Collective Dominance and Refusal to Supply: Closing the Gap in Article 82?

• Date: 01 September 2009
• DOI: 10.1177/0003603X0905400306
• Published date: 01 September 2009
• Author: Paolo Siciliani
• Subject Matter: Foreign Antitrust

Collective dominance and refusal to

supply: Closing the gap in article 82?

BY PAOLO SICILIANI*

I. INTRODUCTION

The interplay between competition and investment is one of the most

pressing economic issues debated in the public policy arena. This is

particularly true in reference to electronic communications and serv-

ices (ECNS) industries, where a balance needs to be reached between

enforcing a level playing field and preserving minimum conditions of

appropriability, in order to maintain investment incentives to venture

into risky development projects, while granting that consumers share

in the benefits from successful innovations.

Regulatory and antitrust authorities play a crucial role in this task,

in particular, as they prevent and deter dominant firms from unduly

monopolizing their markets. In this respect, European policy makers

are in the process of reviewing the analytical frameworks and the rules

THE ANTITRUST BULLETIN:Vol. 54, No. 3/Fall 2009 :683

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* Economic Advisor, Office of Fair Trading, U.K.

AUTHOR’S NOTE: These views are personal and should not be attributed to the Office of

Fair Trading. The usual disclaimer applies. This article was complete in September 2008.

On December 3, 2008, the European Commission published a guidance document con-

cerning its enforcement priorities in applying article 82 to abusive exclusionary conduct

by dominant undertakings. However, it is worth pointing out that this document was

not intended to constitute a statement of law and related only to abuses committed by

undertakings holding single dominance. See European Commission, Guidance on the

Commission’s Enforcement Priorities in Applying Article 82 EC Treating to Abusive

Exclusionary Conduct by Dominant Undertakings, 2009 O.J. (C45/7) ¶¶ 3, 4.

© 2009 by Federal Legal Publications, Inc.

that will instruct their regulatory and antitrust stances.1On the one

hand, with the 2007 Review of the European Regulatory Framework

for ECNS and the Recommendation on Relevant Markets, the EC

Commission is proposing to refine EU telecom rules in order “to regu-

late less in some markets where competition is already effective, and

regulate in a more focussed and more consistent way in markets

where competition still has not yet developed.”2On the other hand,

the need to strike the balance thereof is at the core of the ongoing3

review process of article 82 of the EC Treaty, in particular, on its appli-

cation to exclusionary abuses, whereby the focus shall evolve from

“fairness” to consumer welfare, thus protecting competition, and not

competitors, with the ultimate aim of avoiding consumer harm.4

684 :THE ANTITRUST BULLETIN:Vol. 54, No. 3/Fall 2009

1Similarly, in April 2007 the Antitrust Modernization Commission

(AMC), a bipartisan commission established by the U.S. Congress in 2002 to

review federal antitrust laws to determine whether they should be modern-

ized, reached its conclusions. See ANTITRUST MODERNIZATION COMM’N, REPORT

AND RECOMMENDATIONS 101 (2007), available at http://govinfo.library.unt.edu

/amc/report_recommendation/amc_final_report.pdf. [hereinafter AMC

REPORT]. However, it recommended no legislative changes to section 2 of the

Sherman Act (i.e., the equivalent of article 82 of the EC Treaty), concluding

that courts were generally applying appropriate standards for determining

whether firms were engaging in unlawful monopolistic behavior. Id. at 83.

2Viviane Reding, Review 2006 of EU Telecom Rules: Strengthening Com-

petition and Completing the Internal Market, Address at Annual Meeting of

BITKom (June 27, 2006), available at http://europa.eu/rapid/pressReleasesAction

.do?reference=SPEECH/06/422&format=HTML.

3Indeed, the possibility that this review process will ever lead to the adop-

tion of corresponding Guidelines is a recent topic of debate. See Liza Lovdahl-

Gormsen, Will There be Article 82 Guidelines and What are the Implications?, 2 GLOBAL

COMPETITION POL’Y(2008), available at http://www.globalcompetitionpolicy.org

/index.php?&id=1015&action=907; Cani Fernandez & Albert Pereda, Will There be

Guidelines on Article 82 of the EC Treaty?, 2 GLOBALCOMPETITION POL’Y(2008), avail-

able at http://www.globalcompetitionpolicy.org/index.php?&id=1014&action

=907; and Damien Gerard, The Commission on Velvet: Why it will Probably not Issue

Article 82 Guidelines Any Time Soon, 2 GLOBAL COMPETITION POL’Y(2008), available

at http://www.globalcompetitionpolicy.org/index.php?&id=1026&action=907.

4Neelie Kroes, Preliminary Thoughts on Policy Review of Article 82,

Speech at Fordham Corporate Law Inst. (Sept. 23, 2005), available at

http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/05

/537&format=HTML.

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An archetypal issue where this balance is at the core of the contro-

versy is mandatory upstream access to essential facilities in order to

boost downstream competition.5In this respect, some scholars argue that

European authorities have traditionally shown a “natural bias” in favor

of ex post incentives to improve allocative efficiency, thus sacrificing ex

ante incentives to continuously advance dynamic efficiency.6This bias

seems to survive in the two review processes abovementioned.7On the

one hand, to quote Commissioner Reding once again, “Europe’s lesson

from the liberalisation of the telecom markets is therefore: Competition

has been a key driver for investment and innovation.”8On the other

hand, when defining the essential objective of article 82 of the EC Treaty

in its proposal, the European Commission equates allocative efficiency to

consumer welfare, rather than uniquely endorsing the “consumer harm”

standard, or at least referring to both allocative and dynamic efficiency.9

REFUSAL TO SUPPLY AND ARTICLE 82 : 685

5See Ashwin van Rooijen, The Role of Investments in Refusals to Deal, 31

WORLD COMPETITION 1, 63 (2008), and Christian Ahlborn, Vincenzo Denicolò,

Damien Geradin, & Jorge A. Padilla, DG Comp’s Discussion Paper on Article 82:

Implications of the Proposed Framework and Antitrust Rules for Dynamically

Competitive Industries (Mar. 31, 2006), available at http://ec.europa.eu/comm

/competition/antitrust/art82/057.pdf. For a recent survey on the issue of essen-

tial facility, see Thomas F. Cotter, The Essential Facility Doctrine, inANTITRUST LAW

AND ECONOMICS (Keith N. Hylton ed., forthcoming).

6See, e.g., Damien Geradin, Refusal to Supply and Article 82 (June 14,

2006), available at http://ec.europa.eu/comm/competition/antitrust/art82

/geradin.pdf.

7This bias may be traced back to the philosophical origins of the main-

stream of modern welfare economics. See Mark Blaug, The Fundamental Theo-

rems of Modern Welfare Economics, 39 HIST. POL. ECON. 2, 185 (2007). More

circumscribed to the issue of the enforcement of article 82 EC, it can be

framed within the ordoliberal doctrine. See Giorio Monti, The Concept of Domi-

nance in Article 82, 2 EUR. COMPETITION J. (2006), available at http://ssrn.com

/abstract=1118385. Moreover, from a public choice perspective, this bias may

be justified in light of the greater ease of measuring the short run benefits

from improved allocative efficiency than the long run uncertain benefits from

dynamic efficiency. SeeGeradin, supra note 6.

8Reding, supra note 2.

9European Commission, DG Competition Discussion Paper on the Appli-

cation of Article 82 of the Treaty to Exclusionary Abuses ¶ 54 (2005), available at

http://ec.europa.eu/comm/competition/antitrust/art82/discpaper2005.pdf

[hereinafter Discussion Paper].

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