COM(2008)832 - Guidance on the Commission's Enforcement Priorities in Applying Article 82 EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings

official title

 

Legal instrument	Communication
reference by COM-number125	COM(2008)832
Additional COM-numbers	COM(2008)832
CELEX number128	52008DC0832

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• 1. 

  See for instance paragraph 81.
  
   
• 2. 

  Case 322/81 Nederlandsche Banden Industrie Michelin (Michelin I ) v Commission
   
• 3. 

  See Case 27/76 United Brands Company and United Brands Continentaal v Commission
   
• 4. 

  See Case 27/76 United Brands Company and United Brands Continentaal v Commission
   
• 5. 

  Case 27/76 United Brands and United Brands Continentaal v Commission
   
• 6. 

  Accounting profitability may be a poor proxy for the exercise of market power. See to that effect Case 27/76 United Brands Company and United Brands Continentaal v Commission
   
• 7. 

  Case 85/76 Hoffmann-La Roche
   
• 8. 

  As to the relationship between the degree of dominance and the finding of abuse, see Joined Cases C-395/96 P and C-396/96 P Compagnie Maritime Belge Transports, Compagnie Maritime Belge and Dafra-Lines v Commission
   
• 9. 

  Case T-30/89 Hilti v Commission
   
• 10. 

  Case 85/76 Hoffmann-La Roche v Commission
   
• 11. 

  Case 27/76 United Brands v Commission
   
• 12. 

  See Case T-228/97 Irish Sugar v Commission
   
• 13. 

  For the meaning of the expression 'increase price' see paragraph 11.
  
   
• 14. 

  The concept of
   
• 15. 

  Case T-228/97 Irish Sugar v Commission
   
• 16. 

  Case 62/86 AKZO Chemie v Commission
   
• 17. 

  Average avoidable cost is the average of the costs that could have been avoided if the company had not produced a discrete amount of (extra) output, in this case the amount allegedly the subject of abusive conduct. In most cases, AAC and the average variable cost (AVC) will be the same, as it is often only variable costs that can be avoided. Long-run average incremental cost is the average of all the (variable and fixed) costs that a company incurs to produce a particular product. LRAIC and average total cost (ATC) are good proxies for each other, and are the same in the case of single product undertakings. If multi-product undertakings have economies of scope, LRAIC would be below ATC for each individual product, as true common costs are not taken into account in LRAIC. In the case of multiple products, any costs that could have been avoided by not producing a particular product or range are not considered to be common costs. In situations where common costs are significant, they may have to be taken into account when assessing the ability to foreclose as efficient competitors.
  
   
• 18. 

  In order to apply these cost benchmarks it may also be necessary to look at revenues and costs of the dominant company and its competitors in a wider context. It may not be sufficient to only assess whether the price or revenue covers the costs for the product in question, but it may be necessary to look at incremental revenues in case the dominant company's conduct in question negatively affects its revenues in other markets or of other products. Similarly, in the case of two sided markets it may be necessary to look at revenues and costs of both sides at the same time.
  
   
• 19. 

  See Case 27/76 United Brands v Commission
   
• 20. 

  See, for instance, Case T-30/89 Hilti v Commission
   
• 21. 

  See, in the different context of Article 81, the Commission Communication
   
• 22. 

  The notion of exclusive dealing also includes exclusive supply obligations or incentives with the same effect, whereby the dominant undertaking tries to foreclose its competitors by hindering them from purchasing from suppliers. The Commission considers that such input foreclosure is in principle liable to result in anticompetitive foreclosure if the exclusive supply obligation or incentive ties most of the efficient input suppliers and customers competing with the dominant firm are unable to find alternative efficient sources of input supply.
  
   
• 23. 

  Case T-65/98 Van den Bergh Foods v Commission
   
• 24. 

  Case T-65/98 Van den Bergh Foods v Commission
   
• 25. 

  In this regard, the assessment of conditional rebates differs from that of predation, which always entails a sacrifice.
  
   
• 26. 

  See Case T-203/01 Michelin v Commission (Michelin II )
   
• 27. 

  Case 322/81 Nederlandsche Banden Industrie Michelin v Commission (Michelin I)
   
• 28. 

  The relevant range will be estimated on the basis of data which may have varying degrees of precision. The Commission will take this into account in drawing any conclusions regarding the dominant undertaking's ability to foreclose as efficient competitors. It may also be useful to calculate how big a share of customers' requirements on average the entrant should capture as a minimum so that the effective price is at least as high as the LRAIC of the dominant company. In a number of cases the size of this share, when compared with the actual market shares of competitors and their shares of the customers' requirements, may make it clear whether the rebate scheme is capable to have an anticompetitive foreclosure effect.
  
   
• 29. 

  See Case 85/76 Hoffmann-La Roche
   
• 30. 

  For instance, for rebates see Case C-95/04 P British Airways v Commission
   
• 31. 

  See, to that effect, Case T-203/01 Michelin v Commission (Michelin II )
   
• 32. 

  Technical tying occurs when the tying product is designed in such a way that it only works properly with the tied product (and not with the alternatives offered by competitors). Contractual tying occurs when the customer who purchases the tying product undertakes also to purchase the tied product (and not the alternatives offered by competitors).
  
   
• 33. 

  The undertaking should be dominant in the tying market, though not necessarily in the tied market. In bundling cases, the firm needs to be dominant in one of the bundled markets. In the special case of tying in after-markets, the condition is that the firm is dominant in the tying market and/or the tied after-market.
  
   
• 34. 

  Judgment of 17 September 2007 in Case T-201/04 Microsoft v Commission
   
• 35. 

  Judgment of 17 September 2007 in Case T-201/04 Microsoft v Commission
   
• 36. 

  Case T-30/89 Hilti v Commission
   
• 37. 

  In principle, the LRAIC cost benchmark is relevant here as long as rivals are not able to also sell bundles (see paragraphs 22 to 26 and paragraph 60).
  
   
• 38. 

  The Commission may also pursue predatory practices by dominant undertakings on secondary markets on which they are not yet dominant. In particular, the Commission will be more likely to find such an abuse in sectors where activities are protected by a legal monopoly. While the dominant firm does not need to predate to protect its dominant position in the market protected by legal monopoly, it may use the profits gained in the monopoly market to cross-subsidize its activities in another market and thereby threaten to eliminate effective competition in that other market.
  
   
• 39. 

  In most cases the average variable cost (AVC) and AAC will be the same, as often only variable costs can be avoided. However, in circumstances where AVC and AAC differ, the latter better reflects possible sacrifice: for example, if the dominant firm had to expand capacity in order to be able to predate, then the sunk costs of this extra capacity should be taken into account in looking at the dominant
   
• 40. 

  In the AKZO case the ECJ, in relation to pricing below average variable cost (AVC), held:
   
• 41. 

  If the estimate of cost is based on the direct cost of production (as registered in the firm's accounts), it may not adequately capture whether or not there has been a sacrifice.
  
   
• 42. 

  However, undertakings should not be penalised for incurring ex post losses where the ex ante decision to engage in the conduct was taken in good faith, i.e. if they can provide conclusive evidence that they could reasonably expect that the activity would be profitable.
  
   
• 43. 

  See Case T-83/91 Tetra Pak International v Commission (Tetra Pak II)
   
• 44. 

  In the AKZO case (Case 62/86 AKZO Chemie v Commission
   
• 45. 

  This was confirmed in Case T-83/91 Tetra Pak International v Commission (Tetra Pak II)
   
• 46. 

  Joined Cases C-241/91 P and C-242/91 Radio Telefis Eireann (RTE) and Independent Television Publications (ITP) v Commission (Magill)
   
• 47. 

  See Judgment of 16 September 2008 in Joined Cases C-468/06 à C-478/06 Sot. Lélos kai Sia and Others v GlaxoSmithKline , nyr.
  
   
• 48. 

  Joined Cases 6/73 and 7/73 Istituto Chemioterapico Italiano and Commercial Solvents v Commission
   
• 49. 

  Joined cases C-241/91 P and C-242/91 P Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v Commission (Magill)
   
• 50. 

  Judgment of 17 September 2007 in Case T-201/04 Microsoft v Commission
   
• 51. 

  See Commission Decisions
   
• 52. 

  Case C-418/01 IMS Health v NDC Health
   
• 53. 

  Including a situation in which an integrated firm that sells a
   
• 54. 

  In some cases, however, the LRAIC of a non-integrated competitor downstream might be used as the benchmark, for example when it is not possible to clearly allocate the dominant firm's costs to downstream and upstream operations.
  
   
• 55. 

  Judgment of 17 September 2007 in Case T-201/04 Microsoft v Commission
   
• 56. 

  Joined Cases C-241/91 P and C-242/91 Radio Telefis Eireann (RTE) and Independent Television Publications (ITP) v Commission (Magill)
   
• 57. 

  In general, an input is likely to be impossible to replicate when it involves a natural monopoly due to scale or scope economies, where there are strong network effects or when it concerns so-called 'single source' information. However, in all cases account should be taken of the dynamic nature of the industry and, in particular whether or not market power can rapidly dissipate.
  
   
• 58. 

  Case 7/97 Oscar Bronner v Mediaprint Zeitungs- und Zeitschriftenverlag, Mediaprint Zeitungsvertriebsgesellschaft and Mediaprint Anzeigengesellschaft
   
• 59. 

  Judgment of 17 September 2007 in Case T-201/04 Microsoft v Commission
   
• 60. 

  Case C-418/01 IMS Health v NDC Health
   
• 61. 

  Judgment of 17 September 2007 in Case T-201/04 Microsoft v Commission
   
• 62. 

  See Case 27/76 United Brands Company and United Brands Continentaal v Commission
   
• 63. 

  See for instance paragraph 81.
  
   
• 64. 

  Case 322/81 Nederlandsche Banden Industrie Michelin (Michelin I ) v Commission
   
• 65. 

  See Case 27/76 United Brands Company and United Brands Continentaal v Commission
   
• 66. 

  See Case 27/76 United Brands Company and United Brands Continentaal v Commission
   
• 67. 

  Case 27/76 United Brands and United Brands Continentaal v Commission
   
• 68. 

  Accounting profitability may be a poor proxy for the exercise of market power. See to that effect Case 27/76 United Brands Company and United Brands Continentaal v Commission
   
• 69. 

  Case 85/76 Hoffmann-La Roche
   
• 70. 

  As to the relationship between the degree of dominance and the finding of abuse, see Joined Cases C-395/96 P and C-396/96 P Compagnie Maritime Belge Transports, Compagnie Maritime Belge and Dafra-Lines v Commission
   
• 71. 

  Case T-30/89 Hilti v Commission
   
• 72. 

  Case 85/76 Hoffmann-La Roche v Commission
   
• 73. 

  Case 27/76 United Brands v Commission
   
• 74. 

  See Case T-228/97 Irish Sugar v Commission
   
• 75. 

  For the meaning of the expression 'increase price' see paragraph 11.
  
   
• 76. 

  The concept of
   
• 77. 

  Case T-228/97 Irish Sugar v Commission
   
• 78. 

  Case 62/86 AKZO Chemie v Commission
   
• 79. 

  Average avoidable cost is the average of the costs that could have been avoided if the company had not produced a discrete amount of (extra) output, in this case the amount allegedly the subject of abusive conduct. In most cases, AAC and the average variable cost (AVC) will be the same, as it is often only variable costs that can be avoided. Long-run average incremental cost is the average of all the (variable and fixed) costs that a company incurs to produce a particular product. LRAIC and average total cost (ATC) are good proxies for each other, and are the same in the case of single product undertakings. If multi-product undertakings have economies of scope, LRAIC would be below ATC for each individual product, as true common costs are not taken into account in LRAIC. In the case of multiple products, any costs that could have been avoided by not producing a particular product or range are not considered to be common costs. In situations where common costs are significant, they may have to be taken into account when assessing the ability to foreclose as efficient competitors.
  
   
• 80. 

  In order to apply these cost benchmarks it may also be necessary to look at revenues and costs of the dominant company and its competitors in a wider context. It may not be sufficient to only assess whether the price or revenue covers the costs for the product in question, but it may be necessary to look at incremental revenues in case the dominant company's conduct in question negatively affects its revenues in other markets or of other products. Similarly, in the case of two sided markets it may be necessary to look at revenues and costs of both sides at the same time.
  
   
• 81. 

  See Case 27/76 United Brands v Commission
   
• 82. 

  See, for instance, Case T-30/89 Hilti v Commission
   
• 83. 

  See, in the different context of Article 81, the Commission Communication
   
• 84. 

  The notion of exclusive dealing also includes exclusive supply obligations or incentives with the same effect, whereby the dominant undertaking tries to foreclose its competitors by hindering them from purchasing from suppliers. The Commission considers that such input foreclosure is in principle liable to result in anticompetitive foreclosure if the exclusive supply obligation or incentive ties most of the efficient input suppliers and customers competing with the dominant firm are unable to find alternative efficient sources of input supply.
  
   
• 85. 

  Case T-65/98 Van den Bergh Foods v Commission
   
• 86. 

  Case T-65/98 Van den Bergh Foods v Commission
   
• 87. 

  In this regard, the assessment of conditional rebates differs from that of predation, which always entails a sacrifice.
  
   
• 88. 

  See Case T-203/01 Michelin v Commission (Michelin II )
   
• 89. 

  Case 322/81 Nederlandsche Banden Industrie Michelin v Commission (Michelin I)
   
• 90. 

  The relevant range will be estimated on the basis of data which may have varying degrees of precision. The Commission will take this into account in drawing any conclusions regarding the dominant undertaking's ability to foreclose as efficient competitors. It may also be useful to calculate how big a share of customers' requirements on average the entrant should capture as a minimum so that the effective price is at least as high as the LRAIC of the dominant company. In a number of cases the size of this share, when compared with the actual market shares of competitors and their shares of the customers' requirements, may make it clear whether the rebate scheme is capable to have an anticompetitive foreclosure effect.
  
   
• 91. 

  See Case 85/76 Hoffmann-La Roche
   
• 92. 

  For instance, for rebates see Case C-95/04 P British Airways v Commission
   
• 93. 

  See, to that effect, Case T-203/01 Michelin v Commission (Michelin II )
   
• 94. 

  Technical tying occurs when the tying product is designed in such a way that it only works properly with the tied product (and not with the alternatives offered by competitors). Contractual tying occurs when the customer who purchases the tying product undertakes also to purchase the tied product (and not the alternatives offered by competitors).
  
   
• 95. 

  The undertaking should be dominant in the tying market, though not necessarily in the tied market. In bundling cases, the firm needs to be dominant in one of the bundled markets. In the special case of tying in after-markets, the condition is that the firm is dominant in the tying market and/or the tied after-market.
  
   
• 96. 

  Judgment of 17 September 2007 in Case T-201/04 Microsoft v Commission
   
• 97. 

  Judgment of 17 September 2007 in Case T-201/04 Microsoft v Commission
   
• 98. 

  Case T-30/89 Hilti v Commission
   
• 99. 

  In principle, the LRAIC cost benchmark is relevant here as long as rivals are not able to also sell bundles (see paragraphs 22 to 26 and paragraph 60).
  
   
• 100. 

  The Commission may also pursue predatory practices by dominant undertakings on secondary markets on which they are not yet dominant. In particular, the Commission will be more likely to find such an abuse in sectors where activities are protected by a legal monopoly. While the dominant firm does not need to predate to protect its dominant position in the market protected by legal monopoly, it may use the profits gained in the monopoly market to cross-subsidize its activities in another market and thereby threaten to eliminate effective competition in that other market.
  
   
• 101. 

  In most cases the average variable cost (AVC) and AAC will be the same, as often only variable costs can be avoided. However, in circumstances where AVC and AAC differ, the latter better reflects possible sacrifice: for example, if the dominant firm had to expand capacity in order to be able to predate, then the sunk costs of this extra capacity should be taken into account in looking at the dominant
   
• 102. 

  In the AKZO case the ECJ, in relation to pricing below average variable cost (AVC), held:
   
• 103. 

  If the estimate of cost is based on the direct cost of production (as registered in the firm's accounts), it may not adequately capture whether or not there has been a sacrifice.
  
   
• 104. 

  However, undertakings should not be penalised for incurring ex post losses where the ex ante decision to engage in the conduct was taken in good faith, i.e. if they can provide conclusive evidence that they could reasonably expect that the activity would be profitable.
  
   
• 105. 

  See Case T-83/91 Tetra Pak International v Commission (Tetra Pak II)
   
• 106. 

  In the AKZO case (Case 62/86 AKZO Chemie v Commission
   
• 107. 

  This was confirmed in Case T-83/91 Tetra Pak International v Commission (Tetra Pak II)
   
• 108. 

  Joined Cases C-241/91 P and C-242/91 Radio Telefis Eireann (RTE) and Independent Television Publications (ITP) v Commission (Magill)
   
• 109. 

  See Judgment of 16 September 2008 in Joined Cases C-468/06 à C-478/06 Sot. Lélos kai Sia and Others v GlaxoSmithKline , nyr.
  
   
• 110. 

  Joined Cases 6/73 and 7/73 Istituto Chemioterapico Italiano and Commercial Solvents v Commission
   
• 111. 

  Joined cases C-241/91 P and C-242/91 P Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v Commission (Magill)
   
• 112. 

  Judgment of 17 September 2007 in Case T-201/04 Microsoft v Commission
   
• 113. 

  See Commission Decisions
   
• 114. 

  Case C-418/01 IMS Health v NDC Health
   
• 115. 

  Including a situation in which an integrated firm that sells a
   
• 116. 

  In some cases, however, the LRAIC of a non-integrated competitor downstream might be used as the benchmark, for example when it is not possible to clearly allocate the dominant firm's costs to downstream and upstream operations.
  
   
• 117. 

  Judgment of 17 September 2007 in Case T-201/04 Microsoft v Commission
   
• 118. 

  Joined Cases C-241/91 P and C-242/91 Radio Telefis Eireann (RTE) and Independent Television Publications (ITP) v Commission (Magill)
   
• 119. 

  In general, an input is likely to be impossible to replicate when it involves a natural monopoly due to scale or scope economies, where there are strong network effects or when it concerns so-called 'single source' information. However, in all cases account should be taken of the dynamic nature of the industry and, in particular whether or not market power can rapidly dissipate.
  
   
• 120. 

  Case 7/97 Oscar Bronner v Mediaprint Zeitungs- und Zeitschriftenverlag, Mediaprint Zeitungsvertriebsgesellschaft and Mediaprint Anzeigengesellschaft
   
• 121. 

  Judgment of 17 September 2007 in Case T-201/04 Microsoft v Commission
   
• 122. 

  Case C-418/01 IMS Health v NDC Health
   
• 123. 

  Judgment of 17 September 2007 in Case T-201/04 Microsoft v Commission
   
• 124. 

  See Case 27/76 United Brands Company and United Brands Continentaal v Commission
   
• 125. 

  De Europese Commissie kent nummers toe aan officiële documenten van de Europese Unie. De Commissie maakt onderscheid in een aantal typen documenten door middel van het toekennen van verschillende nummerseries. Het onderscheid is gebaseerd op het soort document en/of de instelling van de Unie van wie het document afkomstig is.
   
• 126. 

  De Raad van de Europese Unie kent aan wetgevingsdossiers een uniek toe. Dit nummer bestaat uit een vijfcijferig volgnummer gevolgd door een schuine streep met de laatste twee cijfers van het jaartal, bijvoorbeeld 12345/00 - een document met nummer 12345 uit het jaar 2000.
   
• 127. 

  Het interinstitutionele nummer is een nummerreeks die binnen de Europese Unie toegekend wordt aan voorstellen voor regelgeving van de Europese Commissie.
  Binnen de Europese Unie worden nog een aantal andere nummerseries gebruikt. Iedere instelling heeft één of meerdere sets documenten met ieder een eigen nummering. Die reeksen komen niet overeen met elkaar of het interinstitutioneel nummer.
   
• 128. 

  Deze databank van de Europese Unie biedt de mogelijkheid de actuele werkzaamheden (workflow) van de Europese instellingen (Europees Parlement, Raad, ESC, Comité van de Regio's, Europese Centrale Bank, Hof van Justitie enz.) te volgen. EURlex volgt alle voorstellen (zoals wetgevende en begrotingsdossiers) en mededelingen van de Commissie, vanaf het moment dat ze aan de Raad of het Europees Parlement worden voorgelegd.
   
• 129. 

  Als dag van bekendmaking van een Europees besluit geldt de dag waarop het besluit in het Publicatieblad wordt bekendgemaakt, en daardoor in alle officiële talen van de Europese Unie bij het Publicatiebureau beschikbaar is.