Communication from the Commission — Guidance on the Commission's enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings (Text with EEA relevance)
Date: 2009-02-24
Institutions: European Commission
Subjects: business policy, common market, competition law, consumer protection, unfair dismissal

24.2.2009

EN

Official Journal of the European Union

C 45/7

II

(Information)

INFORMATION FROM EUROPEAN UNION INSTITUTIONS AND BODIES

COMMISSION

Communication from the Commission — Guidance on the Commission's enforcement priorities in
applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings

(Text with EEA relevance)

(2009/C 45/02)

I. INTRODUCTION

prejudice to the possibility for the Commission to reject a
complaint when it considers that a case lacks priority on
grounds of lack of Community interest.

1. Article 82 of the Treaty establishing the European Com-
munity (‘Article 82’) prohibits abuses of a dominant posi-
tion. In accordance with the case-law,
it is not in itself
illegal for an undertaking to be in a dominant position and
such a dominant undertaking is entitled to compete on the
merits. However, the undertaking concerned has a special
responsibility not to allow its conduct to impair genuine
undistorted competition on the common market. Article 82
is the legal basis for a crucial component of competition
policy and its effective enforcement helps markets to work
better for the benefit of businesses and consumers. This is
particularly important in the context of the wider objective
of achieving an integrated internal market.

II. PURPOSE OF THIS DOCUMENT

specific enforcement decisions,

2. This document sets out the enforcement priorities that will
guide the Commission's action in applying Article 82 to
exclusionary conduct by dominant undertakings. Alongside
the Commission's
is
intended to provide greater clarity and predictability as
framework of analysis which the
regards
Commission employs in determining whether it should
pursue cases concerning various forms of exclusionary
conduct and to help undertakings better assess whether
certain behaviour is likely to result in intervention by the
Commission under Article 82.

the general

it

3. This document is not intended to constitute a statement of
the law and is without prejudice to the interpretation of
Article 82 by the Court of Justice or the Court of First
Instance of the European Communities.
In addition, the
general framework set out in this document applies without

4. Article 82 applies to undertakings which hold a dominant
position on one or more relevant markets. Such a position
may be held by one undertaking (single dominance) or by
two or more undertakings (collective dominance). This
document only relates to abuses committed by an under-
taking holding a single dominant position.

that are most harmful

5. In applying Article 82 to exclusionary conduct by domi-
nant undertakings, the Commission will focus on those
to consumers.
types of conduct
Consumers benefit from competition through lower prices,
better quality and a wider choice of new or improved
goods and services. The Commission, therefore, will direct
its enforcement to ensuring that markets function properly
and that consumers benefit from the efficiency and produc-
tivity which result
from effective competition between
undertakings.

6. The emphasis of the Commission's enforcement activity in
relation to exclusionary conduct
is on safeguarding the
competitive process in the internal market and ensuring
that undertakings which hold a dominant position do not
exclude their competitors by other means than competing
on the merits of the products or services they provide. In
doing so the Commission is mindful
that what really
matters is protecting an effective competitive process and
not simply protecting competitors. This may well mean
that competitors who deliver less to consumers in terms of
price, choice, quality and innovation will leave the market.

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7. Conduct which is directly exploitative of consumers, for
example charging excessively high prices or certain beha-
viour that undermines the efforts to achieve an integrated
is also liable to infringe Article 82. The
internal market,
Commission may decide to intervene in relation to such
conduct, in particular where the protection of consumers
and the proper functioning of the internal market cannot
the purpose of
otherwise be adequately ensured. For
the
providing guidance on its
Commission at
to exclusionary
stage limits
conduct and in, particular, certain specific types of exclu-
sionary conduct which, based on its experience, appear to
be the most common.

enforcement priorities

itself

this

the Commission will

8. In applying the general enforcement principles set out in
into
this Communication,
account the specific facts and circumstances of each case.
For example,
the
Commission will take into account the specific regulatory
environment in conducting its assessment (1). The Commis-
in this
sion may therefore adapt
Communication to the extent that this would appear to be
reasonable and appropriate in a given case.

in cases involving regulated markets,

the approach set out

take

III. GENERAL APPROACH TO EXCLUSIONARY CONDUCT

A. Market power

9. The assessment of whether an undertaking is in a dominant
position and of the degree of market power it holds is a
first step in the application of Article 82. According to the
case-law, holding a dominant position confers a special
responsibility on the undertaking concerned, the scope of
which must be considered in the light of
the specific
circumstances of each case (2).

10. Dominance has been defined under Community law as a
position of economic strength enjoyed by an undertaking,
which enables it
to prevent effective competition being
maintained on a relevant market, by affording it the power
to behave to an appreciable extent independently of its
competitors, its customers and ultimately of consumers (3).
This notion of independence is related to the degree of
competitive constraint exerted on the undertaking in ques-
tion. Dominance entails that these competitive constraints
are not sufficiently effective and hence that the undertaking
in question enjoys substantial market power over a period
of time. This means that the undertaking's decisions are

(1) See for instance paragraph 82.
(2) Case 322/81 Nederlandsche Banden Industrie Michelin (Michelin I) v
Commission [1983] ECR 3461, paragraph 57; Case T-83/91 Tetra Pak v
Commission (Tetra Pak II) [1993] ECR II-755, paragraph 114; Case
T-111/96 ITT Promedia v Commission [1998] ECR II-2937, para-
graph 139; Case T-228/97 Irish Sugar v Commission [1999]
ECR II-2969, paragraph 112; and Case T-203/01 Michelin v Commission
(Michelin II) [2003] ECR II-4071, paragraph 97.

(3) See Case 27/76 United Brands Company and United Brands Continentaal v
Commission [1978] ECR 207, paragraph 65; Case 85/76 Hoffmann-La
Roche & Co. v Commission [1979] ECR 461, paragraph 38.

largely insensitive to the actions and reactions of competi-
tors, customers and, ultimately, consumers. The Commis-
sion may consider that effective competitive constraints are
some actual or potential competition
absent even if
remains (4). In general, a dominant position derives from a
combination of several factors which, taken separately, are
not necessarily determinative (5).

11. The Commission considers that an undertaking which is
capable of profitably increasing prices above the competi-
tive level for a significant period of time does not face suffi-
ciently effective competitive constraints and can thus gener-
ally be regarded as dominant (6). In this Communication,
the expression ‘increase prices’ includes the power to main-
tain prices above the competitive level and is used as short-
hand for the various ways in which the parameters of
the
competition — such as prices, output,
variety or quality of goods or services — can be influenced
to the advantage of the dominant undertaking and to the
detriment of consumers (7).

innovation,

12. The assessment of dominance will take into account the
competitive structure of the market, and in particular the
following factors:

— constraints imposed by the existing supplies from, and
the position on the market of, actual competitors (the
market position of the dominant undertaking and its
competitors),

— constraints imposed by the credible threat of

future
expansion by actual competitors or entry by potential
competitors (expansion and entry),

— constraints imposed by the bargaining strength of the
undertaking's customers (countervailing buyer power).

(a) Market position of

the dominant undertaking and its

competitors

13. Market shares provide a useful

the
Commission of the market structure and of the relative
importance of
the various undertakings active on the
market (8). However, the Commission will interpret market
shares in the light of the relevant market conditions, and

indication for

first

(4) See Case 27/76 United Brands Company and United Brands Continentaal v
Commission [1978] ECR 207, paragraphs 113 to 121; Case T-395/94
Atlantic Container Line and Others v Commission [2002] ECR II-875, para-
graph 330.

(5) Case 27/76 United Brands and United Brands Continentaal v Commission
[1978] ECR 207, paragraphs 65 and 66; Case C-250/92 Gøttrup-Klim
e.a. Grovvareforeninger
v Dansk Landbrugs Grovvareselskab [1994]
ECR I-5641, paragraph 47; Case T-30/89 Hilti v Commission [1991]
ECR II-1439, paragraph 90.

(6) What is a significant period of time will depend on the product and on
the circumstances of the market in question, but normally a period of
two years will be sufficient.

(7) 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 [1978] ECR 207, paragraph 126.
(8) Case 85/76 Hoffmann-La Roche & Co. v Commission [1979] ECR 461,
paragraph 39-41; Case C-62/86 AKZO v Commission [1991]
ECR I-3359, paragraph 60; Case T-30/89 Hilti v Commission [1991]
ECR II-1439, paragraphs 90, 91 and 92; Case T-340/03 France Télécom
v Commission [2007] ECR II-107, paragraph 100.

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in particular of the dynamics of the market and of the
extent to which products are differentiated. The trend or
development of market shares over time may also be taken
into account in volatile or bidding markets.

low market shares are
14. The Commission considers that
generally a good proxy for
the absence of substantial
market power. The Commission's experience suggests that
dominance is not likely if the undertaking's market share is
below 40 % in the relevant market. However, there may be
specific cases below that threshold where competitors are
not in a position to constrain effectively the conduct of a
dominant undertaking, for example where they face serious
capacity limitations. Such cases may also deserve attention
on the part of the Commission.

15. Experience suggests that the higher the market share and
the longer the period of time over which it is held, the
more likely it is that it constitutes an important preliminary
indication of the existence of a dominant position and, in
certain circumstances, of possible serious effects of abusive
conduct,
justifying an intervention by the Commission
under Article 82 (1). However, as a general
the
Commission will not come to a final conclusion as to
should be pursued without
whether or not a case
examining all
to
constrain the behaviour of the undertaking.

the factors which may be sufficient

rule,

(b) Expansion or entry

timely and sufficient. For

16. Competition is a dynamic process and an assessment of the
competitive constraints on an undertaking cannot be based
solely on the existing market
situation. The potential
impact of expansion by actual competitors or entry by
potential competitors, including the threat of such expan-
sion or entry,
is also relevant. An undertaking can be
deterred from increasing prices if expansion or entry is
the Commission to
likely,
consider expansion or entry likely it must be sufficiently
profitable for
taking into
the competitor or entrant,
account factors such as the barriers to expansion or entry,
the likely reactions of the allegedly dominant undertaking
and other competitors, and the risks and costs of failure.
For expansion or entry to be considered timely, it must be
sufficiently swift to deter or defeat the exercise of substan-
tial market power. For expansion or entry to be considered
sufficient, it cannot be simply small-scale entry, for example
into some market niche, but must be of such a magnitude
as to be able to deter any attempt to increase prices by the
putatively dominant undertaking in the relevant market.

(1) 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 [2000] ECR I-1365, paragraph 119; Case
T-228/97 Irish Sugar v Commission [1999] ECR II-2969, paragraph 186.

important

to essential

17. Barriers to expansion or entry can take various forms. They
may be legal barriers, such as tariffs or quotas, or they may
take the form of advantages specifically enjoyed by the
dominant undertaking, such as economies of scale and
scope, privileged access
inputs or natural
technologies (2) or an established
resources,
distribution and sales network (3). They may also include
costs and other impediments, for instance resulting from
network effects, faced by customers in switching to a new
supplier. The dominant undertaking's own conduct may
also create barriers to entry, for example where it has made
significant
investments which entrants or competitors
would have to match (4), or where it has concluded
long-term contracts with its customers that have appreci-
able foreclosing effects. Persistently high market shares may
be indicative of
the existence of barriers to entry and
expansion.

(c) Countervailing buyer power

18. Competitive constraints may be exerted not only by actual
or potential competitors but also by customers. Even an
undertaking with a high market share may not be able to
act to an appreciable extent independently of customers
with sufficient bargaining strength (5). Such countervailing
buying power may result from the customers' size or their
commercial significance for the dominant undertaking, and
their ability to switch quickly to competing suppliers, to
promote new entry or
to vertically integrate, and to
credibly threaten to do so. If countervailing power is of a
sufficient magnitude, it may deter or defeat an attempt by
the undertaking to profitably increase prices. Buyer power
may not, however, be considered a sufficiently effective
constraint if it only ensures that a particular or limited
segment of customers is shielded from the market power of
the dominant undertaking.

B. Foreclosure leading to consumer harm (‘anti-compe-

titive foreclosure’)

19. The aim of the Commission's enforcement activity in rela-
tion to exclusionary conduct is to ensure that dominant
undertakings do not impair effective competition by fore-
closing their competitors in an anti-competitive way, thus
having an adverse impact on consumer welfare, whether in
the form of higher price levels than would have otherwise
prevailed or in some other form such as limiting quality or
the term
reducing consumer choice.

In this document

(2) Case T-30/89 Hilti v Commission [1991] ECR II-1439, paragraph 19.
(3) Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461, para-

graph 48.

(4) Case 27/76 United Brands v Commission [1978] ECR 207, paragraph 91.
(5) See Case T-228/97 Irish Sugar v Commission [1999] ECR II-2969, para-
graphs 97 to 104, in which the Court of First Instance considered
whether the alleged lack of independence of the undertaking vis-à-vis its
customers should be seen as an exceptional circumstance preventing
the finding of a dominant position in spite of the fact that the under-
taking was responsible for a very large part of the sales recorded on the
industrial sugar market in Ireland.

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‘anti-competitive foreclosure’ is used to describe a situation
where effective access of actual or potential competitors to
supplies or markets is hampered or eliminated as a result of
the dominant undertaking whereby the
the conduct of
dominant undertaking is likely to be in a position to profit-
ably increase prices (1) to the detriment of consumers. The
identification of likely consumer harm can rely on qualita-
tive and, where possible and appropriate, quantitative
evidence. The Commission will address such anti-competi-
tive foreclosure either at the intermediate level or at the
level of final consumers, or at both levels (2).

20. The Commission will normally intervene under Article 82
where, on the basis of cogent and convincing evidence, the
allegedly abusive conduct is likely to lead to anti-competi-
tive foreclosure. The Commission considers the following
factors to be generally relevant to such an assessment:

— the position of the dominant undertaking: in general, the
stronger the dominant position, the higher the likeli-
hood that conduct protecting that position leads to
anti-competitive foreclosure,

— the conditions on the relevant market: this includes the
conditions of entry and expansion, such as the existence
of economies of scale and/or scope and network effects.
Economies of scale mean that competitors are less likely
to enter or stay in the market if the dominant under-
taking forecloses a significant part of
the relevant
market. Similarly, the conduct may allow the dominant
undertaking to ‘tip’ a market characterised by network
effects in its favour or to further entrench its position
on such a market. Likewise,
if entry barriers in the
upstream and/or downstream market are significant,
this means that it may be costly for competitors to
overcome
vertical
foreclosure
integration,

through

possible

— the position of the dominant undertaking's competitors: this
includes the importance of competitors for the mainte-
nance of effective competition. A specific competitor
may play a significant competitive role even if it only
holds a small market share compared to other competi-
tors. It may, for example, be the closest competitor to
the dominant undertaking, be a particularly innovative
competitor, or have the reputation of systematically
cutting prices. In its assessment, the Commission may
also consider in appropriate cases, on the basis of

(1) For the meaning of the expression ‘increase price’ see paragraph 11.
(2) The concept of ‘consumers’ encompasses all direct or indirect users of
the products affected by the conduct, including intermediate producers
that use the products as an input, as well as distributors and final consu-
mers both of the immediate product and of products provided by inter-
mediate producers. Where intermediate users are actual or potential
competitors of the dominant undertaking, the assessment focuses on
the effects of the conduct on users further downstream.

information available, whether there are realistic, effec-
tive and timely counterstrategies that competitors would
be likely to deploy,

likely to respond to offers

— the position of the customers or input suppliers: this may
include consideration of the possible selectivity of the
conduct in question. The dominant undertaking may
apply the practice only to selected customers or input
suppliers who may be of particular importance for the
entry or expansion of competitors, thereby enhancing
the likelihood of anti-competitive foreclosure (3). In the
case of customers, they may, for example, be the ones
most
from alternative
suppliers,
they may represent a particular means of
distributing the product that would be suitable for a
new entrant, they may be situated in a geographic area
well suited to new entry or they may be likely to influ-
ence the behaviour of other customers. In the case of
input suppliers, those with whom the dominant under-
taking has concluded exclusive supply arrangements
may be the ones most likely to respond to requests by
customers who are competitors of the dominant under-
taking in a downstream market, or may produce a
grade of the product — or produce at a location —
particularly suitable for a new entrant. Any strategies at
the disposal of the customers or input suppliers which
could help to counter the conduct of the dominant
undertaking will also be considered,

— the extent of the allegedly abusive conduct: in general, the
higher the percentage of
total sales in the relevant
market affected by the conduct, the longer its duration,
and the more regularly it has been applied, the greater
is the likely foreclosure effect,

— possible evidence of actual foreclosure:

foreclosure. For

if the conduct has
been in place for a sufficient period of time, the market
performance of
the dominant undertaking and its
competitors may provide direct evidence of anti-compe-
to the
titive
allegedly abusive conduct,
the
dominant undertaking may have risen or a decline in
market
similar
share may have been slowed. For
reasons, actual competitors may have been marginalised
or may have exited, or potential competitors may have
tried to enter and failed,

attributable
the market share of

reasons

— direct evidence of any exclusionary strategy: this includes
internal documents which contain direct evidence of a
strategy to exclude competitors, such as a detailed plan
to engage in certain conduct in order to exclude a
competitor, to prevent entry or to pre-empt the emer-
gence of a market, or evidence of concrete threats of
exclusionary action. Such direct evidence may be
helpful
in interpreting the dominant undertaking's
conduct.

(3) Case T-228/97 Irish Sugar v Commission [1999] ECR II-2969, para-

graph 188.

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21. When pursuing a case the Commission will develop the
analysis of the general factors mentioned in paragraph 20,
together with the more specific factors described in the
sections dealing with certain types of exclusionary conduct,
and any other factors which it may consider to be appro-
priate. This assessment will usually be made by comparing
the actual or likely future situation in the relevant market
(with the dominant undertaking's conduct in place) with an
appropriate counterfactual, such as the simple absence of
the conduct in question or with another realistic alternative
scenario, having regard to established business practices.

likely to be foreclosed by the conduct in question, the
Commission will examine economic data relating to cost
and sales prices, and in particular whether the dominant
undertaking is engaging in below-cost pricing. This will
require that sufficiently reliable data be available. Where
available, the Commission will use information on the costs
of the dominant undertaking itself. If reliable information
on those costs is not available, the Commission may decide
to use the cost data of competitors or other comparable
reliable data.

22. There may be circumstances where it is not necessary for
the Commission to carry out a detailed assessment before
concluding that the conduct in question is likely to result in
consumer harm. If it appears that the conduct can only
raise obstacles to competition and that it creates no efficien-
cies, its anti-competitive effect may be inferred. This could
be the case,
the dominant undertaking
if
prevents its customers from testing the products of compe-
titors or provides financial incentives to its customers on
condition that they do not test such products, or pays a
distributor or a customer to delay the introduction of a
competitor's product.

for instance,

C. Price-based exclusionary conduct

23. The considerations in paragraphs 23 to 27 apply to price-
based exclusionary conduct. Vigorous price competition is
to consumers. With a view to
generally beneficial
preventing anti-competitive foreclosure,
the Commission
will normally only intervene where the conduct concerned
has already been or is capable of hampering competition
from competitors which are considered to be as efficient as
the dominant undertaking (1).

24. However,

that

the Commission recognises

in certain
circumstances a less efficient competitor may also exert a
constraint which should be taken into account when
considering whether particular price-based conduct leads to
anti-competitive foreclosure. The Commission will take a
dynamic view of that constraint, given that in the absence
of an abusive practice such a competitor may benefit from
demand-related advantages, such as network and learning
effects, which will tend to enhance its efficiency.

25. In order to determine whether even a hypothetical compe-
titor as efficient as the dominant undertaking would be

(1) Case 62/86 AKZO Chemie v Commission [1991] ECR I-3359, para-
graph 72: in relation to pricing below average total cost (ATC) the
Court of Justice stated: ‘Such prices can drive from the market undertakings
which are perhaps as efficient as the dominant undertaking but which, because
of their smaller financial resources, are incapable of withstanding the competi-
tion waged against them’. See also Judgment of 10 April 2008 in Case
T-271/03 Deutsche Telekom v Commission not yet reported, para-
graph 194.

26. The cost benchmarks that the Commission is likely to use
are average avoidable cost
(AAC) and long-run average
incremental cost (LRAIC) (2). Failure to cover AAC indicates
that the dominant undertaking is sacrificing profits in the
short term and that an equally efficient competitor cannot
serve the targeted customers without
incurring a loss.
LRAIC is usually above AAC because, in contrast to AAC
incurred during the
(which only includes fixed costs if
period under examination), LRAIC includes product specific
fixed costs made before the period in which allegedly
abusive conduct took place. Failure to cover LRAIC indi-
cates that the dominant undertaking is not recovering all
fixed costs of producing the good or
the (attributable)
service in question and that an equally efficient competitor
could be foreclosed from the market (3).

27. If the data clearly suggest that an equally efficient compe-
titor can compete effectively with the pricing conduct of
the dominant undertaking, the Commission will, in prin-
ciple, infer that the dominant undertaking's pricing conduct
is not likely to have an adverse impact on effective competi-
tion, and thus on consumers, and will therefore be unlikely
to intervene. If, on the contrary, the data suggest that the
price charged by the dominant undertaking has the poten-
tial
then the
Commission will integrate this in the general assessment of
anti-competitive foreclosure (see Section B above), taking
into account other relevant quantitative and/or qualitative
evidence.

to foreclose equally efficient competitors,

(2) 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 under-
takings 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 consid-
ered to be common costs. In situations where common costs are signifi-
cant, they may have to be taken into account when assessing the ability
to foreclose equally efficient competitors.

(3) In order to apply these cost benchmarks it may also be necessary to
look at revenues and costs of the dominant company and its competi-
tors 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.

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D. Objective necessity and efficiencies

28. In the enforcement of Article 82, the Commission will also
examine claims put forward by a dominant undertaking
that its conduct is justified (1). A dominant undertaking
may do so either by demonstrating that its conduct is
objectively necessary or by demonstrating that its conduct
produces substantial efficiencies which outweigh any anti-
competitive effects on consumers.
the
Commission will assess whether the conduct in question is
indispensable and proportionate to the goal allegedly
pursued by the dominant undertaking.

In this context,

29. The question of whether conduct is objectively necessary
and proportionate must be determined on the basis of
factors external to the dominant undertaking. Exclusionary
conduct may, for example, be considered objectively neces-
sary for health or safety reasons related to the nature of the
product in question. However, proof of whether conduct of
this kind is objectively necessary must take into account
that it is normally the task of public authorities to set and
enforce public health and safety standards. It is not the task
of a dominant undertaking to take steps on its own initia-
tive to exclude products which it
rightly or
wrongly, as dangerous or inferior to its own product (2).

regards,

30. The Commission considers that a dominant undertaking
may also justify conduct leading to foreclosure of competi-
tors on the ground of efficiencies that are sufficient to guar-
antee that no net harm to consumers is likely to arise. In
this context, the dominant undertaking will generally be
expected to demonstrate, with a sufficient degree of prob-
ability, and on the basis of verifiable evidence, that the
following cumulative conditions are fulfilled (3):

— the efficiencies have been, or are likely to be, realised as
a result of the conduct. They may, for example, include
technical
improvements in the quality of goods, or a
reduction in the cost of production or distribution,

— the conduct is indispensable to the realisation of those
efficiencies: there must be no less anti-competitive alter-
natives to the conduct that are capable of producing the
same efficiencies,

(1) See Case 27/76 United Brands v Commission [1978] ECR 207, para-
graph 184; Case 311/84 Centre Belge d'études de marché — Télémarketing
(CBEM) v Compagnie luxembourgeoise de télédiffusion (CLT) and Information
publicité Benelux (IPB) [1985] ECR 3261, paragraph 27; Case T-30/89
Hilti v Commission [1991] ECR II-1439, paragraphs 102 to 119; Case
T-83/91 Tetra Pak International v Commission (Tetra Pak II) [1994]
ECR II-755, paragraphs 136 and 207; Case C-95/04 P British Airways v
Commission [2007] ECR I-2331, paragraphs 69 and 86.

(2) See, for instance, Case T-30/89 Hilti v Commission [1991] ECR II-1439,
paragraph 118-119; Case T-83/91 Tetra Pak International v Commission
(Tetra Pak II) [1994] ECR II-755, paragraphs 83 and 84 and 138.

(3) See, in the different context of Article 81, the Communication from the
Commission — Notice — Guidelines on the application of
Article 81(3) of the Treaty (OJ C 101, 27.4.2004, p. 97).

— the likely efficiencies brought about by the conduct
outweigh any likely negative effects on competition and
consumer welfare in the affected markets,

— the conduct does not eliminate effective competition, by
removing all or most existing sources of actual or
potential competition. Rivalry between undertakings is
including
an essential driver of economic efficiency,
dynamic efficiencies in the form of innovation. In its
absence the dominant undertaking will
lack adequate
incentives to continue to create and pass on efficiency
gains. Where there is no residual competition and no
foreseeable threat of entry, the protection of rivalry and
the competitive process outweighs possible efficiency
gains. In the Commission's view, exclusionary conduct
which maintains, creates or strengthens a market posi-
tion approaching that of a monopoly can normally not
be justified on the grounds that it also creates efficiency
gains.

31. It is incumbent upon the dominant undertaking to provide
all the evidence necessary to demonstrate that the conduct
concerned is objectively justified.
then falls to the
Commission to make the ultimate assessment of whether
the conduct concerned is not objectively necessary and,
based on a weighing-up of any apparent anti-competitive
effects against any advanced and substantiated efficiencies,
is likely to result in consumer harm.

It

IV. SPECIFIC FORMS OF ABUSE

A. Exclusive dealing

32. A dominant undertaking may try to foreclose its competi-
tors by hindering them from selling to customers through
use of exclusive purchasing obligations or rebates, together
referred to as exclusive dealing (4). This section sets out the
circumstances which are most likely to prompt an interven-
tion by the Commission in respect of exclusive dealing
arrangements entered into by dominant undertakings.

(a) Exclusive purchasing

33. An exclusive purchasing obligation requires a customer on
a particular market to purchase exclusively or to a large

(4) The notion of exclusive dealing also includes exclusive supply obliga-
tions or incentives with the same effect, whereby the dominant under-
taking 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 anti-competitive foreclosure
if the exclusive supply obligation or incentive ties most of the efficient
input suppliers and customers competing with the dominant under-
taking are unable to find alternative efficient sources of input supply.

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extent only from the dominant undertaking. Certain other
obligations, such as stocking requirements, which appear to
fall short of requiring exclusive purchasing, may in practice
lead to the same effect (1).

(b) Conditional rebates

34. In order

customers

to accept

to convince

in whole or in part,

the dominant undertaking may have

exclusive
to
purchasing,
compensate them,
for the loss in
competition resulting from the exclusivity. Where such
compensation is given, it may be in the individual interest
of a customer to enter into an exclusive purchasing obliga-
tion with the dominant undertaking. But
it would be
wrong to conclude automatically from this that all exclusive
purchasing obligations, taken together, are beneficial
for
customers overall, including those currently not purchasing
from the dominant undertaking, and the final consumers.
The Commission will focus its attention on those cases
is likely that consumers as a whole will not
where it
benefit. This will,
in particular, be the case if there are
many customers and the exclusive purchasing obligations
of
taken together, have the
effect of preventing the entry or expansion of competing
undertakings.

the dominant undertaking,

35. In addition to the factors mentioned in paragraph 20, the
following factors will generally be of particular relevance in
determining whether the Commission will
intervene in
respect of exclusive purchasing arrangements.

an

the

important

obligations,

36. The capacity for exclusive purchasing obligations to result
in anti-competitive foreclosure arises in particular where,
without
competitive
constraint is exercised by competitors who either are not
yet present in the market at the time the obligations are
concluded, or who are not in a position to compete for the
full supply of the customers. Competitors may not be able
to compete for an individual customer's entire demand
because the dominant undertaking is an unavoidable
trading partner at least for part of the demand on the
market, for instance because its brand is a ‘must stock item’
preferred by many final consumers or because the capacity
constraints on the other suppliers are such that a part of
demand can only be provided for by the dominant
supplier (2). If competitors can compete on equal terms for
each individual
exclusive
purchasing obligations are generally unlikely to hamper
effective competition unless the switching of supplier by
customers is rendered difficult due to the duration of the
exclusive purchasing obligation. In general, the longer the
duration of the obligation, the greater the likely foreclosure
effect. However, if the dominant undertaking is an unavoid-
able trading partner for all or most customers, even an
exclusive purchasing obligation of short duration can lead
to anti-competitive foreclosure.

customer's

demand,

entire

(1) Case T-65/98 Van den Bergh Foods v Commission [2003] ECR II-4653. In
this case the obligation to use coolers exclusively for the products of
the dominant undertaking was considered to lead to outlet exclusivity.
(2) Case T-65/98 Van den Bergh Foods v Commission [2003] ECR II-4653,

paragraphs 104 and 156.

rebate is that

37. Conditional rebates are rebates granted to customers to
reward them for a particular form of purchasing behaviour.
The usual nature of a conditional
the
customer is given a rebate if its purchases over a defined
reference period exceed a certain threshold,
the rebate
being granted either on all purchases (retroactive rebates) or
only on those made in excess of those required to achieve
the threshold (incremental rebates). Conditional rebates are
not an uncommon practice. Undertakings may offer such
rebates in order to attract more demand, and as such they
may stimulate demand and benefit consumers. However,
such rebates — when granted by a dominant undertaking
foreclosure effects
— can also have actual or potential
similar
to exclusive purchasing obligations. Conditional
rebates can have such effects without necessarily entailing a
sacrifice for the dominant undertaking (3).

38. In addition to the factors already mentioned in paragraph
20, the following factors are of particular importance to the
Commission in determining whether a given system of
conditional rebates is liable to result in anti-competitive
foreclosure and, consequently, will be part of the Commis-
sion's enforcement priorities.

39. As with exclusive purchasing obligations, the likelihood of
anti-competitive foreclosure is higher where competitors
are not able to compete on equal terms for the entire
demand of each individual customer. A conditional rebate
granted by a dominant undertaking may enable it to use
the demand of each
the ‘non contestable’ portion of
that would be
customer
purchased by the customer from the dominant undertaking
in any event) as leverage to decrease the price to be paid for
the ‘contestable’ portion of demand (that is to say, the
amount for which the customer may prefer and be able to
find substitutes) (4).

the amount

is to say,

(that

40. In general

terms, retroactive rebates may foreclose the
market significantly, as they may make it less attractive for
customers to switch small amounts of demand to an alter-
native supplier, if this would lead to loss of the retroactive
rebates (5). The potential
foreclosing effect of retroactive
rebates is in principle strongest on the last purchased unit
of the product before the threshold is exceeded. However,
what is in the Commission's view relevant for an assess-
ment of the loyalty enhancing effect of a rebate is not
simply the effect on competition to provide the last indivi-
dual unit, but the foreclosing effect of the rebate system

(3) In this regard, the assessment of conditional rebates differs from that of

predation, which always entails a sacrifice.

(4) See Case T-203/01 Michelin v Commission (Michelin II)

[2003]
ECR II-4071, paragraphs 162 and 163. See also Case T-219/99 British
Airways v Commission [2003] ECR II-5917, paragraphs 277 and 278.
(5) Case 322/81 Nederlandsche Banden Industrie Michelin v Commission

(Michelin I) [1983] ECR 3461, paragraphs 70 to 73.

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on (actual or potential) competitors of
the dominant
supplier. The higher the rebate as a percentage of the total
price and the higher the threshold, the greater the induce-
ment below the threshold and, therefore, the stronger the
likely foreclosure of actual or potential competitors.

41. When applying the methodology explained in para-
graphs 23 to 27, the Commission intends to investigate, to
the extent that the data are available and reliable, whether
the rebate system is capable of hindering expansion or
entry even by competitors that are equally efficient by
making it more difficult for them to supply part of the
requirements of individual customers. In this context the
Commission will estimate what price a competitor would
have to offer in order to compensate the customer for the
loss of the conditional rebate if the latter would switch part
of its demand (‘the relevant range’) away from the dominant
undertaking. The effective price that the competitor will
have to match is not the average price of the dominant
undertaking, but the normal (list) price less the rebate the
customer loses by switching, calculated over the relevant
range of sales and in the relevant period of
time. The
Commission will take into account the margin of error that
may be caused by the uncertainties inherent in this kind of
analysis.

(the

share’ or

competitor

‘contestable

42. The relevant range over which to calculate the effective
price in a particular case depends on the specific facts of
each case and on whether the rebate is incremental or
retroactive. For incremental rebates, the relevant range is
normally the incremental purchases that are being consid-
ered. For retroactive rebates, it will generally be relevant to
assess in the specific market context how much of a custo-
mer's purchase requirements can realistically be switched to
a
‘contestable
portion’). If it is likely that customers would be willing and
able to switch large amounts of demand to a (potential)
competitor relatively quickly, the relevant range is likely to
be relatively large. If, on the other hand, it is likely that
customers would only be willing or able to switch small
amounts incrementally, then the relevant range will be rela-
tively small. For existing competitors their capacity to
expand sales to customers and the fluctuations in those
sales over time may also provide an indication of the rele-
vant range. For potential competitors, an assessment of the
scale at which a new entrant would realistically be able to
enter may be undertaken, where possible.
It may be
possible to take the historical growth pattern of new
entrants in the same or in similar markets as an indication
of a realistic market share of a new entrant (1).

(1) 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 underta-
king's ability to foreclose equally 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' require-
ments, may make it clear whether the rebate scheme is capable to have
an anti-competitive foreclosure effect.

43. The lower the estimated effective price over the relevant
range is compared to the average price of the dominant
supplier, the stronger the loyalty-enhancing effect. However,
as long as the effective price remains consistently above the
LRAIC of the dominant undertaking, this would normally
allow an equally efficient competitor to compete profitably
In those circumstances the
notwithstanding the rebate.
rebate is normally not capable of
foreclosing in an
anti-competitive way.

44. Where the effective price is below AAC, as a general rule
the rebate scheme is capable of foreclosing even equally
efficient competitors. Where the effective price is between
AAC and LRAIC, the Commission will investigate whether
other factors point to the conclusion that entry or expan-
sion even by equally efficient competitors is likely to be
investigate
affected. In this context, the Commission will
whether and to what extent competitors have realistic and
effective counterstrategies at
for instance
their capacity to also use a ‘non contestable’ portion of
their buyers' demand as leverage to decrease the price for
the relevant range. Where competitors do not have such
counterstrategies at
the Commission will
their disposal,
consider that the rebate scheme is capable of foreclosing
equally efficient competitors.

their disposal,

45. As indicated in paragraph 27, this analysis will be inte-
grated in the general assessment, taking into account other
relevant quantitative or qualitative evidence. It is normally
important to consider whether the rebate system is applied
with an individualised or a standardised threshold. An indi-
vidualised threshold — one based on a percentage of the
total requirements of
the customer or an individualised
volume target — allows the dominant supplier to set the
threshold at such a level as to make it difficult for custo-
mers to switch suppliers,
thereby creating a maximum
loyalty enhancing effect (2). By contrast, a standardised
volume threshold — where the threshold is the same for all
or a group of customers — may be too high for some
smaller customers and/or too low for larger customers to
have a loyalty enhancing effect. If, however, it can be estab-
lished that a standardised volume threshold approximates
the requirements of an appreciable proportion of custo-
mers, the Commission is likely to consider that such a stan-
dardised system of rebates may produce anti-competitive
foreclosure effects.

(c) Efficiencies

46. Provided that the conditions set out in Section III D are
fulfilled, the Commission will consider claims by dominant
undertakings that rebate systems achieve cost or other
advantages which are passed on to customers (3). Transac-
tion-related cost advantages are often more likely to be

(2) See Case 85/76 Hoffmann-La Roche & Co. v Commission [1979] ECR 461,
paragraphs 89 and 90; Case T-288/97 Irish Sugar v Commission [1999]
ECR II-2969, paragraph 213; Case T-219/99 British Airways v Commis-
sion [2003] ECR II-5917, paragraphs 7 to 11 and 270 to 273.

(3) For instance,

for rebates see Case C-95/04 P British Airways v

Commission [2007] ECR I-2331, paragraph 86.

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incremental

achieved with standardised volume targets than with indivi-
dualised volume
rebate
targets. Similarly,
schemes are in general more likely to give resellers an
incentive to produce and resell a higher volume than retro-
active rebate schemes (1). Under the same conditions, the
Commission will consider evidence demonstrating that
exclusive dealing arrangements result in advantages to par-
ticular customers if those arrangements are necessary for
the dominant undertaking to make certain relationship-
specific investments in order to be able to supply those
customers.

B. Tying and bundling

47. A dominant undertaking may try to foreclose its competi-
tors by tying or bundling. This section sets out the circum-
stances which are most likely to prompt an intervention by
the Commission when assessing tying and bundling by
dominant undertakings.

48.

‘Tying’ usually refers to situations where customers that
purchase one product (the tying product) are required also
to purchase another product from the dominant under-
taking (the tied product). Tying can take place on a tech-
nical or contractual basis (2). ‘Bundling’ usually refers to the
way products are offered and priced by the dominant
undertaking. In the case of pure bundling the products are
only sold jointly in fixed proportions. In the case of mixed
bundling, often referred to as a multi-product rebate, the
products are also made available separately, but the sum of
the prices when sold separately is higher than the bundled
price.

49. Tying and bundling are common practices intended to
provide customers with better products or offerings in
more cost effective ways. However, an undertaking which is
dominant in one product market (or more) of a tie or
bundle (referred to as the tying market) can harm consu-
mers through tying or bundling by foreclosing the market
for the other products that are part of the tie or bundle
indirectly, the tying
(referred to as the tied market) and,
market.

50. The Commission will normally take action under Article 82
where an undertaking is dominant in the tying market (3)
and where,
the following conditions are
fulfilled: (i) the tying and tied products are distinct products,
and (ii) the tying practice is likely to lead to anti-competi-
tive foreclosure (4).

in addition,

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

[2003] ECR II-4071, paragraphs 56 to 60, 74 and 75.

(2) 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).

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

(4) Case T-201/04 Microsoft v Commission [2007] ECR II-3601, in particu-

lar paragraphs 842, 859 to 862, 867 and 869.

(a) Distinct products

51. Whether the products will be considered by the Commis-
sion to be distinct depends on customer demand. Two
products are distinct if, in the absence of tying or bundling,
a substantial number of customers would purchase or
would have purchased the tying product without also
buying the tied product from the same supplier, thereby
allowing stand-alone production for both the tying and the
tied product (5). Evidence that two products are distinct
could include direct evidence that, when given a choice,
customers purchase the tying and the tied products sepa-
rately from different sources of supply, or indirect evidence,
such as the presence on the market of undertakings specia-
lised in the manufacture or sale of the tied product without
the tying product (6) or of each of the products bundled by
the dominant undertaking, or evidence indicating that
undertakings with little market power, particularly in
competitive markets, tend not to tie or not to bundle such
products.

(b) Anti-competitive foreclosure in the tied and/or tying market

52. Tying or bundling may lead to anti-competitive effects in
the tied market, the tying market, or both at the same time.
However, even when the aim of the tying or bundling is to
protect the dominant undertaking's position in the tying
market, this is done indirectly through foreclosing the tied
market.
In addition to the factors already mentioned in
paragraph 20, the Commission considers that the following
factors are generally of particular importance for identifying
cases of likely or actual anti-competitive foreclosure.

53. The risk of anti-competitive foreclosure is expected to be
greater where the dominant undertaking makes its tying or
bundling strategy a lasting one, for example through tech-
nical tying which is costly to reverse. Technical tying also
reduces
individual
the
components.

opportunities

resale

for

of

54. In the case of bundling, the undertaking may have a domi-
nant position for more than one of the products in the
bundle. The greater the number of such products in the
bundle, the stronger the likely anti-competitive foreclosure.
This is particularly true if
for a
competitor to replicate, either on its own or in combination
with others.

the bundle is difficult

55. The tying may lead to less competition for customers inter-
ested in buying the tied product, but not the tying product.
If there is not a sufficient number of customers who will
buy the tied product alone to sustain competitors of the
dominant undertaking in the tied market, the tying can lead
to those customers facing higher prices.

(5) Case T-201/04 Microsoft v Commission [2007] ECR II-3601, para-

graphs 917, 921 and 922.

(6) Case T-30/89 Hilti v Commission [1991] ECR II-1439, paragraph 67.

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56. If the tying and the tied product can be used in variable
proportions as inputs to a production process, customers
may react to an increase in price for the tying product by
tied product while
increasing their demand for
decreasing their demand for the tying product. By tying the
two products the dominant undertaking may seek to avoid
this substitution and as a result be able to raise its prices.

the

57. If the prices the dominant undertaking can charge in the
tying market are regulated, tying may allow the dominant
undertaking to raise prices in the tied market in order to
compensate for the loss of revenue caused by the regulation
in the tying market.

58. If the tied product is an important complementary product
for customers of the tying product, a reduction of alterna-
tive suppliers of the tied product and hence a reduced avail-
ability of that product can make entry to the tying market
alone more difficult.

(c) Multi-product rebates

59. A multi-product rebate may be anti-competitive on the tied
or the tying market if it is so large that equally efficient
competitors offering only some of the components cannot
compete against the discounted bundle.

60. In theory, it would be ideal if the effect of the rebate could
be assessed by examining whether the incremental revenue
covers the incremental costs for each product in the domi-
nant undertaking's bundle. However,
in practice assessing
the incremental revenue is complex. Therefore, in its enfor-
cement practice the Commission will in most situations use
the incremental price as a good proxy. If the incremental
price that customers pay for each of the dominant underta-
king's products in the bundle remains above the LRAIC of
the dominant undertaking from including that product in
the bundle, the Commission will normally not intervene
since an equally efficient competitor with only one product
should in principle be able to compete profitably against
the bundle. Enforcement action may, however, be warranted
if the incremental price is below the LRAIC, because in
such a case even an equally efficient competitor may be
prevented from expanding or entering (1).

61. If the evidence suggests that competitors of the dominant
undertaking are selling identical bundles, or could do so in
a timely way without being deterred by possible additional
costs, the Commission will generally regard this as a bundle
competing against a bundle,
in which case the relevant
question is not whether the incremental revenue covers the
incremental costs for each product in the bundle, but rather
whether the price of the bundle as a whole is predatory.

(1) In principle, the LRAIC cost benchmark is relevant here as long as
competitors are not able to also sell bundles (see paragraphs 23 to 27
and paragraph 61).

(d) Efficiencies

62. Provided that the conditions set out in Section III D are
fulfilled, the Commission will look into claims by dominant
undertakings that their tying and bundling practices may
lead to savings in production or distribution that would
benefit customers. The Commission may also consider
whether such practices reduce transaction costs for custo-
mers, who would otherwise be forced to buy the compo-
nents separately, and enable substantial savings on packa-
ging and distribution costs for suppliers.
It may also
examine whether combining two independent products
into a new, single product might enhance the ability to
bring such a product to the market to the benefit of consu-
mers. The Commission may also consider whether tying
and bundling practices allow the supplier to pass on effi-
ciencies arising from its production or purchase of large
quantities of the tied product.

C. Predation

63. In line with its enforcement priorities, the Commission will
generally intervene where there is evidence showing that a
dominant undertaking engages in predatory conduct by
deliberately incurring losses or foregoing profits in the
short term (referred to hereafter as ‘sacrifice’), so as to fore-
close or be likely to foreclose one or more of its actual or
potential competitors with a view to strengthening or main-
taining its market power,
thereby causing consumer
harm (2).

(a) Sacrifice

64. Conduct will be viewed by the Commission as entailing a
sacrifice if, by charging a lower price for all or a particular
part of its output over the relevant time period, or by
expanding its output over the relevant time period, the
dominant undertaking incurred or is incurring losses that
could have been avoided. The Commission will take AAC
as the appropriate starting point for assessing whether the
dominant undertaking incurred or is incurring avoidable
losses. If a dominant undertaking charges a price below
AAC for all or part of its output, it is not recovering the
costs that could have been avoided by not producing that
output:
that could have been
avoided (3). Pricing below AAC will thus in most cases be

incurring a loss

is

it

(2) The Commission may also pursue predatory practices by dominant
undertakings on secondary markets on which they are not yet domi-
nant. 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 undertaking does not need to engage in predatory
conduct 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.

(3) 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 undertaking had to expand capacity in
order to be able to predate, then the sunk costs of that extra capacity
should be taken into account in looking at the dominant undertaking's
losses. Those costs would be reflected in the AAC, but not the AVC.

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viewed by the Commission as a clear
sacrifice (1).

indication of

65. However, the concept of sacrifice does not only include
pricing below AAC (2).
to show a predatory
In order
strategy, the Commission may also investigate whether the
allegedly predatory conduct led in the short term to net
revenues lower than could have been expected from a
reasonable alternative conduct, that is to say, whether the
dominant undertaking incurred a loss that it could have
avoided (3). The Commission will not compare the actual
conduct with hypothetical or theoretical alternatives that
might have been more profitable. Only economically
rational and practicable alternatives will be considered
which, taking into account the market conditions and busi-
ness realities facing the dominant undertaking, can realisti-
cally be expected to be more profitable.

66. In some cases it will be possible to rely upon direct
evidence consisting of documents
from the dominant
undertaking which clearly show a predatory strategy (4),
such as a detailed plan to sacrifice in order to exclude a
competitor, to prevent entry or to pre-empt the emergence
of a market, or evidence of concrete threats of predatory
action (5).

(b) Anti-competitive foreclosure

67. If sufficient reliable data are available, the Commission will
apply the equally efficient competitor analysis, described in
paragraphs 25 to 27, to determine whether the conduct is
capable of harming consumers. Normally only pricing
below LRAIC is capable of foreclosing as efficient competi-
tors from the market.

68. In addition to the factors already mentioned in para-
graph 20,
the Commission will generally investigate
whether and how the suspected conduct reduces the likeli-
if the
hood that competitors will compete. For instance,
dominant undertaking is better informed about cost or
other market conditions, or can distort market signals

(1) In Case 62/86 AKZO Chemie v Commission [1991] ECR I-3359, para-
graph 71, the Court held, in relation to pricing below average variable
cost (AVC), that: ‘A dominant undertaking has no interest in applying such
prices except that of eliminating competitors so as to enable it subsequently to
raise its price by taking advantage of its monopolistic position, since each sale
generates a loss …’.

(2) If the estimate of cost is based on the direct cost of production (as regis-
tered in the undertaking's accounts), it may not adequately capture
whether or not there has been a sacrifice.

(3) 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, that is to say, if they can provide conclusive evidence that
they could reasonably expect that the activity would be profitable.
(4) See Case T-83/91 Tetra Pak International v Commission (Tetra Pak II)
[1994] ECR II-755, paragraphs 151 and 171, and Case T-340/03
France Télécom v Commission [2007] ECR II-107, paragraphs 198 to 215.
(5) In Case 62/86 AKZO Chemie v Commission [1991] ECR I-3359, the
Court accepted that there was clear evidence of AKZO threatening ECS
in two meetings with below cost pricing if it did not withdraw from the
organic peroxides market. In addition there was a detailed plan, with
figures, describing the measures that AKZO would put into effect if ECS
would not withdraw from the market (see paragraphs 76 to 82, 115,
and 131 to 140).

about profitability, it may engage in predatory conduct so
as to influence the expectations of potential entrants and
thereby deter entry. If the conduct and its likely effects are
felt on multiple markets and/or in successive periods of
possible entry, the dominant undertaking may be shown to
be seeking a reputation for predatory conduct.
the
If
targeted competitor is dependent on external
financing,
substantial price decreases or other predatory conduct by
the
the dominant undertaking could adversely affect
competitor's performance so that its access to further finan-
cing may be seriously undermined.

69. The Commission does not consider that it is necessary to
show that competitors have exited the market in order to
show that there has been anti-competitive foreclosure. The
possibility cannot be excluded that the dominant under-
taking may prefer
from
follow the dominant
competing vigorously and have it
undertaking's pricing, rather than eliminate it
from the
market altogether. Such disciplining avoids the risk inherent
in eliminating competitors, in particular the risk that the
assets of the competitor are sold at a low price and stay in
the market, creating a new low cost entrant.

to prevent

competitor

the

70. Generally speaking, consumers are likely to be harmed if
the dominant undertaking can reasonably expect its market
power after the predatory conduct comes to an end to be
greater than it would have been had the undertaking not
engaged in that conduct in the first place, that is to say, if
the undertaking is likely to be in a position to benefit from
the sacrifice.

71. This does not mean that the Commission will only inter-
vene if the dominant undertaking would be likely to be
able to increase its prices above the level persisting in the
market before the conduct. It is sufficient, for instance, that
the conduct would be likely to prevent or delay a decline in
prices that would otherwise have occurred.
Identifying
consumer harm is not a mechanical calculation of profits
and losses, and proof of overall profits is not required.
Likely consumer harm may be demonstrated by assessing
the likely foreclosure effect of the conduct, combined with
consideration of other factors, such as entry barriers (6). In
this context, the Commission will also consider possibilities
of re-entry.

72. It may be easier for the dominant undertaking to engage in
predatory conduct if it selectively targets specific customers
with low prices, as this will limit the losses incurred by the
dominant undertaking.

(6) This was confirmed in Case T-83/91 Tetra Pak International v Commission
(Tetra Pak II) [1994] ECR II-755, upheld on appeal in Case C-333/94 P
Tetra Pak International v Commission [1996] ECR I-5951, where the
Court of First Instance stated that proof of actual recoupment was not
required (paragraph 150 in fine). More in general, as predation may
turn out to be more difficult than expected at the start of the conduct,
the total costs to the dominant undertaking of predating could
outweigh its later profits and thus make actual recoupment impossible
while it may still be rational to decide to continue with the predatory
strategy that it started some time ago. See also COMP/38.233 Wanadoo
Interactive, Commission Decision of 16 July 2003, paragraphs 332
to 367.

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24.2.2009

73. It is less likely that the dominant undertaking engages in
the conduct concerns a low price

predatory conduct if
applied generally for a long period of time.

trade (2) or from lowering its resale price are also not dealt
with in this section.

(c) Efficiencies

74. In general it is considered unlikely that predatory conduct
will create efficiencies. However, provided that the condi-
tions set out in Section III D are fulfilled, the Commission
will consider claims by a dominant undertaking that the
low pricing enables it to achieve economies of scale or effi-
ciencies related to expanding the market.

D. Refusal to supply and margin squeeze

75. When setting its enforcement priorities, the Commission
starts from the position that, generally speaking, any under-
taking, whether dominant or not, should have the right to
choose its trading partners and to dispose freely of its prop-
erty. The Commission therefore considers that intervention
on competition law grounds requires careful consideration
where the application of Article 82 would lead to the impo-
sition of an obligation to supply on the dominant under-
taking (1). The existence of such an obligation — even for a
fair remuneration — may undermine undertakings' incen-
tives to invest and innovate and, thereby, possibly harm
consumers. The knowledge that they may have a duty to
supply against their will may lead dominant undertakings
— or undertakings who anticipate that they may become
dominant — not to invest, or to invest less, in the activity
in question. Also, competitors may be tempted to free ride
on investments made by the dominant undertaking instead
of
these consequences
would, in the long run, be in the interest of consumers.

investing themselves. Neither of

76. Typically competition problems arise when the dominant
undertaking competes on the ‘downstream’ market with the
buyer whom it refuses to supply. The term ‘downstream
market’ is used to refer to the market for which the refused
input
is needed in order to manufacture a product or
provide a service. This section deals only with this type of
refusal.

77. Other types of possibly unlawful refusal to supply, in which
the supply is made
conditional upon the purchaser
accepting limitations on its conduct, are not dealt with in
to
this section. For instance, halting supplies in order
punish customers for dealing with competitors or refusing
to supply customers that do not agree to tying arrange-
ments, will be examined by the Commission in line with
the principles set out in the sections on exclusive dealing
and tying and bundling. Similarly, refusals to supply aimed
from engaging in parallel
at preventing the purchaser

(1) Joined Cases C-241/91 P and C-242/91 Radio Telefis Eireann (RTE) and
Independent Television Publications (ITP) v Commission (Magill) [1995]
ECR I-743, paragraph 50; Case C-418/01 IMS Health v NDC Health
[2004] ECR I-5039, paragraph 35; Case T-201/04 Microsoft v
Commission [2007] ECR II-3601, paragraphs 319, 330, 331, 332
and 336.

78. The concept of refusal to supply covers a broad range of
practices, such as a refusal to supply products to existing or
new customers (3), refusal to license intellectual property
rights (4), including when the licence is necessary to provide
interface information (5), or refusal to grant access to an
essential facility or a network (6).

79. The Commission does not regard it as necessary for the
refused product to have been already traded: it is sufficient
that there is demand from potential purchasers and that a
potential market for the input at stake can be identified (7).
Likewise, it is not necessary for there to be actual refusal on
the part of a dominant undertaking; ‘constructive refusal’ is
sufficient. Constructive refusal could, for example, take the
form of unduly delaying or otherwise degrading the supply
of the product or involve the imposition of unreasonable
conditions in return for the supply.

80. Finally,

instead of refusing to supply, a dominant under-
taking may charge a price for the product on the upstream
market which, compared to the price it charges on the
downstream market (8), does not allow even an equally effi-
cient competitor to trade profitably in the downstream
market on a lasting basis (a so-called ‘margin squeeze’). In
margin squeeze cases the benchmark which the Commis-
sion will generally rely on to determine the costs of an
equally efficient competitor are the LRAIC of the down-
stream division of the integrated dominant undertaking (9).

81. The Commission will consider these practices as an enforce-
ment priority if all the following circumstances are present:

— the refusal relates to a product or service that is objec-
tively necessary to be able to compete effectively on a
downstream market,

(2) See Judgment of 16 September 2008 in Joined Cases C-468/06 to
C-478/06 Sot. Lélos kai Sia and Others v GlaxoSmithKline, not yet
reported.

(3) Joined Cases 6/73 and 7/73 Istituto Chemioterapico Italiano and

Commercial Solvents v Commission [1974] ECR 223.

(4) Joined Cases C-241/91 P and C-242/91 P Radio Telefis Eireann (RTE) and
Independent Television Publications Ltd (ITP) v Commission (Magill) [1995]
ECR 743; Case C-418/01 IMS Health v NDC Health [2004] ECR I-5039.
Those judgments show that in exceptional circumstances a refusal to
license intellectual property rights is abusive.

(5) See Case T-201/04 Microsoft v Commission [2007] ECR II-3601.
(6) See Commission Decision 94/19/EC of 21 December 1993 in Case
IV/34.689 Sea Containers v Stena Sealink — Interim Measures (OJ L 15,
18.1.1994, p. 8) and Commission Decision 92/213/EEC of 26 February
1992 in Case IV/33.544 British Midland v Aer Lingus — (OJ L 96,
10.4.1992, p. 34).

(7) Case C-418/01 IMS Health v NDC Health [2004] ECR I-5039, para-

graph 44.

(8) Including a situation in which an integrated undertaking that sells a
‘system’ of complementary products refuses to sell one of the comple-
mentary products on an unbundled basis to a competitor that produces
the other complementary product.

(9) 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 undertaking's costs to
downstream and upstream operations.

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C 45/19

— the refusal is likely to lead to the elimination of effective

competition on the downstream market, and

— the refusal is likely to lead to consumer harm.

82. In certain specific cases, it may be clear that imposing an
obligation to supply is manifestly not capable of having
negative effects on the input owner's and/or other opera-
tors' incentives to invest and innovate upstream, whether
ex ante or ex post. The Commission considers that this is
particularly likely to be the case where regulation compa-
tible with Community law already imposes an obligation to
supply on the dominant undertaking and it is clear, from
the considerations underlying such regulation,
the
necessary balancing of incentives has already been made by
the public authority when imposing such an obligation to
supply. This could also be the case where the upstream
the dominant undertaking has been
market position of
the protection of special or exclusive
developed under
rights or has been financed by state resources.
In such
specific cases there is no reason for the Commission to
deviate from its general enforcement standard of showing
likely anti-competitive foreclosure, without considering
whether the three circumstances referred to in paragraph 81
are present.

that

(a) Objective necessity of the input

83. In examining whether a refusal

to supply deserves its
priority attention, the Commission will consider whether
the supply of the refused input is objectively necessary for
operators to be able to compete effectively on the market.
This does not mean that, without the refused input, no
competitor could ever enter or survive on the downstream
market (1). Rather, an input is indispensable where there is
no actual or potential substitute on which competitors in
the downstream market could rely so as to counter — at
least in the long-term — the negative consequences of the
refusal (2).
In this regard, the Commission will normally
make an assessment of whether competitors could effec-
tively duplicate the input produced by the dominant under-
taking in the foreseeable future (3). The notion of duplica-
tion means the creation of an alternative source of efficient
supply that is capable of allowing competitors to exert a
competitive constraint on the dominant undertaking in the
downstream market (4).

(1) Case T-201/04 Microsoft v Commission [2007] ECR II-3601, para-

graphs 428 and 560 to 563.

(2) Joined Cases C-241/91 P and C-242/91 Radio Telefis Eireann (RTE) and
Independent Television Publications LTD (ITP) v Commission (Magill)
[1995] ECR 743, paragraphs 52 and 53; Case 7/97 Oscar Bronner v
Mediaprint Zeitungs- und Zeitschriftenverlag, Mediaprint Zeitungsvertriebs-
gesellschaft and Mediaprint Anzeigengesellschaft [1998] ECR I-7791, para-
graphs 44 and 45; Case T-201/04 Microsoft v Commission [2007]
ECR II-3601, paragraph 421.

(3) 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.

(4) Case 7/97 Oscar Bronner v Mediaprint Zeitungs- und Zeitschriftenverlag,
Mediaprint Zeitungsvertriebsgesellschaft and Mediaprint Anzeigengesellschaft
[1998] ECR I-7791, paragraph 46, Case C-418/01 IMS Health v NDC
Health [2004] ECR I-5039, paragraph 29.

84. The criteria set out in paragraph 81 apply both to cases of
disruption of previous supply, and to refusals to supply a
good or service which the dominant company has not
previously supplied to others (de novo refusals to supply).
However, the termination of an existing supply arrange-
ment is more likely to be found to be abusive than a de novo
refusal to supply. For example, if the dominant undertaking
had previously been supplying the requesting undertaking,
and the latter had made relationship-specific investments in
order to use the subsequently refused input, the Commis-
sion may be more likely to regard the input in question as
indispensable. Similarly,
the
the fact
input in the past has found it in its interest to
essential
supply is an indication that supplying the input does not
imply any risk that the owner receives inadequate compen-
sation for the original investment. It would therefore be up
to the dominant company to demonstrate why circum-
stances have actually changed in such a way that the conti-
nuation of its existing supply relationship would put in
danger its adequate compensation.

the owner of

that

(b) Elimination of effective competition

85. If the requirements set out in paragraphs 83 and 84 are
fulfilled, the Commission considers that a dominant under-
taking's refusal to supply is generally liable to eliminate,
immediately or over
time, effective competition in the
downstream market. The likelihood of effective competition
being eliminated is generally greater the higher the market
share of
the dominant undertaking in the downstream
market. The less capacity-constrained the dominant under-
taking is relative to competitors in the downstream market,
the closer the substitutability between the dominant under-
taking's output and that of its competitors in the down-
stream market, the greater the proportion of competitors in
the downstream market that are affected, and the more
likely it is that the demand that could be served by the fore-
closed competitors would be diverted away from them to
the advantage of the dominant undertaking.

(c) Consumer harm

86. In examining the likely impact of a refusal to supply on
consumer welfare, the Commission will examine whether,
the
for consumers,
refusal to supply in the relevant market outweigh over time
the negative consequences of imposing an obligation to
supply. If they do, the Commission will normally pursue
the case.

the likely negative consequences of

87. The Commission considers that consumer harm may, for
instance, arise where the competitors that the dominant
the refusal,
undertaking forecloses are, as a result of
prevented from bringing innovative goods or services to
market and/or where follow-on innovation is likely to be
stifled (5). This may be particularly the case if the under-
taking which requests supply does not intend to limit itself
essentially to duplicating the goods or services already

(5) Case T-201/04 Microsoft v Commission [2007] ECR II-3601, para-

graphs 643, 647, 648, 649, 652, 653 and 656.

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24.2.2009

offered by the dominant undertaking on the downstream
market, but intends to produce new or improved goods or
services for which there is a potential consumer demand or
is likely to contribute to technical development (1).

88. The Commission also considers that a refusal to supply
may lead to consumer harm where the price in the
upstream input market is regulated, the price in the down-
stream market is not regulated and the dominant under-
taking, by excluding competitors on the downstream
market through a refusal to supply, is able to extract more
profits in the unregulated downstream market
than it
would otherwise do.

(d) Efficiencies

89. The Commission will consider claims by the dominant
undertaking that a refusal to supply is necessary to allow
the dominant undertaking to realise an adequate return on

the investments required to develop its input business, thus
generating incentives to continue to invest in the future,
taking the risk of failed projects into account. The Commis-
sion will also consider claims by the dominant undertaking
that its own innovation will be negatively affected by the
obligation to supply, or by the structural changes in the
market conditions that imposing such an obligation will
bring about, including the development of follow-on inno-
vation by competitors.

90. However, when considering such claims, the Commission
will ensure that the conditions set out in Section III D are
fulfilled. In particular, it falls on the dominant undertaking
to demonstrate any negative impact which an obligation to
supply is likely to have on its own level of innovation (2). If
a dominant undertaking has previously supplied the input
in question, this can be relevant for the assessment of any
claim that the refusal to supply is justified on efficiency
grounds.

(1) Case C-418/01 IMS Health v NDC Health [2004] ECR I-5039, para-
graph 49; Case T-201/04 Microsoft v Commission [2007] ECR II-3601,
paragraph 658.

(2) Case T-201/04 Microsoft v Commission [2007] ECR II-3601, para-

graph 659.