Keywords
Summary

Keywords

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1. Competition ° Administrative procedure ° Observance of the right to a fair hearing ° Hearings ° Drawing-up of minutes ° Requirement that they be exhaustive ° Limits

(Commission Regulation No 99/63, Art. 9(4))

2. Competition ° Dominant position ° Relevant market ° Definition ° Criteria

(EEC Treaty, Art. 86)

3. Competition ° Dominant position ° Relevant market ° Geographical definition ° Criteria

(EEC Treaty, Art. 86)

4. Competition ° Dominant position ° Concept ° Criteria for assessment ° Size of market shares

(EEC Treaty, Art. 86)

5. Competition ° Dominant position ° Obligations on dominant undertaking ° Conduct on a market neighbouring the dominated market ° Application of Article 86 even where there is no dominant position on the neighbouring market ° Conditions

(EEC Treaty, Art. 86)

6. Competition ° Dominant position ° Abuse ° Exclusive supply contracts ° System of tied sale

(EEC Treaty, Art. 86)

7. Competition ° Dominant position ° Abuse ° Undertaking creating obstacles to its competitors' activities on the market in products designed to be used with equipment manufactured by it ° Possibility of justification based on technical considerations or considerations relating to product liability or the protection of health ° Absence

(EEC Treaty, Art. 86)

8. Competition ° Dominant position ° Abuse ° Pricing at less than cost with a view to eliminating a competitor

(EEC Treaty, Art. 86)

9. Competition ° Dominant position ° Abuse ° Discriminatory pricing

(EEC Treaty, Art. 86)

10. Competition ° Administrative procedure ° Termination of infringements ° Commission' s power ° Orders addressed to undertakings ° Measures which may be prescribed

(Council Regulation No 17, Art. 3(1))

11. Competition ° Administrative procedure ° Termination of infringements ° Commission' s power ° Orders addressed to undertakings ° Recommendations made during the administrative procedure ° Additional measures imposed by the final decision ° Breach of the principle of the protection of legitimate expectations ° Absence

(Council Regulation No 17, Art. 3(1) and (3))

12. Competition ° Fines ° Amount ° Determination ° Right to be heard ° Procedure

(Council Regulation No 17, Art. 19; Commission Regulation No 99/63, Art. 7)

13. Competition ° Fines ° Amount ° Determination ° Criteria ° Complex infringement ° Obligation on the Commission to break down the amount between the various aspects of the infringement ° Absence

(Council Regulation No 17, Art. 15(2))

14. Competition ° Community rules ° Infringements ° Committed intentionally ° Concept

(Council Regulation No 17, Art. 15(2))

15. Competition ° Fines ° Amount ° Determination ° Criteria

(Council Regulation No 17, Art. 15(2))

Summary

1. The drawing-up of exhaustive minutes of the hearing of an undertaking alleged to have infringed the competition rules is an essential procedural requirement when it proves necessary so as to enable the Advisory Committee on Restrictive Practices and Monopolies to deliver its opinion and the Commission to adopt its decision with full knowledge of the facts, that is without being misled on an essential point by errors or omissions. That would not be the case if the minutes simply fail to record certain statements by a representative of the undertaking in question, which contain nothing of importance that was not in other observations submitted by representatives of that undertaking during the hearing and recorded in the minutes. In such a case, the omission does not prejudice the right of the undertaking concerned to a fair hearing and cannot have any effect on the outcome of the consultation procedure or the content of the final decision. It accordingly cannot vitiate the administrative procedure as a whole and so call in question the lawfulness of the final decision.

2. An undertaking' s possibly dominant position on a given market may be examined only once it has been established that the market in the relevant products is distinct from other sectors of the general market. The definition of the product market must take account of the overall economic context, so as to be able to assess the actual economic power of the undertaking in question. In order to assess whether an undertaking is in a position to behave to an appreciable extent independently of its competitors and customers and consumers, it is necessary first to define the products which, although not capable of being substituted for other products, are sufficiently interchangeable with its products, not only in terms of the objective characteristics of those products, by virtue of which they are particularly suitable for satisfying constant needs, but also in terms of the competitive conditions and the structure of supply and demand on the market.

3. In the scheme of Article 86 of the Treaty the geographical market must be defined so as to determine whether the undertaking concerned is in a dominant position in the Community or a substantial part of it. The definition of the geographical market accordingly calls for an economic assessment. That market can thus be defined as the territory in which all traders operate in the same or sufficiently homogeneous conditions of competition in so far as concerns specifically the relevant products, without its being necessary for those conditions to be perfectly homogeneous.

4. Holding approximately 90% of the market is in itself, in the absence of exceptional circumstances, evidence of the existence of a dominant position. It is clear that holding such market shares means that the position on the market of the undertaking concerned makes it an inevitable partner for other operators and guarantees it the freedom of conduct characteristic of a dominant position.

5. The special responsibility not to allow its conduct to impair genuine undistorted competition on the common market which Article 86 of the Treaty imposes on an undertaking in a dominant position on a given market must be understood as prohibiting it from engaging in any conduct which is such as to hinder the maintenance or the growth of the degree of competition still existing in a market where, as a result of the very presence of that undertaking, competition is weakened.

That is why the conduct of such an undertaking may be caught by and penalized under Article 86 even where it occurs on a market distinct from the dominated market, in so far as, because that market is closely linked to the dominated market and it is in a leading position on that market, it has freedom of conduct on that market compared with the other operators there present such as to impose on it, on that market also and without its being necessary to establish that it is in a dominant position, a special responsibility to maintain genuine undistorted competition.

6. The fact that an undertaking in a dominant position on a market imposes on the purchasers of the machines which it markets an obligation to obtain the raw materials to supply those machines exclusively from itself or a supplier designated by it is an abuse of a dominant position within the meaning of Article 86 of the Treaty. Where an undertaking in a dominant position directly or indirectly ties its customers by an exclusive supply obligation, that constitutes an abuse since it deprives the customer of the ability to choose his source of supply and denies other manufacturers access to the market. It is irrelevant that such a tied sale is in accordance with commercial usage, since a usage which may be acceptable in a normal situation, on a competitive market, cannot be accepted in the case of a market where competition is already restricted.

7. Article 86 of the Treaty prohibits an undertaking in a dominant position, which manufactures and markets both machines and the consumable products to supply them, from deciding of its own initiative and in reliance on technical requirements, product liability problems or considerations relating to the protection of public health or the protection of its reputation, that the two constitute an inseparable integrated system and consequently cannot be sold otherwise than by way of tied sale, thus denying possible competitors in the field of the consumable products access to the market.

8. Although it may be acceptable for an undertaking in a dominant position to sell at a loss in certain circumstances, that would not be the case where such selling was eliminatory. Although Community competition law recognizes that an undertaking in a dominant position has the right to take reasonable steps to protect its commercial interests, it does not countenance acts whose actual purpose is to strengthen that dominant position and abuse it. In particular, Article 86 of the Treaty prohibits an undertaking in a dominant position from eliminating a competitor by practising competition by means of price which does not come within the scope of competition on the basis of quality.

The existence of gross or semi-gross margins ° obtained by subtracting from the sale price the variable direct costs or the average variable costs, being the costs relating to the unit produced ° which are negative suggests that a pricing practice is eliminatory. An undertaking in a dominant position has no interest in applying prices below average variable costs (that is to say, those which vary depending on the quantities produced) except that of eliminating competitors so as to enable it subsequently to raise its prices by taking advantage of its monopolistic position, since each sale generates a loss equal to the total amount of the fixed costs (that is to say, those which remain constant regardless of the quantities produced) and at least part of the variable costs relating to the unit produced.

Furthermore, if the net margin is negative and the gross margin positive, that is to say, if the prices are below average total costs (fixed costs plus variable costs), but above average variable costs, those prices must be regarded as abusive if they are determined as part of a plan for eliminating a competitor. The period during which such prices are applied as part of a plan for damaging a competitor is accordingly a factor to be taken into consideration.

9. For an undertaking in a dominant position to apply prices which discriminate between users established in different Member States is prohibited by Article 86(c) of the Treaty. Although that provision does not preclude such an undertaking from setting different prices in the various Member States, in particular where the price differences are justified by variations in the conditions of marketing and the intensity of competition, the dominant undertaking has the right only to take reasonable steps to protect its commercial interests in that way. In particular, it may not apply artificial price differences in the various Member States such as to place its customers at a disadvantage and to distort competition in the context of an artificial partitioning of national markets.

10. Where an undertaking has abused its dominant position by both discriminatory or predatory pricing and loyalty rebates, the Commission, in prohibiting that undertaking, on all the markets where it is subject to Article 86, from granting certain customers any rebate or more favourable condition in whatever form without objective consideration, is within the limits of its power under Article 3(1) of Regulation No 17 to issue orders to bring the infringements to an end.

11. By imposing in its final decision certain additional measures designed to put an end to the infringement, over and above the measures which it had already recommended during the administrative procedure, the Commission does not act in disregard of the principle of the protection of legitimate expectations. Article 3(3) of Regulation No 17 simply empowers the Commission to address to the undertakings recommendations for termination of the abuses before taking a decision finding an infringement under that article. The effect of compliance with such recommendations by the undertaking in question can in no case be to restrict the Commission' s power under paragraph (1) of that article to impose, when it takes the decision, any measure it considers necessary in order to bring the abuses found to an end.

12. Article 19(1) of Regulation No 17 and Article 7(1) of Regulation No 99/63 expressly provide that, where the Commission proposes to impose a fine, the undertakings concerned must have the opportunity to make their submissions on the matters to which the Commission has taken objection. It is thus by way of their submissions on the duration, the gravity and the foreseeability of the anti-competitive nature of the infringement that the rights of the defence of the undertakings concerned are guaranteed before the Commission in relation to setting the amount of the fine.

13. The Commission is not bound to break down the amount of the fine between the various aspects of the abuse in order to enable the undertakings concerned to assess whether the fine imposed for abuse of a dominant position is of a proper amount and to put forward their defence and in order to enable the Community judicature to exercise its power of review. In particular, such a breakdown is impossible where all the infringements found are part of a coherent overall strategy and must accordingly be dealt with globally for the purposes both of applying Article 86 of the Treaty and of setting the fine. It is sufficient for the Commission to specify its criteria for setting the general level of the fine imposed. It is not required to state specifically how it took into account each factor mentioned among those criteria which contribute to setting the general level of the fine.

14. In order for an infringement of the competition rules of the Treaty to be regarded as committed intentionally, it suffices that the undertaking concerned could not have been unaware of the anti-competitive nature of its conduct, whether or not it was aware that it was infringing the competition rules of the Treaty.

15. In order to assess the gravity of the infringements of the Community competition rules attributable to an undertaking, with a view to determining a fine which is proportionate, the Commission may take into account the exceptional duration of certain infringements, the number and diversity of the infringements, which concerned all or almost all the group' s products and some of which affected all the Member States, the particular gravity of infringements forming part of a deliberate and coherent strategy seeking by various eliminatory practices towards competitors and by a policy of retaining customers to maintain artificially or to strengthen the undertaking' s dominant position on markets where competition was already limited, the particularly harmful effects of the abuses in terms of competition and the benefit gained by the applicant from its infringements.

A fine corresponding to approximately 2.2% of the total turnover of a given year is therefore not disproportionate. It falls within the parameters laid down by Article 15(2) of Regulation No 17, according to which the amount of the fine may be up to 10% of the turnover in the preceding business year of the undertaking concerned.