Keywords

Summary



Keywords

1. Competition – Administrative procedure – Commission decision finding an infringement – Use as evidence of the internal documentation of an undertaking having taken part in the infringement – Lawfulness

(Arts 81 EC and 82 EC)

2. Competition – Dominant position – Abuse – Exclusive supply contracts – Agreement entered into between an undertaking and a central purchasing organisation

(Art. 82 EC)

3. Competition – Dominant position – Abuse – Concept – Objective concept relating to conduct which is such as to influence the structure of a market and having the effect of hindering the maintenance or growth of competition – Obligations on the dominant undertaking – Competition on the basis of merit

(Art. 82 EC)

4. Competition – Dominant position – Abuse – Exclusive supply contracts – Loyalty rebates

(Art. 82 EC)

5. Competition – Dominant position – Abuse – Rebate scheme having a foreclosure effect on the market – Loyalty rebates – Classification as abuse

(Art. 82 EC)

6. Competition – Dominant position – Abuse – Quantity rebate – Lawfulness – Conditions – Whether rebate scheme constitutes abuse – Criteria for assessment

(Art. 82 EC)

7. Competition – Administrative procedure – Decision establishing an infringement – Duty to state reasons – Scope

(Arts 82 EC and 253 EC)

8. Competition – Dominant position – Abuse – Concept – Foreclosure of a substantial part of the market by a dominant undertaking

(Art. 82 EC)

9. Competition – Dominant position – Abuse – Retroactive rebates – Whether abusive – Criteria for assessment

(Art. 82 EC)

10. Competition – Dominant position – Abuse – Concept – Conduct having the effect or object of preventing competition from being maintained or developed

(Art. 82 EC)

11. Competition – Dominant position – Abuse – Exclusive supply contracts – Individualised quantity commitments amounting to abuse

(Art. 82 EC)

12. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement – Relevant factors – Raising of the general level of fines – Lawfulness – Conditions

(Council Regulation No 1/2003, Art. 23(2))

13. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement – Consideration of total turnover or relevant turnover of the undertaking concerned – Limits

(Council Regulations Nos 17, Art. 15(2,) and 1/2003, Art. 23(2); Commission Communication 98/C 9/03)

Summary

1. The internal documentation of an undertaking may be evidence that the undertaking has infringed the competition rules. Such documentation may indicate whether the exclusion of competition was intended or, on the contrary, suggest another explanation for the practices under consideration. It may, for example, allow the Commission to place those practices in context and to substantiate its own assessment of those practices.

When it makes use of that documentation to state reasons for its decision, it is perfectly legitimate for the Commission, whilst not concealing the existence of documents that show matters in a different light, to concentrate primarily on the anti-competitive conduct of the undertaking and not on its lawful actions mentioned in certain internal documents, since it is precisely that anti-competitive conduct which it is the Commission’s task to investigate.

(see paras 35-36)

2. There is no need for the practices of a dominant undertaking to tie purchasers by a formal undertaking as to exclusivity in order for it to be found that those practices amount to an abuse of a dominant position within the meaning of Article 82 EC. It is enough that those practices give customers an incentive not to turn to competing suppliers and to obtain all or most of their requirements exclusively from the undertaking concerned; there is thus no need to analyse the exclusivity of any agreements at issue on the basis of the applicable national law.

With regard to agreements entered into between an undertaking and a central purchasing organisation which are binding on the parties, the question as to whether the agreements also had an impact on the purchasing behaviour of their members does not depend on a formal analysis. When the conditions negotiated depend on target quantities to be purchased by the central organisation as a whole, it is inherent in the negotiation of that type of agreement that the agreement will encourage members of the organisation to make purchases with a view to achieving the target set.

(see paras 59, 61-62)

3. The concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened and which, through recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition. It follows that Article 82 EC prohibits a dominant undertaking from eliminating a competitor and from strengthening its position by recourse to means other than those based on competition on the merits. The prohibition laid down in that provision is also justified by the concern not to cause harm to consumers.

Consequently, whilst the finding of a dominant position does not in itself imply any criticism of the undertaking concerned, that undertaking has a special responsibility, irrespective of the causes of that position, not to allow its conduct to impair genuine undistorted competition on the common market. Likewise, whilst the fact that an undertaking is in a dominant position cannot deprive it of its entitlement to protect its own commercial interests when they are attacked, and whilst such an undertaking must be allowed the right to take such reasonable steps as it deems appropriate to protect those interests, such behaviour cannot be allowed if its purpose is to strengthen that dominant position and thereby abuse it.

(see paras 38, 206-207)

4. An undertaking which is in a dominant position on a market and ties purchasers – even if it does so at their request – by an obligation or promise on their part to obtain all or most of their requirements exclusively from that undertaking abuses its dominant position within the meaning of Article 82 EC, whether the obligation in question is stipulated without further qualification or whether it is undertaken in consideration of the grant of a rebate. The same applies if the undertaking in question, without tying the purchasers by a formal obligation, applies, either under the terms of agreements concluded with these purchasers or unilaterally, a system of loyalty rebates, that is to say, discounts conditional on the customer’s obtaining all or most of its requirements from the undertaking in a dominant position.

Obligations of this kind to obtain supplies exclusively from a particular undertaking, whether or not they are in consideration of rebates or of the granting of loyalty rebates intended to give the purchaser an incentive to obtain his supplies exclusively from the undertaking in a dominant position, are incompatible with the objective of undistorted competition within the common market, because they are not based on an economic transaction which justifies this burden or benefit but are designed to remove or restrict the purchaser’s freedom to choose his sources of supply and to deny producers access to the market.

(see paras 208-209, 295-296)

5. A loyalty rebate, which is granted in return for an undertaking by the customer to obtain his stock exclusively or almost exclusively from an undertaking in a dominant position, is contrary to Article 82 EC because of the foreclosure effect that it entails. Such a rebate is designed through the grant of financial advantage, to prevent customers from obtaining their supplies from competing producers.

(see paras 210-211)

6. Quantity rebate systems implemented by an undertaking occupying a dominant position, linked solely to the volume of purchases made from that undertaking, are generally considered not to have the foreclosure effect prohibited by Article 82 EC. If increasing the quantity supplied by the undertaking concerned results in lower costs for the supplier, the latter is entitled to pass on that reduction to the customer in the form of a more favourable tariff. Quantity rebates are therefore deemed to reflect gains in efficiency and economies of scale made by the undertaking in a dominant position.

It follows that a rebate system in which the rate of the discount increases according to the volume purchased from the dominant undertaking will not infringe Article 82 EC unless the criteria and rules for granting the rebate reveal that the system is not based on an economically justified countervailing advantage but tends, following the example of a loyalty and target rebate, to prevent customers from obtaining their supplies from competitors.

In determining whether a quantity rebate system is abusive, it is thus necessary to consider all the circumstances, particularly the criteria and rules governing the grant of the rebate, and to investigate whether, in providing an advantage not based on any economic service justifying it, the rebates tend to remove or restrict the buyer’s freedom to choose his sources of supply, to bar competitors from access to the market, to apply dissimilar conditions to equivalent transactions with other trading parties or to strengthen the dominant position by distorting competition.

(see paras 212-214)

7. The statement of reasons required by Article 253 EC must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure, in such a way as to enable the persons concerned to ascertain the reasons for the measure and to defend their rights and the Court to exercise its power of review. In the case of a decision adopted pursuant to Article 82 EC, that principle requires that the contested decision mention facts forming the basis of the legal grounds of the measure and the considerations which led to the adoption of the decision.

(see para. 227)

8. The foreclosure by a dominant undertaking of a substantial part of the market cannot be justified by showing that the contestable part of the market is still sufficient to accommodate a limited number of competitors. First, the customers on the foreclosed part of the market should have the opportunity to benefit from whatever degree of competition is possible on the market and competitors should be able to compete on the merits for the entire market and not just for a part of it. Second, it is not the role of the dominant undertaking to dictate how many viable competitors will be allowed to compete for the remaining contestable portion of demand.

It is by analysing the circumstances of the case that it is possible to establish whether the practices of an undertaking in a dominant position are capable of excluding competition and it would be artificial to establish without prior analysis the portion of the tied market beyond which the practices of a dominant undertaking may have an exclusionary effect on competitors.

(see paras 241-242)

9. The exclusionary mechanism represented by retroactive rebates does not require the dominant undertaking to sacrifice profits, since the cost of the rebate is spread across a large number of units. If retroactive rebates are given, the average price obtained by the dominant undertaking may well be far above cost and ensure a high average profit margin. However, retroactive rebate schemes ensure that, from the point of view of the customer, the effective price for the last units is very low because of the ‘suction effect’.

(see para. 267)

10. For the purposes of establishing an infringement of Article 82 EC, it is not necessary to show that the anti-competitive conduct of the dominant undertaking had an actual impact on the relevant markets. It is sufficient in that respect to show that that conduct tends to restrict competition or, in other words, that the conduct is capable of having that effect.

(see para. 289)

11. Even if it is accepted that they do not bind the purchaser by a formal obligation as to exclusivity, individualised quantity commitments in respect of which it is established – following analysis which is not only purely formal from the legal point of view but which also takes into account the specific economic context in which the agreements in question operate – that they de facto tie and/or induce the purchaser to obtain all or most of its requirements from the dominant undertaking and which are not based on an economic transaction which justifies this burden or benefit but are designed to remove or restrict the purchaser’s freedom to choose his sources of supply and to deny producers access to the market, constitute an abuse of a dominant position within the meaning of Article 82 EC.

(see paras 297-298)

12. Neither the obligation to respect the principle of equal treatment nor the fact that in the past the Commission may have applied fines of a particular level for certain types of infringements means that it is stopped from raising that level within the limits indicated by Regulation No 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, if that is necessary to ensure implementation of Community competition policy.

The gravity of infringements must be established by reference to numerous factors, such as the particular circumstances of the case, its context and the deterrent effect of fines, although no binding or exhaustive list of the criteria which must be applied has been drawn up. The relevant data, such as the markets, the products, the countries, the undertakings and the periods concerned differ in each case. It follows that the Commission cannot be compelled to impose on undertakings fines which amount to identical percentages of their respective turnovers in cases that are comparable so far as the gravity of the infringements is concerned.

Since fines constitute an instrument of the Commission’s competition policy, that institution must be allowed a margin of discretion when fixing their amount, in order that it may direct the conduct of undertakings towards compliance with the competition rules.

(see paras 310-313)

13. With regard to determination of the amount of a fine censuring an infringement of the Community competition rules, it is permissible for the Commission – subject to compliance with the upper limit provided for in Article 23(2) of Regulation No 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, which refers to total turnover of the undertaking concerned –to take account of the turnover of the undertaking in question in order to assess the gravity of the infringement when determining the amount of the fine, but it may not attribute disproportionate importance thereto by comparison with other relevant factors.

The method of calculation set out in the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, provides that numerous factors are to be taken into account when the gravity of the infringement is assessed for the purpose of setting the fine, including, in particular, the nature of the infringement, its actual impact on the market, where this can be measured, the geographic size of the market affected and the necessary deterrent effect of the fine. Although the guidelines do not provide that the fines are to be calculated according to the overall turnover of the undertakings concerned or their turnover on the relevant product market, they do not preclude such turnover from being taken into account in determining the amount of the fine in order to comply with the general principles of Community law and where circumstances demand it.

It follows that, while it cannot be denied that the relevant product tur nover may constitute an appropriate basis for assessing the threat to competition on the relevant product market within the European Economic Area, it is nevertheless the case that that factor is not the sole criterion by reference to which the Commission must assess the gravity of the infringement.

(see paras 316-318)