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Collective Dominance in EC Competition Law: Trojan Horse or Useful Tool?
Published online by Cambridge University Press: 27 October 2017
Extract
The evolution of the concept of joint or collective dominance has contributed an important chapter to EC Competition law and has been the focus of intense attention in the academic literature. This thorny notion has proved relevant both in the context of the application of Article 82 EC and of the EC Merger Regulation even if a textual reference to it was clear in the first case but non-existent in the second.
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- Copyright © Centre for European Legal Studies, Faculty of Law, University of Cambridge 2003
References
1 See Schödermeier, M ‘Collective dominance revisited: an analysis of the EC Commission’s new concepts of oligopoly control’ (1990) 11 European Competition Law Review 28 Google Scholar; Winckler, A and Hansen, M, ‘Collective dominance under the EC merger control regulation’ (1993) 30 Common Market Law Review 787 Google Scholar; Venit, JS, ‘Two steps forward and no steps back: economic analysis and oligopolistic dominance after Kali & Salz ’ (1998) 35 Common Market Law Review 1101 CrossRefGoogle Scholar; Bishop, SB, ‘Power and responsibility: the ECJ’s Kali-Salz judgment’ (1999) 20 European Competition Law Review 37 Google Scholar; Korah, V, ‘ Gencor v Commission: Collective dominance’ (1999) 20 European Competition Law Review 337 Google Scholar; Whish, R, ‘Collective Dominance’ in Judicial Review in European Union Law, (Liber amicorum in honour of Lord Slynn of Hadley), Vol 1, O’Keefe, D and Bavasso, A, (eds), (The Hague, 2000), 581 Google Scholar; Motta, M, ‘EC merger policy and the Airtours case’ (2000) 21 European Competition Law Review 199 Google Scholar; Preece, S, ‘ Compagnie Maritime Belge: missing the boat?’ (2000) 21 European Competition Law Review 388 Google Scholar; Cook, CJ, and Kerse, CS, EC Merger Control (3rd edn (Sweet and Maxwell 2000), pp 168–175 Google Scholar; Monti, G, ‘The scope of collective dominance under Article 82 EC’ (2001) 38 Common Market Law Review 131 CrossRefGoogle Scholar; Niels, G, ‘Collective dominance: more than just oligopolistic interdependence’ (2001) 22 European Competition Law Review 168 Google Scholar; Christensen, P and Rabassa, V, ‘The Airtours decision: is there a new Commission approach to collective dominance?’ (2001) 22 European Competition Law Review 227 Google Scholar; Withers, C and Jephcott, M, ‘Where to now for EC oligopoly control?’ (2001) 22 European Competition Law Review 295 Google Scholar; Richardson, R and Gordon, C, ‘Collective dominance: the third way’ (2001) 22 European Competition Law Review 416 Google Scholar; McGregor, L, ‘The future for the control of oligopolies following Compagnie Maritime Belge ’ (2001) 22 European Competition Law Review 434 Google Scholar; Overd, A, ‘After the Airtours appeal’ (2002) 23 European Competition Law Review 375 Google Scholar; Jones, A, and Sufrin, B, EC Competition Law (Oxford UP 2001), 681–91Google Scholar; Haupt, H, ‘Collective dominance under Article 82 EC and EC merger control in the light of the Airtours judgment’ (2002) 23 European Competition Law Review 434 Google Scholar; Feddersen, C and O’Donoghue, R, ‘ Airtours plc v Commission ’ (2002) 39 Common Market Law Review 1171 Google Scholar; Navarro, E, et al, Merger Control in the EU (Oxford UP 2002), 191–240 Google Scholar.
2 See Art 2(3) of Council Regulation 4064/89 (OJ [1990] L 257/13), as amended by Council Regulation 1310/97 (OJ [1997] L 180/1).
3 See the statement of the Court in Europemballage Corporation and Continental Can v Commission (Case C–6/72 [1973] ECR 215 at para 25 of the judgment).
4 Joined Cases C–395/96P and C–396/96P [2000] ECR I–1365.
5 Case T–342/99, Judgment of 6 June 2002, not yet reported.
6 Case 78/70 Deutsche Grammophon v Metro [1971] ECR 487 at para 17 of the judgment.
7 See Case 48/69 ICI v Commission [1972] ECR 619 at paras 131–42 of the judgment. This approach has been referred to as the ‘narrow’ view of the coverage of Art 82 EC (see Rodger, BJ, ‘Oligopolistic market failure: collective dominance versus complex monopoly’ (1995) 16 European Competition Law Review, 21 at 22)Google Scholar.
8 See also the statement of the Court in Case 247/86 Alsatel v Novasam [1988] ECR 5987, at para 20.
9 Decision 73/109/EEC, OJ [1973] L 140/17; [1973] CMLR D 65.
10 Ibid at para 172.
11 In the Sugar Cartel case, the two producers produced all the Dutch sugar and their sales represented more than 85% of the Dutch market.
12 Joined Cases 40 to 48, 50, 54–56, 111, 113 and 114/73 [1975] ECR 1663, at paras 403–20 of the judgment.
13 Case 85/76 [1979] ECR 461.
14 Ibid at paras 38–79 of the judgment. Both the definition of individual dominance and indicative factors of dominance had been set out in earlier cases (see Case 27/76 United Brands v Commission [1978] ECR 207 at paras 65–129 of the judgment) and Commission decisions (see the decisions of the Commission in Re Continental Can [1972] 1 CMLR D 11 at para II.B.3; in Re United Brands [1976] CMLR D 28 at para II.A.2 and in Re Aardolie Belange Gemeenschap BV [1972] 2 CMLR D 1.
15 Case 85/76 above n 13 at para 39 of the judgment.
16 See Whish above n 1 at 586 and Withers and Jephcott above n 1 at 296.
17 See Whish above n 1 at 586–87.
18 Joined Cases T–68/89, T–77/89 and T–78/89 Società Italiana Vetro v Commission [1992] ECR II–1403.
19 The Commission (see Commission Decision 89/93/EEC, OJ [1989] L 33/44) had established the existence of a collective dominant position on the basis of three main factors: First, because of the large and stable joint market shares of the undertakings, both in the automotive and non-automotive market. Secondly, because the undertakings presented themselves as a single economic entity. This was reflected in the fact that the producers jointly maintained special links with the main glass distributors in Italy and that their business decisions displayed a marked degree of interdependence with regard to prices and conditions of sale. Finally, because the three undertakings had established among themselves structural links relating to production through the systematic exchange of products (see para 79 of the Commission’s decision).
20 Ibid at para 358 of the judgment.
21 See above n 6.
22 Case C–393/92 [1994] ECR I–1477.
23 Ibid at para 42 of the judgment. See also the decisions of the Court in Centro Servizi Spediporto v Spedizioni Maritima del Golfo (Case C–96/94 [1995] ECR I–2883) at para 33 of the judgment, and in DIP v Comune di Bassano del Grappa and Comune di Chioggia (Joined Cases C–140/94, C–141/94 and C–142/94 [1995] ECR I–3257) at para 26 of the judgment.
24 See the decision of the Commission in European Sugar cartel (above n 9 and corresponding text).
25 T–24–26 and 28/93 [1996] ECR II–1019.
26 OJ [1986] L 378/4.
27 See Art 1(3)(b) of Regulation 4056/86.
28 Commission Regulation 4056/86 (see note 26 above) expressly acknowledges that Art 82 may be applicable to conferences benefiting from the exemption (see Art 8 of the Regulation), if the conduct of their members constitutes an abuse of dominant position. See also Art 7(2) of Council Regulation 3976/87 on the application of Art 81(3) EC in the air transport sector (OJ [1987] L 374/9) and the judgment of the Court in Ahmed Saeed Flugreisen v Zentrale zur Bekämpfung unlauteren Wettbewerbs [1989] ECR 803, at para 37.
29 See Cases T–24–26 and 28/93, note 25 above, at paras 64–65 of the judgment, and Commission Decision 93/82/EEC (OJ [1993] L 34/20) at paras 57–61. See also the decision of the Commission in Port of Rødby (Commission Decision 94/119/EC OJ [1994] L 55/63, where the Commission applied the same approach to two companies that jointly operated the ferry route between the ports of Rødby and Puttgarden and cooperated in joint ticket sales, in joint fixing of timetables and rates and in the granting of identical discounts.
30 This was recognised by the European Court on appeal (see Cases C–395/96 and C–396/96P [2000] ECR I–1365 at paras 39–41 of the judgment).
31 See Cases C–395/96P and C–396/96P, note 30 above,
32 Advocate General Fennelly delivered his Opinion on the appeal in October 1998 and proposed the adoption of an expansive definition of economic links. He took the view that of the two ingredients necessary for a position of collective dominance to occur—a connecting relationship between the undertakings and the adoption of a common market strategy—it was the second one that was predominant. Hence, economic links could only be defined ‘by reference to their result, namely, the establishment of a situation where a group of independent undertakings performs as a single market entity’. He concluded that the notion of economic links could go beyond links of a contractual nature to encompass cross-shareholdings, common directorships, or even family links with economic consequences (see the Opinion of AG Fennelly in Joined Case C–395/96P and C–396/96P Compagnie Maritime Belge v Commission [2000] ECR I–1365, I–1383–I–1384.).
33 See below nn 78–84 below and corresponding text.
34 Joined Cases C–68/94 and C–30/95 [1998] ECR I–1375.
35 See, inter alia, the decision of the Commission in Nestlé-Perrier (Case IV/M, OJ [1992] L 356/1).
36 Ibid at para 221 of the judgment.
37 See n 22 above. On the facts of the case, however, the Court annulled the Commission’s decision because the economic analysis used by the Commission to conclude that the merged entity (Kali und Salz (K+S) and Mitteldeutsche Kali (MdK)) and another undertaking in that market (Société Commerciale des Potasses et de l’Azote (SCPA)) would be collectively dominant did not support that finding conclusively. See further Venit above n 1.
38 Case T–102/96 [1999] ECR II–753.
39 Commission Decision 97/26/EC (OJ [1997] L 11/30).
40 See Case T-102/96 above n 38 at paras 123-57.
41 The Commission, however, took the view that a number of structural links did exist in the case, and this finding that was later upheld by the Court (see Case T-102/96 above n 38 at para 280).
42 Case T-102/96 above n 38 at para 270.
43 This expression was also used by the Commission and by the European Court in Kali und Salz (See Joined Cases C–68/94 and C–30/95 above n 34 at para 27 of the judgment. In that case, the Commission had listed—among other criteria which it thought relevant to the establishment of a position of collective dominance—three structural links: a joint venture, the cooperation between the parties in an export-cartel, and the channelling of the Kali und Salz supplies to France through SCPA.
44 Case T–102/96 above n 38 at para 273. As Whish explains, the Court treated structural links as a ‘sub-species’ of economic links: see above n 1 at 600.
45 See Withers and Jephcott above n 1 at 298.
46 See also Korah above n 1 at 337.
47 Case T–102/96 above n 38 at para 274 of the judgment.
48 See Case T–102/96 above n 38 at para 277 of the judgment.
49 Niels above n 1 at 170. On static and dynamic oligopoly theory, see also Haupt above n 1 at 435–36.
50 Ibid at 172. See also Richardson and Gordon above n 1 at 420. For arguments against the automatic application of collective dominance to oligopolies in the context of Art 82 EC cases, see Monti above n 1 at 143–44.
51 See also Whish, R, Competition Law 4th edn (Butterworths 2001), 487 Google Scholar.
52 On the difficulties of distinguishing tacit coordination and competitive behaviour, see Christensen and Rabassa above n 1 at 229.
53 See Monti above n 1 at 133–35.
54 See Withers and Jephcott above n 1 at 298.
55 See McGregor above n 1 at 436. For an analysis of the criticisms directed to the theory of oligopolistic interdependence, see Whish above n 51 at 463–65.
56 Decision 2000/276/EC, OJ [2000] L 93/1; [2000] 5 CMLR 494.
57 Ibid at paras 52 and 148 of the decision.
58 Ibid at paras 54 and 150 of the decision.
59 Ibid.
60 Ibid at para 54 of the decision.
61 Ibid at para 150 of the decision.
62 Ibid at paras 87 and 127 of the decision.
63 Ibid.
64 See para 138 of the decision.
65 Ibid.
66 Withers and Jephcott above n 1 at 302; Richardson and Gordon above n 1 at 420; Niels above n 1 at 168.
67 See Motta above n 1. This author provided a thoughtful and clear analysis of the Commission’s decision and argued that there was little doubt that the merger would decrease economy efficiency. In his view, what made the decision controversial was the fact that the Commission used the concept of collective dominance to block the merger, without proving the likelihood of tacit collusion after the merger. This author concluded that the solution to the problem could lie in a modification of the EC Merger regulation ‘so as to allow for the prohibition of welfare detrimental mergers even when they do not create or strengthen dominance’ (see above n 1 at 199 and 207).
68 See Christensen and Rabassa, (above n 1), who argued that the Commission’s analysis in Airtours was consistent with that applied in previous decisions.
69 But see Whish above n 51 at 491, who convincingly argued that although the language of the Commission’s decision could be construed as introducing a lower threshold for collective dominance, it was not clear from the decision that the Commission intended to do so.
70 Case T–342/99 Airtours v Commission, above n 5, at para 16.
71 See below nn 86–94 below and corresponding text.
72 Case T–228/97 [1999] ECR II–2969. The decision of the Court of First Instance was appealed before the European Court and the appeal was dismissed by Order of 10 July 2001 (Case C–497/99, not yet reported).
73 Ibid at paras 61–64 of the judgment.
74 This would be confirmed later by the judgment of the European Court on the appeal in Compagnie Maritime Belge (Joined Cases C–395/96P and C–396/96P, above n 32).
75 Ibid at para 51 of the judgment.
76 See the decision of the Commission in Irish Sugar (Decision 97/624/EC OJ [1997] L 258/1) at para 112. For the Commission, these ties created a ‘clear parallelism of interest of the two companies vis-à-vis third parties’ (Ibid).
77 See Case T–228/97 above n 72 at para 46.
78 Joined Cases C–395/96P and C–396/96P above n 32.
79 See Cases T–24–26 and 28/93 above n 25.
80 Joined Cases C–395/96P and C–396/96P above n 32 at paras 43–44 of the judgment.
81 The Court of First Instance had been satisfied that the Commission had provided sufficient proof that the members of the liner conference presented themselves as a common entity (see Cases T–24–26 and T–28/93 above n 25 at paras 63–65 of the judgment). See also the judgment of the European Court (Joined Cases C–395/96 and C–396/96 above n 32 at paras 46–47 of the judgment).
82 Ibid at para 45 of the judgment.
83 See Withers and Jephcott above n 1 at 303, and McGregor above n 1 at 436.
84 See above nn 44 and 77.
85 See Withers and Jephcott above n 1 at 303, and McGregor above n 1 at 437.
86 Case T–342/99 above n 5.
87 See generally, Feddersen and O’Donoghue above n 1; Haupt above n 1.
88 Case T–342/99 above n 5 at para 61 of the judgment.
89 See above nn 56–65 above and corresponding text.
90 Case T–342/99 above n 5 at para 62 of the judgment.
91 Ibid.
92 Ibid.
93 Ibid.
94 See above nn 49–52 above and corresponding text.
95 It would also not be contrary to Art 81 EC in the absence of express collusion between the undertakings.
96 For example, in CEWAL, (Decision 93/82/EEC, OJ [1993] L 34/20), the Commission found that the members of the liner conference had abused their position of collective dominance mainly by engaging in the practice known as ‘fighting ships’ and by establishing 100% loyalty arrangements. The practice of ‘fighting ships’ involves the members of the liner conference modifying their freight rates by departing from the tariff in force, in order to offer the same or lower rates than those of their principal independent competitor for vessels sailing on the same route. This can be described as a form of ‘selective price cutting’ (see the judgment of the Court in Compagnie Maritime Belge (Cases C395/96P and C396/96P above n 32 at para 117 of the judgment). The decision of the Commission on the issue of the abusive practices was upheld by the Court of First Instance and was confirmed on appeal by the European Court of Justice (see sections III and V above). Preece, (see above n 1 at 39091) has cogently argued, that the judgment of the Court could have been more explicit when dealing, in particular, with the abusive nature of selective price-cutting. The appellants had contended that their practice was not abusive because they were simply reacting in a normal and rational competitive way and because they were not pricing below cost. The Court, however, confirmed the Commission’s view that the practice was abusive, but Preece explains that the judgment strictly circumscribed its ruling to the specialised market of liner conferences, thereby suggesting that the principle may not have been of wider application (ibid at 39192). Preece also contrasts the Court’s approach with the more analytical and thorough consideration of this practice provided by Advocate General Fennelly (ibid).
97 OJ [2003] C 20/19.
98 In this respect, see Motta’s interpretation of the Commission’s approach in Airtours (above nn 1 and 67).
99 COM (2001) 745, final.
100 See n 97 above.
101 See paras 53–57 of the Explanatory Memorandum that accompanies the Commission’s proposal.
102 This would be the proposed (new) Art 2(2) of the EC Merger Regulation. See also Recital 21 in the preamble to the proposal.
103 See para 57 of the Explanatory Memorandum, above n 101.