Fabricación y diseño del prototipo

The relevance of specific investments for community and Italian antitrust law also manifest in another perspective. Specific investments can define the relevant market, especially aftermarkets, that facilitate the configuration of an antitrust violation. With these contractual investments, a lock-in situation occurs in the contract (section 1.3.3.1); this allows the counterparty to adopt an opportunistic behavior with antitrust relevance. Such relevance occurs in different ways.

According to one proposal, there is no distance between the abuse of economic dependence and abuse of the dominant position.³¹¹ The same situation could happen in the case of markets derived from the main product (aftermarket), especially repair and replacement; there would be high switching costs and irrecoverable investments.³¹² It is necessary to investigate whether specific investments could reduce the notion of a relevant market to such a degree to concentrate its attention on a contractual relationship.³¹³

While the notion of abuse of the dominant position is well recognized, the antitrust impact of abuse of economic dependence is less well understood. This issue requires assessing the market relevance in the case of specific investments. Article 9/3-bis of Law No. 192/1998 establishes this

310 Paragraph 29 of the guidelines.

311 G. COLANGELO, L’abuso di dipendenza economica tra disciplina della concorrenza e diritto dei contratti:

un’analisi economica e comparata, cit., p. 42.

312 Ibid., p. 42.

313 G. COLANGELO adopts a position capable of reducing the notion of the relevant market enough to include a contractual relationship. The author (L’abuso di dipendenza economica tra disciplina della concorrenza e diritto dei contratti: un’analisi economica e comparata, cit., p. 153) argues that, in the face of the loss of collective well-being with an opportunistic conduct, antitrust intervention should occur. This situation resembles a monopoly power. It has a distributive impact and loss of efficiency, and it would mean a market failure. The author’s proposal gives a joint view of contractual power and market power. There are some difficulties accepting this theory. It has a very specific interpretation of the market delimitation, and it represents a risk. Antitrust intervention would risk becoming selective.

The reasoning could lead to an indiscriminate jurisdiction of the antitrust authority, which would introduce further distortion of competition and iniquity. The antitrust authority would be forced to select the practices considered illegal, while small and medium-sized enterprises would continue to adopt them in the market. In this regard, P. FABBIO, L’abuso di dipendenza economica, cit., p. 469.

abuse as relevant to the market.³¹⁴ It acknowledges the intervention of the AGCM and highlights the possible application of Article 3 of Law No. 297/1990 (Italian antitrust law). The abuse of economic dependence in a commercial relationship with the presence of specific investments may be relevant to the market and, for that reason, antitrust measures can be imposed. It is necessary to identify the hypothesis in which this situation would be suitable, and its examination requires evaluating the relationship between the abuse of economic dependence and abuse of the dominant position.

With the delimitation of the relevant market based on a concrete hypothesis of abuse, the doctrine seeks to indicate the abusive behaviors that are pertinent to antitrust law.³¹⁵ That behavior must, first of all, be sizeable in the relevant market in accordance with the de minimis rule. This assessment requires establishing whether the dominant position consists of true market power or only contractual power. The dominant market position has for on horizontal dominance and vertical dominance. Situations of vertical dominance include abuse of the dominant position and economic dependence; however, the latter is not always relevant to the market. There might be an abuse of economic dependence concerning only a contractual power, without market power. In this case, economic dependence does not correspond to an antitrust violation. Market relevance happens only in exceptional circumstances; the relationship between the abuse of economic dependence with relevance to the market and the dominant position must be clarified.³¹⁶

The legislation shows some interference in the configuration of these situations. There are three possible hypotheses: i) the full overlap between the dominant position and economic dependence, ii) economic dependence is relevance to the competition and the market but does not

314 Article 3 of Regulation EU/1/2003 provides that the Member States are not prevented from approving and applying more restrictive national legislation in their territory. It is within this context that the implementation of the hypothesis of antitrust violation that finds no correspondence in the European antitrust rules is allowed.

315 M. LIBERTINI, Diritto della Concorrenza dell’Unione Europea, cit., p. 286. The delimitation of the relevant market serves to identify a specific market power and, therefore, cannot dispense a relational criterion. The relevant market must be determined in accordance with the following logical rationale: i) the individuation of the business initiative to be evaluated; ii) the individuation of the type of demand and supply that this initiative may affect, directly or indirectly;

and iii) the determination of the group of companies that are currently or potentially interested in this type of demand and supply, and hence the foreseeable competitive reactions (M. LIBERTINI, Diritto della Concorrenza dell’Unione Europea, cit., p. 97). The abuse of the dominant position imposes the evaluation of whether, after a given business initiative, the other players concerned suffer or if they can effectively react. This approach is based on an accurate reading of the Commission’s communication on the definition of the relevant market to apply community law to antitrust matters (European Commission Communication 97/C 372/03).

316 Ibid., pp. 287-8.

have the requirements of abuse of the dominant position, and iii) economic dependence without relevance to the market.³¹⁷

In this scenario, the doctrine establishes seven hypotheses of the configuration of a relationship of power/subjection between companies: a) the situation of hegemony in relation to the competitors; b) the power situation regarding its competitors, which derives from a dominant position in a contiguous market and the players’ reverential fear of the more vulnerable market; c) the power situation regarding competitors at a horizontal level, which derives from the availability of an exclusive, non-duplicable resource, placed on the downstream or upstream market and appropriately enjoyed by the dominant party through vertical integration; d) the situation of market power regarding companies operating on other market levels, which must consider the dominant company a necessary partner; the dominant company does not operate directly in the relevant market but can exercise decisive influence over it; e) the vertical power position of the producer of highly renowned goods in relation to distributors that need to dispose of the product in their assortment in order to develop effective competition at another market level; f) the vertical power situation inherent to the markets derived from its products, in particular, those of technical assistance and spare parts of products of a particular brand operating in the market; this power can be exercised in relation to companies operating in the downstream market; g) the vertical power situation deriving from the sole holder of the demand present in a smaller market (assistance and repair) and requiring the formation of small, specialized companies; in this regard, there are also the aftermarkets, although these differ from those indicated in situation f); and h) the power situation that a larger company can acquire in confronting a small company when the latter has operated as the only (or almost only) client for a particular period and has thus become a dependent customer.³¹⁸

Based on this classification, the following systematization is proposed: i) in hypotheses a) and b), there is a dominant position, but no economic dependence; ii) in hypotheses c) and d), there is an interference between both, and the dependent party can resort to claiming one or the other;

iii) under e), f), and g), there is a complete, albeit only occasional, interference between the two governing rules; the economic dependence has relevance to the aftermarkets only in exceptional

317 Ibid., p. 288.

318 Ibid., p. 291.

cases; and iv) in hypothesis h), there is economic dependence without relevance to the market and no dominant position.³¹⁹

Based on this distinction, some conclusions can be drawn concerning specific investments.

In principle, the situation of economic dependence in which the dependent company makes specific investments to perform the contract usually has no antitrust relevance (situation h)). The power situation in the contract is not the same as with market power; this type of dependency has more a modest impact than the other situations’ repercussions on the proper functioning of the market.

This power cannot be extended, like the one that results in the case of generalized market power, which can harm an indeterminate number of subjects. These considerations do not rule out the influence of competition as a legal principle (bene giuridico della concorrenza) in economic dependence; the dependence of a commercial relationship represents a movement in the competition and influences its development.³²⁰

The possible and exceptional antitrust relevance of specific investments has a particular impact on situations f) and g). These investments might not even be specific contractual investments, the objective of this thesis. There might be an antitrust impact in aftermarkets derived from the specificity of the product sold.³²¹ One must acknowledge the modest repercussions on the

319 Ibid., p. 291. In the same regard, P. FABBIO, L’abuso di dipendenza economica, cit., pp. 461-473.

320 P. FABBIO, L’abuso di dipendenza economica, cit., pp. 475-6. The author then clarifies that this is a generalized abstraction. There are some hypotheses in which a violation of the market could be envisioned. He suggests that the dependence of a commercial relationship may allow the dominant company to force the counterparty to anticompetitive conduct in another market of remarkable size; or that a single dominant undertaking could result in a series of similar abuses with synergistic effects on competition (P. FABBIO, L’abuso di dipendenza economica, cit., note 127, p. 476).

321 The discussion on derivative markets must not be made without mentioning the American Supreme Court’s decision on the Kodak case (Eastman Kodak Co. v. Image Technical Services Inc., 903 F.2d 612 [1990: Kodak I], 504 U.S. 451 [1992: Kodak II], 125 F.3d 1195 [1997: Kodak III]). It discussed the commercial practices with which Kodak excluded some independent operators that used to repair its photocopiers from the aftermarket of maintenance and repair services. The company refused to provide the parts needed to perform such services. Users had to resort exclusively to Kodak’s subsidiaries. This conduct was viewed as a tie-in and an attempt to monopolize the market of spare parts.

Kodak argued that a product could not form part of a relevant market and that competition in the primary market precluded any verification of monopoly power in the secondary market. The Supreme Court, with the majority vote of Justice Blackmun, understood that the absence of power in the primary market did not rule out the possibility of verifying it in the derivative market, and that the increase in prices therein did not affect sales in the primary market.

Consumers had difficulty calculating the value of the switching costs and maintenance costs of their acquisition; if they knew the change in the company’s maintenance policy, they could have chosen another photocopier brand. In those circumstances, the relevant market was the market of spare parts and maintenance, and its analysis dispenses with competition in the primary market. Justice Scalia dissented from this opinion, accompanied by Justice O’Connor and Justice Thomas. They argued that Kodak had no market power but circumstantial power, and that a lock-in on the secondary market only constituted a disruption of competition. For G. COLANGELO, L’abuso di dipendenza economica tra disciplina della concorrenza e diritto dei contratti: un’analisi economica e comparata, cit., p. 37, Kodak’s decision did not establish the concept of a lock-in effect. In addition, this concept was belied in another later case, Independent Service Organizations Antitrust Litigation (Xerox) (203 F.3d 1322 (Fed. Cir. 2000). The connection between the opportunism of the installed basis and the refusal to sell spare parts was not made clear. This conduct would not be

collective well-being of the abuses committed in these markets, and that they could not generate antitrust protection in all the situations. The strategy adopted by small and medium-sized enterprises to gain profits from the position acquired could be permissible and would not be relevant to antitrust law.³²² The companies that control the aftermarket also suffer indirect competitive pressure in the primary market; furthermore, in some cases, the market control has small geographic dimensions and little economic significance.³²³ There would be antitrust relevance only in cases of general practice adopted uniformly by companies active in the primary market that take advantage of the derived market, or if the derived market is of great economic importance concerning the primary product market.

In this regard, the European Commission has examined the relevance of the aftermarket and proposed a test to examine its significance based on the conclusions reached in the Pelicano/Kyocera case.³²⁴ Kyocera had a relatively small market share in the printer market; it was considered non-dominant in the secondary cartridge market, even though it had a high market share. One of the main arguments for adopting this position was the proportionally high price of the secondary product compared to the primary product (70% of the printer’s value). This circumstance indicated that the potential consumer would examine the overall cost that would be incurred before choosing the equipment.

According to the criteria established, after distinguishing between the primary and secondary markets, the existence of market power in the secondary market requires assessing whether the increase in the price of the secondary product would change the pattern of consumer behavior concerning the main product within a reasonable period. The threat of changing the product in the primary market would alter the behavior in the secondary market and exclude dominance despite the high market share in the secondary market. The rationale assumes that the consumer, when buying the primary product, takes into account the factors related to secondary products; at the same time, the primary market must be competitive enough for consumers to be able to switch products if there is a price increase in the secondary good.

related to Kodak’s abusive extraction of profit by setting prices for spare parts, as it could be achieved without excluding independent traders. The opposite view to the Kodak case prevailed with the case Queen City Pizza v.

Domino’s Pizza (124 F.3d 430 (3rd. 1997). For antitrust purposes, it must be ascertained whether the vulnerable contractor can freely choose from among a sufficient range of possible counterparties and if the contractual imbalance was predictable and therefore accepted.

322 P. FABBIO, L’abuso di dipendenza economica, cit., p. 468.

323 P Ibid., p. 469.

324 Rejection Letter of 22 September 1999 in Case No IV/34.330 – Pelikan/Kyocera.

In the proposed test, the European Commission clarified that dominance in the secondary market is linked to i) the interdependence between the primary market and the derivative market and ii) the conditions in the primary market, i.e., the reaction of consumers in the primary market in view of the potential change in the secondary market.³²⁵ In order to assess the degree of independence of the markets, factors related to the secondary product should be taken into account (the price and cost of shelf life of the primary product, the price transparency of the secondary products, the price percentage of the secondary product in relation to the primary product value, whether the primary product is bought or rented, whether the secondary product is to be repurchased in the foreseeable future, whether price discrimination between old and new consumers is possible, and the potential for new consumers). The analysis of the conditions of market competitiveness would primarily follow the approach of analyzing the reaction of consumers to the price increase of a specific primary commodity.

These criteria were applied in the EFIM case in 2009 and confirmed by the Court of Justice in 2011.³²⁶ Based on this case, the Court of Justice developed a test to be applied to evaluate the configuration of market power in the secondary market. The questions to be answered are as follows: i) whether the consumer can make an informed choice, including pertaining to the useful life of the product, from among the various products on the primary market; ii) whether they are prone to make that choice; iii) if prices are increased significantly in the aftermarket, iii.i) whether a number of consumers would adapt their buying behavior in the primary market; and iii.ii) whether this would occur within a reasonable period. If the answers are positive, there would be no dominance in the secondary market. A negative response does not turn the primary producer into a dominant one in the aftermarket; another, more in-depth analysis must be made.

In the cases analyzed by the European Commission, some conclusions have been reached.

The non-dominance of the producer in the secondary market, as in the Kyocera/Pelicano case, would lead to the independence of the primary and the secondary markets. The more reduced the relationships between those two markets are, the higher the likelihood of being found dominant in the secondary market is. Secondary market dominance cannot be established if there is competition in the primary market and if there are low exchange barriers. The test also requires considering the

325 A. CAPOBIANCO, Competition Issues in Aftermarkets – Note from the European Union, in https://one.oecd.org/document/DAF/COMP/WD(2017)3/en/pdf.

326 Rejection of complaint of 20 May 2009 in case COMP/C-3/39.391 EFIM and Judgment of the General Court of 24 November 2011, Case T-296/09, confirmed by the Court of Justice, Case C-56/12 P.

difference between current and new consumers. The above criteria might not apply if there is discrimination between future and former consumers. The absence of a discrimination policy allows future consumers to avoid opportunistic behavior.

If market interdependence and dominance in the secondary market are verified, the Commission should conduct a competitive examination of practices adopted in the relevant market.

The effects on the primary and secondary markets may be relevant. There would be some justification of efficiency for the conduct in the secondary market; however, the burden of this proof is conferred on the company that produces the good.

Few other cases have been examined by the European Commission on this issue. In some, the Commission concluded that companies may have abused their dominant position in the aftermarket. These cases have resulted in offering deals to the companies under investigation.³²⁷ In others, the commission concluded that there was be no abuse of aftermarket dominance.³²⁸ The last case examined in 2014 analyzed whether there would be a concerted practice or agreement between several producers in order to discontinue the supply of spare parts by producers of watches and clocks to independent repairers, who invested in equipment and training. This could constitute a violation of the competition rules in the secondary watch repair market.

The Commission adopted the view that there is a separate market for replacement parts and maintenance services, especially as buyers of prestigious watches are not able to gauge the overall price of these watches. However, the Commission ruled out the configuration of abuse and collusive agreement. This decision was based on the grounds of the coherence of the manufacturers’ business strategy to suspend the supply of spare parts to implement a selective system of watch and clock repair.

Specific investments are an element that can delimit the secondary market, especially after

Specific investments are an element that can delimit the secondary market, especially after