Competition policy I - What are we talking about? Pr. Emmanuel - - PowerPoint PPT Presentation

Competition policy

I - What are we talking about?

• Pr. Emmanuel COMBE

17 June 2016 EuraAudit International Conference

Who does what?

• the regulation of competition is not limited to

competition law: there is also commercial law (unfair competition, price transparency, etc)

• specifics of competition law: protect the competition

process and not the competitors! + action on behalf

• f economic public order ('competition policy')

The field of competition policy

• ex-post control of behaviour = 'antitrust'
• agreements (collective behaviour)
• abuse of a dominant position (unilateral conduct)
• ex-ante control (notification system)
• control of concentrations
• control of State aid

Subject United States European Union France Agreements Section 1 of the Sherman Act Section 3 of the Clayton Act Article 101 of the TFEU

• Art. L 420-1
• f the commercial code

Abuse of dominant position Section 2 of the Sherman Act Section 2 of the Clayton Act (discrimination) Article 102 of the TFEU

• Art. L 420-2
• f the commercial code

Contrôl of concentration Section 7 of the Clayton Act Celler-Kefauver Act Hart-Scott-Rodino Act Regulation n°139/2004

• Art. L 430-1 to L.430.10
• f the commercial code

State Aid Articles 107 & 108 of the TFEU Exclusive juridiction of the European Commission

Table 1. The main fields of competition policy

The institutional framework in the EU

• specialised authorities:
• community level: Competition DG
• national level: national competition authorities (NCAs)
• national common law jurisdictions:
• in civil matters: compensation for damage
• in criminal matters: agreement practices

(see France: Article L 420-6... almost never applied)

European Commission other national competition authorities National competition common law Authorities of country X jurisdictions of country X ECN

The European Commission

• DG Comp combines the three powers of

investigation, instruction and decision

• the Commission's decisions are subject to the

control of the community courts (ECJ, ICC)

• it has exclusive jurisdiction over:
• the application of regulation 139/2004 on

community concentrations

• the control of State aid

The European Commission

• has a jurisdiction shared with national authorities

to:

• implement Article 101 (including §3)
• implement Article 102
• to explain its action, the Commission publishes

numerous guidelines ("soft law", American- inspired) which explain its methodology

National competition authorities

• these in charge of both the application of internal

competition law and, since Regulation 1/2003 of the Community law on CAP (articles 101 and 102) came into force

• NCAs are independent authorities, under the

control of the courts (France: CA of Paris and Court of Cassation)

The main tools

The preventive function

• 'prior notification' system for concentrations and

State aid

• advantage: upstream intervention ("it is better to

prevent than to cure")

• limits: difficulty of an a priori approach with

double risk of error

The corrective function

• impose penalties to encourage companies to change

their behaviour and respect competition rules how effective are penalties? (see chapter on cartels)

• sanctions may also take the form of injunctions +

publication of the decision

14

Evolution of the penalties imposed

• ver a long period in France

In millions of euros

Balance sheet 2015

1.25 billion euros in penalties

15

Decision no. Decision description Sanctions 15 D-01 TNT overseas

€4,200,000

15-D-02 Local radio stations

€300,000

15-D-03 Dairy products

€192,700,000

15-D-04 Baking flour

€1,138,000

15-D-08 Poultry

€15,200,000

15-D-10 Broadcasting from the Eiffel Tower

€5,660,000

15-D-17 Mobile telephony in Réunion and Mayotte

€10,780,000

15-D-19 Parcel transport

€672,332,000

15-D-20 Telecoms / companies market

€350,000,000 €1,252,310,000

Injunctions: Microsoft, EU case [2004]

Concerning tied selling, Microsoft is within 90 days to

• ffer equipment manufacturers a version of its Windows
• perating system for PC clients that have no WMP reader.

This corrective measure which puts a term in tied selling, does not mean that consumers shall obtain PCs and

• perating systems without a multimedia reader. The effect
• f the corrective measure ordered by the Commission will

be that the grouped sales will be configured according to consumers’ wishes and not a choice imposed by Microsoft. Microsoft retains the right to offer a version of its

• perating system for PC’s with a WMP reader. It must

however stop recourse to any commercial, technical or contractual means that will have the effect of making the non-linked version less valuable or less powerful. In particular it should not give rebates to equipment manufacturers upon their purchase of Windows with a WMP reader.

The corrective function

• ability to reduce the penalty by not challenging the

grievances and taking on commitments (NCG)

• in France, the NCG has given way to the transaction

procedure (following the Macron act): penalty range at an absolute level

Agreement in linen rental/maintenance (07-D-21)

"Documents seized during raids showed that the Elis group and the Initial BTB company implemented a non-aggression pact for customers served exclusively (Exchange of information before tendering and implementation at the point of bidding of cover in order to limit the risk of change

• f supplier) and price coordination for "shared customers". Elis and Initial BTB gave up

challenging the objections and suggested innovative commitments. The Elis group, as well as seven members of the group, and Initial BTB companies requested the benefit of the "non-challenge of grievance" procedure (transaction). They made a classic commitment to the development of programmes for training their employees in competition law but also a more innovative commitment to the establishment of a whistleblowing system relating to offences under the competition law, which is an innovation in France Whistleblowing is an internal procedure for the company that gives employees the ability to report any prohibited practice they may know about to the human resources department, to an internal auditing department or to a mediator specially appointed for this purpose, benefiting from the confidentiality of their procedures. They also proposed behavioural commitments for the transparency of professional meetings between competitors at the request and for the service of customers, as well as commitments to facilitate the sending of work clothes to the new provider when the customer decides to change supplier. The Competition authority considered that these were significant insofar as they can contribute to streamlining the market by removing the obstacle to changing provider which is the risk of an interruption to the provision of rental-maintenance. It has therefore taken this into account in the calculation of the penalties, by giving a 30% reduction in the penalty to Initial BTB, whose fine amounts to 5.25 million euros, and 25% to the Elis group of companies, which are penalised by 12.9 million euros."

Provisional measures

• the 'legal time' deadlines don't always match

the urgency of an infringement of competition

• two conditions for obtaining provisional measures:
• likely offence
• existence of serious, irreparable and immediate

losses

• the measures should be limited to what is strictly

necessary

The engagement procedure

• the principle: authorities draw the company's

attention to competition "concerns" (stage prior to the notification of objections). It may then suggest commitments to solve the problem

• advantage: flexible and fast procedure + direct action
• n the origin of the competition problem + no

recognition of objections

An example of commitment: Nespresso

In France, 73% of portioned espresso coffee machines are Nespresso machines and 85% of the capsules sold that are compatible with Nespresso machines are Nespresso brand capsules (2012 figures). During appraisal, the services of the authority had noted several practices of a technical, legal and commercial order urging consumers only to use branded capsules with Nespresso machines:

• n the technical side : 4 successive changes (between 2007 and 2013) to

Nespresso machines had the effect of making competing manufacturers' capsules incompatible with new models;

• n the legal side : Nespresso had affixed notices to Nespresso machines, on their

packaging, as well as in their operating instructions and in particular in the guarantee, encouraging consumers only to use Nespresso brand capsules;

• n the commercial side : Nespresso had developed in the press and its

shops, communication urging consumers only to use Nespresso brand capsules. The Authority considers that these practices, tending to oust the manufacturers of competing capsules are likely to constitute abuse of a dominant position.

An example of commitment: Nespresso

Nespresso is committed to communicating information to competitors about technical changes when it is giving an order to produce new machines, without waiting for marketing. It has, furthermore, embarked on a deadline for incompressible safeguard guaranteeing competitors that it will have this information at least 4 months (as

• pposed to 3 months for the initial version) before putting the

machines on the market. Nespresso is committed to making prototypes and new machines available to competitors via trusted third parties , at least 15 of these so that they can carry out compatibility testing on their capsules, when only three prototypes were originally offered; It is finally committed to be more transparent on the origin of technical changes to machines and on new technical specifications.

To conclude: Towards civil action in Europe?

• the application of articles 101 and 102 remains

mainly because of the public authorities, while "private enforcement" is under-developed in Europe (in contrast to the United States)

• now the full effectiveness of the rules on

competition also assumes the right to compensation for victims of CAP

• to fill in this "delay", the Commission adopted a

directive in November 2014

Competition policy

II- From cartels to concerted practices

• Pr. Emmanuel COMBE

17 June 2016 EuraAuditInternational Conference

€50 €15 €15 Close to €0 Monopoly Oligopoly Competition

• The best profit for a company is that of a monopoly
• In situation where there is an oligopoly (and even

more so if there is competition), the sum of profits is always less than that of a monopoly

Economic reminder

€50 €15 €15 Monopoly Oligopoly Competition

Issue for a company: how to come closer to a monopoly situation?

• Differentiation strategies (R&D, advertising,

quality of service/product, cut costs, etc.) a priori lawful

• Strategy of agreements competition law
• Strategies of eviction/discrimination

law on abuse of a dominant position

• M&A strategy

merger regulations (concentrations)

Cartel practices

• in law all agreements, including between

competitors are not unlawful

" Horizontal co-operation agreements can lead to substantial economic

benefits, in particular if they combine complementary activities, skills

• r assets. Horizontal co-operation can be a means to share risk, save

costs, increase investments, pool know-how, enhance product quality and variety, and launch innovation faster. (Guidelines 2011)

• in economics: rule of reason = balance efficiency

gains/distortion of competition

• cartel: horizontal (= between competitors)

agreement (therefore concordance of wills)with the sole aim of restricting competition

NB: in law, often quick to conclude there is concordance of wills Reminder of burden of proof

• two possible cases:
• to avoid prices falling (defensive cartel)
• artificially increasing prices (offensive

cartel)

Cartels in a nutshell

• intermediate or standard product markets
• small number of offerers/highly

concentrated market

• barriers on entry
• repeated interactions between firms/multi-

market contacts

Cartels

Conditions cartelisation

• direct fixing of the sale price, margins, discounts,

commercial terms, etc.

• collective boycotting of a new competitor
• production quotas
• special case of invitations to tender: cover offer,

exchanging quotations, etc.

• division of markets (by customer or by area)

The steel cartel

the stability of cartels

• Chicago School theory: cartels are unstable

(each participant has an interest in cheating, giving secret rebates return to competition)

• An

approach not really borne

• ut...

empirically and theoretically

Company A Reduce price Respect price Reduce price (3 ; 3) (8 ; 0) Company B Respect price (0 ; 8) (5 ; 5)

The result is (3,3): A and B are cheating!

The members of a cartel have no incentive to cheat if:

• Rapid detection of cheating
• Severe punishment of cheats

Structural factors of stability

• transparency
• f

transactions (faster detection): B to C

• frequency
• f

transactions (faster punishment):

• symmetry of production capacities and costs

("balance of terror")

• multi-market contact

Practices encouraging stability

• regular exchanges of information on the transactions

between the members of the cartel (monitoring)

• commitment

to buy back production from competitors (punishment)

• best price clause (monitoring)

The steel cartel

"The three distributors sanctioned also actively took part in these monitoring practices: This was notably the case of Carrefour which set up a promotional campaign called ‘Carrefour reimburses the difference times 10' for several successive years, thus encouraging consumers to monitoring prices on its behalf. Using information obtained when reimbursing consumers, Carrefour systematically asked the relevant suppliers to ‘solve the problem' caused by the lower prices offered by its competitors."

Cartels: from punishment to detection

• cartels are considered as ILLEGAL practices
• in the United States: section 1 of the Sherman

Act (1890)

• in the EU: Article 101 (paragraph 1) of the TFEU
• in France, Article L 420-1
• a "per se" approach (no "rule of reason")
• their very PURPOSE is enough to condemn them

(whilst their EFFECT is presumed)

Paragraph 1 of Article 101 of the TFEU: "The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market (…) »

Article L 420-1 of the French Commercial Code

"shall be prohibited, when they have the aim or may have the effect of preventing, restricting or distorting the free play of competition in a market, Common actions, agreements, express or tacit undertakings or coalitions, particularly when they are intended to:

• 1. Limit access to the market or the free exercise of competition by
• ther undertakings;
• 2. Prevent price fixing by the free play of the market, by artificially

encouraging the increase or reduction of prices;

• 3. Limit or control production, opportunities, investments or technical

progress;

• 4. Share out the markets or sources of supply"

• an effective punishment = a DISSUASIVE

punishment

• a rational agent does not break the law if:

gain from the breach < probability of detection x average punishment

to be effective, the punishment must therefore be at least equal to the ratio of the gain divided by the probability of detection: Illegal gain Optimum punishment = Probability of detection

How to come closer to the optimum punishment?

• increase the level of financial sanctions
• widen the sanctions:
• civil action? still not very common in Europe/very

frequent in the USA

• criminal penalties? in the USA, prison sentences in big

cartel affairs

Total amount of fines imposed by the European Commission against cartels (in millions of Euros)

Source: DOJ Antitrust division [2015]

Reinforce the detection of cartels

• increase the powers competition authorities' of

investigation (cf. telephone records in France)

• "get those who know to talk"! role of leniency

policies; success in the USA, in the EU (since 1996) ….and in France (since 2004), thanks to adequate design; A FORMIDABLE INSTRUMENT

Article L 464-2 of the French Commercial Code

"A total or partial exemption from financial penalties may be granted to a company or a body which, along with

• thers, has implemented a practice prohibited by the

provisions of Article L. 420-1, if it has helped to establish the existence of the prohibited practice and to identify its perpetrators by providing information which the council or the administration did not have access to beforehand

The French legal framework Article L 464-2 of the French Commercial Code

The financial penalties are proportionate to the seriousness of the charges brought, to the scale of the damage caused to the economy, to the financial situation of the body or company penalised or to the group to which the latter belongs, and to the likelihood of any repetition of practices prohibited by the present Part. They are individually determined for each company or body penalised, with reasons given for each penalty."

Steps in determining a penalty 1/ Value of the sales x duration of the offence = base for the fine 2/ Rate (severity + damage) x base = basic amount of the sanction 3/ mitigating/aggravating circumstances + other factors of individualisation + reiteration = individualised amount of the penalty

4/ comparison with the legal ceiling (10% of turnover) (capping if necessary)

5% if the company does not contest truth of allegations ("NCG"), 3 million Euros if not a company 750,000 if simplified procedure

5/ application of NCG + leniency + taking into account of ability to pay = final amount of the penalty

The counterfactual principle

Individualisation

• mitigating circumstances ("maverick",

coerced company, practice encouraged or authorised by public authorities)

• aggravating circumstances (leader, coercion

exercised, "particular moral authority")

• other factors:
• financial difficulties (-)
• size of the company (+)
• belonging to a group (+) the extra rate can be

very substantial (up to + 50%)

companies penalty before penalty after reduction Ciblex 4,4 millions 25,000

• 94%

Lambert Valette 6.7 million 500 000

• 92%

XP 11.8 million 900,000

• 92%

Heppner 34.1 million 3 million

• 91 %

Ducros 4.3 million 300,000

• 93 %

Ziegler 8.3 million 10,000

• 99.9 %

Exchanges of information between competitors

The notion of "concerted practices"

• concerted practice = agreement that does not go as far

as a cartel, but which has an anti-competitive aim/effect reducing uncertainty between competitors

• the concerted practice may take place in secret or

in public (e.g. a system of announcing future prices)

• exchanges of information between competitors are at

the heart of the analysis of concerted practices

"although it is correct to say that this requirement

• f independence does not deprive traders of the right

to adapt themselves intelligently to the existing or anticipated conduct of their competitors, it does however strictly preclude any direct or indirect contact between such traders, the object or effect of which is to create conditions of competition which do not correspond to the normal conditions of the market in question (CJEC, 1998, John Deere)

• Analysis case by case: exchanges of information

are not anti-competitive in principle; they may even be pro-competitive!

• Exchanges of information are anti-competitive in

certain cases List of criteria

Characteristics of the market

• market not very transparent before the exchange
• f information
• concentrated market (narrow oligopoly)
• stability of supply and demand (unless the

aim of the exchange is to stabilise the market)

• symmetry of positions ( strong punishment)
• frequency of transactions ( fast punishment)

Type ofinformation exchanged

• individualised (not aggregated)
• strategic: prices/quantities/discounts/negotiating

parameters

• frequent (in relation to the characteristics of the

market)

• past/future
• confidential

On the reciprocity of the exchanges of information

Differing degrees of seriousness

• Exchanges of information on future prices are

considered as more serious (object infringement) than on past prices

• A famous case: "Parisian palaces" (2005)

The special case of price scales

• Practise of dissemination of price scales by a

professional federation: not "immune" to competition law!

• Strict burden of proof on the implication of the

members of the federation

Competition policy

III- Vertical agreements in the retail sector

• Pr. Emmanuel COMBE

17 June 2016 EuraAuditInternational Conference

The vertical structure of the retail sector Producer (Wholesaler; Buying group) Distributor (retailer) End consumer

The motivations for vertical restraints

A manufacturer must choose between:

• distributing its products itself = vertical integration ("do-

it-yourself" eg Dell)

• sell its production to all distributors

= market ("laissez-faire" eg agricultural produce)

• select its distributor, by imposing restrictive clauses on

them = "vertical restraints" (example of branded perfumes)

Main vertical restraints

• Purchasing quotas (min. or max.)
• Territorial exclusivity
• Selective distribution (qualification of personnel,

location of point of sale, homogeneity of range, brand promotion, etc.)

• Exclusive distribution
• Resale price maintenance (RPM) and its variations

Why introduce vertical restraints?

• Double margin argument
• Service offer argument
• Trademark protection argument
• Discrimination argument
• Foreclosure argument (locking up)

Vertical restraints and competition policy

82

Article 101 TFEU paragraph 3

"The provisions of paragraph 1 may, however, be declared inapplicable in the case of:

• any agreement or category of agreements between undertakings, (...)

which contributes to improving the production or distribution of goods or to promoting technical or economic progress while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question."

83

• automatic exemption of the agreement below a

certain threshold (market share of 30%) …..unless "blatant restraints"

• individual exemption above 30% of MS, if all the

conditions of paragraph 3 are met

The case of resale price maintenance

• Price ceiling is not forbidden
• Price floor and fixed price = blatant restraint

(presumption of unlawfulness, virtually impossible to

• verturn)
• A recommended retail price can sometimes be

considered as disguised RPM

• RPM has ambivalent effects in economics: case-by-

case approach

• and yet, RPM is prohibited in Europe
• usual argument: other instruments exist

that are less restrictive on competition (such as selective distribution) to achieve the same aim

86

The perfumes case (06-D-04)

" Between 1997 and 2000, the above companies operating

luxury perfume and cosmetics brands entered into agreements with the distributors in their commercial networks, and in particular the national chains Marionnaud, Nocibé and Séphora. The purpose of the agreements was to put a stop to Any competition between retailers, for each of the brands' products. Each supplier of perfumes or cosmetics set its distributors a "recommended retail price" for each of its products, and also indicated the maximum discount they were permitted to practise in order to level up the retail prices of the products concerned"

87

The perfumes case (06-D-04)

" Each agreement organised by the supplier also saw the

introduction of a "pricing control system". This involved checks

• n the prices practised, and pressure and threats of commercial

retaliation against any distributor who refused to apply the prices imposed by the brand, preferring to let competition play by selling at lower prices. An analysis of the price listings recorded during the course of the investigation revealed that the agreement was highly effective, as the prices applied largely adhered to the levels agreed between the companies. "

88

The perfumes case (06-D-04)

"Under national and European case law, brands with a "luxury"

image are permitted to exercise a certain degree of control over the situation of the retail outlets distributing their products. They are allowed to check that their products are displayed

• advantageously. This approach, which is known as selective

distribution, leads the brand to choose its sales outlets very

• rigorously. However, the case law in question does not permit

brands to prevent the selected distributor from fixing its own margins, and therefore its own retail prices. This distributor's freedom to determine its own margins and prices is beneficial to ...

89

Theperfumes case (06-D-04)

…end consumers, who can take advantage of competition between retail outlets for the same brand products and

• btain

better prices. The accused brands unsuccessfully attempted to argue that by harmonizing retail prices at a high level, they were merely attempting to protect their products' "luxury image". In reality, the lack of competition resulting from the agreement between the producer and its distributors actually enables everyone to raise, and then share, the surplus

• btained, at the consumer's expense.

Vertical restraints and online sales

• general principle: any distributor can a priori

sell online

• …except in exceptional cases: "objective justification"

Examples of blatant restraints in online sales

• preventing passive sales:
• practice of "re-routing"
• limitation of payment according to the address of

residence of the buyer

• limiting online sales by imposing a proportion of sales
• nline/hard sales; on the other hand it is possible to fix

a minimum turnover (based on objective criteria)

• dual pricing policy according to channel of distribution

Justifications of blatant restraints

• objective justification: public health, public order (e.g.

dales of weapons), etc

• efficiency gains under §3:

example of launching of a new brand: to secure a distributor's investments, by banning the sales

• f other distributors on the internet for 2 years

Example of selective distribution

• the producer cannot forbid its approved

distributors from selling its products online, nor reserve this channel of distribution for itself

• but the producer can transpose the criteria of

selective distribution to online sales (quality of service, safety of products, etc.), as long as these criteria are equivalent to those imposed on physical stores

• the supplier may sell on the internet even if it has

entrusted the distribution of its products to a network, from the moment the sales are passive + respecting

• f the same rules it imposes on its distributors

for online sales

• the supplier can refuse to sell to a "pure player" (no

physical store)

• to avoid "ghost stores", the supplier can impose on its

distributors the sale of a quantity of products in absolute terms … but it may not impose a proportion for online sales

• the supplier may demand that its distributors not

resell the products outside the network, for example to a marketplace

but the recent decision of the Court of Appeal of in the Caudalie case places a nuance on this point

97

the transposition of the criteria: the example of the cosmetic products (commitments)

98

the transposition of the criteria (cont.)

99

the transposition of the criteria (end)

100

The Pierre Fabre case (1)

101

The Pierre Fabre case (2)

Competition policy

IV- Abuse of a dominant position

• Pr. Emmanuel COMBE

17 June 2016 EuraAuditInternational Conference

The legal framework

Article 102 TFEU

" Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or

• ther unfair trading conditions;

(b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to acceptance by the

• ther parties of supplementary obligations which, by their nature or

according to commercial usage, have no connection with the subject

• f such contracts.. "

Article L 420-2 of the French Commercial Code

"Is prohibited, under the conditions set out in Article

• L. 420-1, the abuse by a company or a group of

companies of a dominant position on the internal market or a substantial part of it. Such abuses may consist in particular in a refusal to sell, tied selling or discriminatory terms of sale as well as the breaking

• ff of established commercial relations on the sole

grounds that the partner refuses to submit to unjustified commercial terms […]. "

• particular responsibility of a company in a

dominant position (even if legitimately entitled to protect its commercial interests)

• the dominant company may defend itself by

claiming an objective justification

• the alleged abuse must have an effect on the

market, even if this is only a potential effect; no need to demonstrate the concrete effect

• the issue is to protect the competition

process and not the competitors, be they small ones notion of the "equally efficient competitor"

• abuse of a dominant position first of all

requires proof of a …dominant position

• step 1: identify the scope of the market where

the abuse is alleged to take place a complex operation!

• step 2: measure the dominant position: with

what indicators?

The main forms of abuse

• f a dominant position

• exclusivity clauses
• tied selling
• denigration
• rebates and discounts
• refusal of access to an "essential" facility
• abusive pricing (e.g. for access to an

infrastructure)

• practice of margin squeezing
• "predatory pricing"

Exclusivity clauses

• the lock-in effect depends on factors such as:

scope of the exclusivity clause, duration, exit terms (penalties)

• exclusivity may concern all or part of the supplies
• exclusivity is not limited to a clause in a contract:

general policy tending to lead to exclusivity

Hoffman Laroche judgment (CJEC 1979)

"Whereas, for a company 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

• n their part to obtain all or most of their requirements exclusively from the

said company abuses its dominant position within the meaning of Article 86

• f the Treaty, 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 said company, without tying the purchasers by a formal obligation , applies , either under the terms of agreements concluded with these purchasers or unilaterally , a system of fidelity rebates , that is to say discounts conditional on the customer ' s obtaining all or most of its requirements - whether the quantity of its purchases be large or small - 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 fidelity rebates intended to give the purchaser an incentive to obtain his supplies exclusively from the company 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 deprive the purchaser of or restrict his possible choices of sources of supply and to deny other producers access to the market (...)

Tied selling

• often justified by efficiency gains
• abuse = proposing (A + B), using the "tying

product" A to exclude from the market a competitor present on with product B ("tied product")

• analysis criteria: unavoidable nature of the tying

product, pure tied selling, etc.

Rebates

• distinguish between different types of rebate:

quantity, loyalty, range

• loyalty rebates are the most problematic: need to

distinguish between incremental/retroactive rebates

• analysis criteria: "contestable share" of demand,

amount of rebate, rebate threshold

Rebates

• ample European case law:

Hoffman LaRoche (1979), Michelin I (1983), Michelin 2 (2003), BA (2007), Tomra (2012), Intel (2014), Post Danmark (2015)

• three types of case can be distinguished

Denigration

Other forms of abuse

Intel [2009]

The case of predatory pricing Behaviour consisting of sacrificing profits in the short term (MEANS) with the aim of eliminating (or disciplining) an equally efficient competitor in order to increase its market power (END)

Detecting predation

issue: to distinguish the competitive behaviour of

cutting prices from predatory behaviour

what reasons can explain a reduction in prices?

Detecting predation

cost test: comparison between sale price and cost

structure

"bundled indicator" rule: to reveal a predatory

intention and a context favourable to the implementation of such behaviour

two other rules

Akzo judgment (CJEC 3 July 1991) "- Prices below average variable costs (…) by means of which a

dominant company seeks to eliminate a competitor must be regarded as abusive. A dominant company has no interest in applying such prices except that of eliminating competitors (...) since each sale generates a loss, namely the total amount of the fixed costs (...) and, at least, part of the variable costs relating to the unit produced" "Moreover, prices below average total costs, that is to say, fixed costs plus variable costs, but above average variable costs, must be regarded as abusive if they are determined as part of a plan for eliminating a competitor"

The effects of abuse: what indicators?

Comparison with internal forecasts (Subutex 13-D-21)

Comparison with internal forecasts (Subutex 13-D-21)

Facts and what prevails currently. Supposing that in the absence of the practices, the penetration of generic BHD would have been 30 base points higher than what was observed once its market share had stabilised, or the mean difference between the most recent estimates before the arrival of the generics and the observations made afterwards, the loss to the authorities could be between 3 and 7 million Euros a year.

Comparison with internal forecasts (L’Equipe 14-D-02)

• Scenario S0 "No riposte". This first scenario corresponds to the situation

envisages if there is no response to the launch of 10Sport.

• Scenario S1 "Launch Z": This second scenario corresponds to the launch of a new

daily referred to in the tables under the code name "Z". This is the scenario adopted.

• Scenario S2 "Flagship". This third scenario corresponds to the overhaul of the

L'Equipe newspaper without launching a new daily. This is the competitive scenario not adopted and which would have consisted, for L'Equipe, of innovating in response to the launch of 10Sport.com in order to limit the number of readers it is likely to divert by improving the offer to the consumer.