly speaking, this test requires that a firm is able to demonstrate that the conduct under consideration is rational for the firm absent a tendency to eliminate competition. In the digital economy particular problems arise with respect to the definition of the relevant market and the determination of dominance. This is mainly due to the two-sided nature of most platform markets. Also, new forms of abusive behaviour can emerge in the digital economy that are related to the user data a platform has collected.
The author is grateful to Georg Götz and Johannes Paha for helpful comments.
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Notes
- 1.
See for example the contribution by Abrantes-Metz and Sokol (2013) which, despite the title “Antitrust Corporate Governance and Compliance”, only deals with cartels.
- 2.
- 3.
For a discussion of structural and empirical screens for detecting cartels see Harrington (2010).
- 4.
See Abrantes-Metz et al. (2013) for an application of Benford’s law in the context of the Libor-cartel.
- 5.
Actually, also an abusive behaviour of several firms that are jointly dominant is conceivable, e.g. where the members of a cartel agree to employ an exclusionary strategy to force a firm not participating in the cartel to exit the market. In this chapter the focus is on single firm dominance and abusive behaviour.
- 6.
Price discrimination can also be present if customers are charged the same price but where the cost of providing the product or service differ.
- 7.
A well known case of excessive prices is United Brands (Case 27/76 United Brands v Commission [1978] ECR 207, [1978] 1 CMLR 429). The European Commission found that United Brands was charging unfair (excessive prices for Chiquita bananas in several European countries. This decision, however, has been dismissed by the European Court of Justice. A case of price discrimination is Irish Sugar (Case T-228/97 Irish Sugar v Commission [1999] ECR II-2969). Here, the dominant firm offered rebates for customers located near the border to Northern Ireland which, besides preventing foreign imports, distorted competition between the dominant firm’s customers.
- 8.
For a comprehensive survey of European cases related to the abuse of a dominant position including the economics background see O’Donoghue and Padilla (2013).
- 9.
Chiquita, Official Journal 1976 L 223/27, confirmed on appeal in Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, para. 65.
- 10.
In some national competition laws different thresholds are used. For example, in Austria, a firm with a market share of 30 % could be considered as dominant.
- 11.
For the concept of barriers to entry see McAfee et al. (2004).
- 12.
For example, in the German market for spices the company Fuchs holds a market share of 75 %, despite being only a small or medium sized firm.
- 13.
This could be the case if a dominant firm has inflated the prices of its products and thus “created” competition by substitute products that would not be considered as substitutes at competitive prices. Here, the firm would have made the mistake of the “cellophane fallacy”. See Sect. 6.3.1.
- 14.
For a discussion of the cellophane fallacy and how to avoid it see e.g. OECD (2012).
- 15.
Sales managers, for example could consider their firm as a market leader and therefore implicitly use a narrower market definition.
- 16.
Of course, overcompliance assumes that the staff is informed about the relevant aspects of competition law.
- 17.
For a detailed discussion of the competitive conditions in the context of single firm dominance see O’Donoghue and Padilla (2014), pp. 143–174.
- 18.
With respect to the magnitude of the price-cost margin, concepts from the economics of regulation could be employed where returns on capital in excess of 20 % are considered as problematic. See e.g. Littlechild (2011).
- 19.
Additional problems may arise for example with respect to the allocation of common cost in multi-product firms or concerning the appropriate time period because in the short term, most costs are fixed and variable costs are therefore low and vice versa.
- 20.
This implies that dissimilar conditions are also present if for example the same price is charged in two different geographic regions where the costs of providing the good or service differ.
- 21.
See e.g. the case of Irish Sugar (Case T-228/97 Irish Sugar v Commission [1999] ECR II-2969).
- 22.
A detailed overview of the different types of exclusionary abuse including the legal aspects is provided by O’Donoghue and Padilla (2013).
- 23.
- 24.
This type of reasoning for discriminating between abusive and lawful behaviour has been suggested by Werden (2006, 2007), and Melamed (2005, 2006). It has been questioned however whether this test can be applied all kinds of exclusionary behaviour in particular to exclusive dealing. See Jacobsen and Sher (2006).
- 25.
An introduction to the competitive aspects of two-sided markets is provided by Evans and Schmalensee (2013).
- 26.
For discussions of how to apply the HMT in the case of two-sided markets see e.g. Filistrucchi et al. (2012).
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Schwalbe, U. (2016). Antitrust Compliance and Abusive Behaviour. In: Paha, J. (eds) Competition Law Compliance Programmes. Springer, Cham. https://doi.org/10.1007/978-3-319-44633-2_6
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