Monday, July 20, 2009
Posted by D. Daniel Sokol
Damien Geradin (Tilburg Law) has posted the interesting Abuse of Dominance in the Postal Sector – The Contribution of the Guidance Paper on Article 82 Ec.
ABSTRACT: On December 15, 2005, the European Commission ('Commission') released a controversial Discussion Paper on Article 82 EC, the provision of the EC Treaty dealing with abuses of a dominant position. This policy document triggered a long and protracted debate not only among competition law experts but also within the Commission itself. The Commission’s plan to distance itself from a 'form-based' approach to the enforcement of Article 82 EC, which sits uneasily with modern economic principles, towards an 'effects-based' approach more in line with such principles was welcomed. Some aspects of the Discussion Paper were criticized nonetheless as being unclear, impracticable, or still overly restrictive. Following the Discussion Paper and the ensuing academic debate on Article 82 EC, the Commission published (on 3 December 2008) its somewhat shorter and more wieldy 'Guidance on the Commission’s Enforcement Priorities in Applying Article 82 EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings' (“Guidance Paper”), which essentially sets out the Commission’s enforcement priorities with respect to exclusionary abuses. In line with the approach already taken in the fields of Article 81 EC and merger control, the Commission, through its Guidance Paper, has vowed to take a more effects-based approach to exclusionary abuses by dominant undertakings. This is illustrated by the admissibility of familiar economic concepts such as the efficiency defense and the introduction of the 'equally efficient competitor' test. The core premise of Commission intervention now rests on a finding that a dominant undertaking has engaged in conduct that is likely to lead to anticompetitive foreclosure, i.e. exclusionary conduct that is liable to cause consumer harm. Though there is much merit in the commission’s new approach to exclusionary conduct it is open to debate whether it goes far enough. One of the limitations of the Guidance Paper is that it fails to provide for 'safe harbours'. For instance, pricing schemes that do not exclude equally efficient competitors because the price set by the dominant firm is above its costs may nevertheless be considered abusive in some circumstances. Hence, (postal) operators whose prices are above their costs cannot be sure that their pricing is not incompatible with Article 82 EC. The Guidance Paper also contains some lacunae as it does not address for instance exploitative behavior or price discrimination that are particularly contentious issues under EC competition law. Finally, the nature of the Guidance Paper is ambiguous. The Guidance Paper is not intended to be a statement or interpretation of the law, but instead lays out the Commission’s 'enforcement priorities' with respect to Article 82 EC. This raises the issue whether the Commission is bound to apply the principles developed in the Guidance Paper or whether it can apply the more restrictive and formalistic principles contained in the Community courts’ case-law. In the context of the postal sector the advent of the Guidance Paper is particularly propitious in light of the crucial changes that are taking place. The recently promulgated Third Postal Directive ('Postal Directive') provides the legal basis for the full market opening of the postal sector, which is to be accomplished by 31 December 2010. A corollary of the abolition of any remaining, exclusive or special rights is that new possibilities for increased competition in the postal sector will be created. At the same time, however, the removal of the reserved sector is likely to increase the frequency of claims by entrants that incumbent postal operators are engaging in abusive behavior to maintain their market power in liberalized markets. With this in mind, the Guidance Paper provides dominant (postal) undertakings with a set of parameters within which they can assess conduct addressed in it i.e. exclusive dealing, tying and bundling, predatory practices, and refusal to supply. The paper is structured as follows. First, the paper reviews the approach taken by the Guidance Paper with respect to the assessment of dominance. Second, it examines the test that the Guidance Paper intends to apply to determine whether a given practice amounts to anticompetitive foreclosure. Third, it explores the approaches proposed by the Guidance Paper when addressing the various categories of abuse that may be committed by dominant firms, particularly postal operators. Finally, a short conclusion is provided.