EL DESARROLLO DE LA LEGISLACIÓN EDUCATIVA

If the supplier of software is not dominant and in the absence of a cartel, or market

investigation, the only solution provided by competition law to a refusal to supply interface information is the concept of collective dominance under Article 102. The purpose of evaluating whether the market for 3D CAD could be considered oligopolistic is to find a solution to lock-in and other problems associated with a lack of interoperability. Collective dominance would allow the refusal to supply interface information to be subjected to the exceptional circumstances test to determine whether it is an abuse of a dominant

position.⁴⁷⁷

The “oligopoly problem” is said to be one of the chief concerns of EU competition policy as oligopolies do not have an express Treaty provision to regulate their unique structure and intrinsic behaviour.⁴⁷⁸ This is seen as a “lacuna” in EU law ⁴⁷⁹ which the European

Commission and Courts have sought to address in recent years. Caution has rightly been

475 Ibid para 21

476 Richard Whish and David Bailey Competition Law (8^th Ed OUP 2015) 27

477 The exceptional circumstances test is considered in Section 5.4

478 Craig Callery ‘Considering the oligopoly problem’ (2011) 32 ECLR 142, 142

479 Jephcott M and Withers c, ‘Where to go now for EC oligopoly control? ’ (2001) 22 European Competition Law Review 295, 300

155 shown to avoid penalising the innate structure of the oligopolistic market unless there is behaviour that goes beyond rational responses to that market. But this has proven to be a very thin line to draw.⁴⁸⁰ There is said to be an “oligopoly gap”, where subcompetitive performance is not adequately addressed by legal provisions to control anti-competitive abusive behaviour.⁴⁸¹

Oligopoly is defined as ‘sale by a few sellers’. It is a phenomenon occurring somewhere on the continuum between monopoly and perfect competition. ‘Oligo’ means few while

‘mono’ means one and ‘polypoly’ means many.⁴⁸² “Because there are only a few firms each firm can affect the market price and hence its rivals’ profit....a firm must consider rival firms’ behaviour to determine its own policy”.⁴⁸³

Not all oligopolistic markets are a problem and there are economic models of oligopolists competing on price or output.⁴⁸⁴ The main argument against oligopolies is that, because there are only a few competitors in an oligopolistic market, they are very aware of each other’s presence and behaviour and are interdependent. They are bound to match and follow each other’s marketing strategy and price competition will be minimal or non-existent. They produce non-competitive stability.⁴⁸⁵ This view is supported by the literature on ‘game-theory’ and ‘the Prisoner’s Dilemma’.⁴⁸⁶ The interdependence can be used by the oligopolists for their own self-interest if they match each other’s conduct to

480 K Middleton, Cases & Materials on UK & EC Competition Law (2nd edn, OUP 2009), 211

481 Ionnis Kokkoris Merger Control in Europe (Routledge 2011); Barry Hawk and Giorgio Motta, ‘Oligopolies and Collective Dominance: A Solution in Search of a Problem’ Treviso Conference on Antitrust Between EC Law and National Law, Eighth Edition; Fordham Law Legal Studies Research Paper No. 1301693. Available at SSRN:

http://ssrn.com/abstract=1301693

482 Richard Whish and David Bailey, Competition Law (8th edn, Oxford University Press 2015), 595

483 Dennis W. Carlton and Jeremy M. Perloff, Modern Industrial Organization ((4th Edition) edn, 2005), 157

484Richard Whish and David Bailey, Competition Law (8th edn, Oxford University Press 2015), 595

485 Ibid 596

486 Ibid 596

156 charge profit-maximising prices at a supra-competitive level. They do this by relying on the structure of the market and mutual self-awareness rather than actual communication.⁴⁸⁷ There is debate as to whether the market structure itself produces the problem. There is empirical evidence to support the structuralist theory that there is a direct correlation with profits being higher in oligopoly markets than in less concentrated markets.⁴⁸⁸ Later empirical studies failed to find a simple link between profits and concentration in a wide range of industries and higher profits seemed better explained by efficiencies.⁴⁸⁹ This led to a more agnostic view of oligopolies where efficiency was seen as a benefit and there was also an appreciation that coordination in oligopoly markets was more difficult to achieve than originally thought.⁴⁹⁰ According to the Cournot model⁴⁹¹ oligopolistic interdependence exists in any market with few firms and output is often lower than in perfect competition but this does not always mean firms are maximising joint profits by tacit collusion. In an oligopoly anything can happen and oligopolistic interdependence is not enough to justify intervention without joint profit maximisation through tacit collusion.⁴⁹² The market structure is important but is not the only cause and structural remedies to deconcentrate the market are not the only solution. The market can adopt a non-co-operative equilibrium in which profits can only be increased by co-ordinating behaviour. Stable co-operation

487 Ibid 596

488 Joe Bain, ‘Relation of Profit Rate to Industry Concentration, American Manufacturing" 1936-1940’ (1951) 65 Q J Econ 293

489 H Demsetz, ‘Two Systems of Belief About Monopoly’ in H Goldschmid, H Mann and J Weston (eds), Industrial Concentration: The New Learning (Little Brown 1974)

490Barry Hawk and Giorgio Motta, ‘Oligopolies and Collective Dominance: A Solution in Search of a Problem’

Treviso Conference on Antitrust Between EC Law and National Law, Eighth Edition; Fordham Law Legal Studies Research Paper No. 1301693. Available at SSRN: http://ssrn.com/abstract=1301693,61

491 The Cournot model describes an industry structure where companies making homogeneous products who have market power to affect the price of goods compete on output and do not collude.

492 Gunnar Niels, ‘Collective dominance: more than just oligopolisitic interdependence’ (2001) 22 ECLR 168, 172

157 may occur if it is more profitable than cheating which depends on the extent and nature of available market information.⁴⁹³

The theory of oligopolistic interdependence is not without its critics who challenge the central proposition that oligopolies can earn supra-competitive profits without explicitly colluding. The theory of oligopoly relies on a simplistic picture of markets which in reality are more varied and complex with different costs, goods, levels of barrier to entry so markets differ considerably and make it difficult to have one theory for them all.

Oligopolies are not as interdependent as theory claims, for example one firm may benefit from cutting prices and there can be intense competition in some oligopolistic markets if not for price then for quality, after sales and other aspects. Further, the oligopolistic structure might result from efficiencies and be subject to competitive pressures. If supra-competitive profits are achieved new firms will enter and barriers may be illusionary.

Game theory has attempted to provide a reference model to describe the rational behaviour of undertakings in an oligopolistic market. Rather than merely identifying structural conditions the impact of certain aspects are examined including whether they allow repeated interaction between oligopolists; create barriers to entry; encourage mutually acceptable market equilibrium; facilitate monitoring and detection of cheating and allow for immediate effective retaliation. Barriers to entry, which are particularly relevant when there is a lack of interoperability, are considered to be a particularly significant factor supporting collusion.

Undertakings in the 3D CAD industry appear to be a tight oligopoly, indeed they could be said to be a perfect oligopoly with a tight market structure and with each undertaking enjoying a significant market share.⁴⁹⁴

A tight oligopoly is said to have two essential features:

493 Ibid 171

494 Craig Callery ‘Considering the oligopoly problem’ (2011) 32 ECLR 143, 146

158

 Some factors that makes for easy price comparison and alignment, such as a small number of sellers, homogeneous products, high market transparency. Members of the oligopoly can monitor each other and coordinate actions including responding if one of them lowers their prices. The 3D CAD industry has “very complex pricing”⁴⁹⁵ but the numbers of suppliers is very small and with similar products.⁴⁹⁶

 Some factors, such as high barriers to entry or lack of buyer market power, which allow prices to be raised without risk of losing market share.⁴⁹⁷ A lack of

interoperable interfaces would certainly increase barriers to entry and lock-in can reduce the buyer’s bargaining position.