Mediciones directas

The position o f the same undertakings in neighbouring (or converging) markets can, in certain circumstances, be a decisive factor in assessing dominance. EC competition law allows a legal assessment o f these situations o f complex dominance. Complex dominance refers collectively to those situations in which dominance is achieved either by the combined exercise o f economic powers by two or more economic players in the same market (“joint or collective dominance”) or by the combination o f effects in two potentially distinct markets (“extended or leveraged dominance”). In the context o f the dominance assessment carried out by the Commission in communications merger cases analysed in Chapter VI below, the Commission has often expressed concerns about the interrelation between the parties' position in neighbouring markets as a result o f horizontal or vertical integration.^^ EC competition law allows a legal assessment o f these situations o f dominance.

See the Telia/Telenor Decision, para 265, in relation to broadcasting on the ability o f the merged entity to leverage its position at the infrastructure level into the downstream distribution level. In relation to vertical integration see the example o f the recent joint venture between Vodafone, Vivendi and Canal Plus for the creation o f Vizzavi an Internet portal which would have developed, marketed and provided a branded multi-access Internet portal throughout Europe providing a seamless environment for web-based interactive services across a number o f platforms, such as fixed and mobile telephony networks, PCs and palm tops, as well as television sets. The Commission considered that the transaction would have lead to competitive concerns in the developing national markets for TV-based internet portals and the national and pan-European markets for mobile phone based internet portals. In order to obtain clearance the parties therefore provided undertakings to ensure that the default portal could be changed should the customer so wish. This was intended to remove the potential detrimental and discriminatory vertical effects o f the transaction. See Commission Press Release “Commission clears Vizzavi Internet portal venture between Vodafone, Vivendi, and Canal + subject to conditions" IP/00/821 o f 20 July, 2000.

Chapter IV Antonio F. Bavasso

In addition we have seen above that, as a result o f convergence, a variety o f different situations might arise in which dominance, abuse and effects o f the conduct may take place across different markets. W hilst the current degree o f convergence might not justify new market definitions within the communications sector, it is very likely that a company dominant in one market might seek to leverage its position to exploit it in a different but related m a rk e t.^ ^ Conversely, at a more advanced level o f convergence, two

companies might be in a position o f collective dominance in a market which is closely related to the two separate markets where they operate in d e p e n d e n tly .^ ^

3.1 Joint or collective dominance

Article 82 also applies when more than one company are jointly or collectively dominant. This is one o f the means by which the Commission is seeking (sometimes controversially) to tackle oligopolies. This form o f dominance can be critical in a sector with high barriers to entry which favour concentration and may result in an impairment o f its technological dynamism. In addition joint dominance can potentially be envisaged if two operators offer similar services in different areas o f the same geographic market or even if two undertakings operate alternative and substitutable forms o f communications. That may be the case for telecommunications, cable operators or operators o f alternative networks o f communications conveyance who, jointly, can hold a dominant position on access to various competing methods o f communications.

The situation o f collective dominance covered by Article 82 differs from that in which two companies collude or make anticompetitive agreements which would fall under Article 81.^9 It entails what economists refer to as “tacit collusion”: that is the situation

For instance a telecommunications company can try to enter the market o f visual information or products by using telecommunications networks.

Temple Lang gives the example o f a company controlling television cables or broadcasting television programmes supplied to households via cable that olfers interactive services which may be a duopolist in the market for these services because only it and the national telecommunications company are in a position to offer them on a nation-wide basis, supra note U-17 above, at 404.

^9 T. Soames,“An Analysis o f the Principles o f Concerted Practice and Collective Dominance: A Distinction without a Difference?", 17 ECLR (1996), 24. In particular, the difference between concerted practice and collective dominance was clearly spelled out by Advocate General Slynn in Zuchner: “A concerted practice, while lacking the consensual nature o f an agreement or decision, implies a series o f independent acts which between them substitute co-operation 148

marketing conditions than they would be able to do without co-ordination to the detriment o f customers and ultimately consumers. In legal, as opposed to economic terms (for which the question is irrelevant), this situation falls between Article 81 (on agreements and concerted practices, essentially explicit collusion) and Article 82 (on abuse o f dominance). Whilst the Court and the Commission have not excluded the parallel application o f the two provisions^® as well as acting only under one o f the two when both apply, there is no explicit constraint under the EC competition rules on the unilateral conduct o f an undertaking that is not in a dominant position. The early EC judgments on Article 86 (now Article 82 ) did not accept the notion o f collective dominance^i and this notion struggled to find its way into the EC case law. Nevertheless the concept o f collective dominance has been progressively accepted although, at first, subject to the existence o f the “economic links” as a result o f which two or more undertakings hold a dominant position vis à vis other operators on the same market.32 The reference to economic links was first suggested in Società Italiana Vetro and subsequently strengthened in Almelo^^ where the existence o f links was treated not merely as an example but as a necessary requirement for the establishment o f collective dominance. This approach was reiterated in subsequent judgments^"^ which refer back to Almelo. In Compagnie Maritime Belge^^ the Court o f First Instance reaffirmed that Article 82 is capable o f applying to a situation in which several undertakings together

fo r competition. In contrast, one o f the hallmarks o f a dominant position covered by Article 86 is its unilateral nature" (emphasis added); See Case 172/80, Zuchner v. Bayerische Vereisnsbank, [1981] ECR 2021, at 2039.

See respectively Hqffman-La Roche, supra note III-7 above, and Racal Decca, OJ 1989, L 43/27; more recently see Joined Cases C-395/96P and C-396/96P, Compagnie Maritime Beige NV, [2000] ECR I 1365; [2000] 4 CMLR 1076, para 33.

In Hqffman-La Roche, supra note IU-7 above, para 39 the ECJ distinguished oligopolistic interdependence from single firm dominance. Article 86 (as it then was) did not apply to interdependence.

See Joined Cases T-68/89 etc., Società Italiana Vetro SpA, [1992] II ECR 1403, and with regard to the applicability in case o f concentrations Joined Cases C-68/94 and C-30/95, France v. Commission, (“Kali und Salz GmbH") [1998] I ECR 1375.

Case C-393/92, Municipality o f Almelo and Others v. Energie bedrijf Ijsselmij NV, [1994] 1 ECR 1477, paras 41 and 42.

Case C-96/94, Centro Servizi Spediporto v. Spedizioni Marittima del Golfo Sri, [1995] I ECR 2883, para 33 and Joined Cases C-140-142/94, DIP Spa v. Comune di Bassano del Grappa e Comune di Chioggia, [1995] I ECR 3257, para 26.

Joined Cases T-24/93, T-25/93 and T-28/93, Compagnie Maritime Beige Transports v. Commission, [1996] ECR Ü- 1201, para 60.

Chapter IV Antonio F. Bavasso

hold a dominant position on the relevant market, but this occurs where links are estahlished.36 The meaning o f "links" remained for a long time unclear.

In particular, it was unclear whether the notion could extend to cover a situation o f interdependence where, however, the competitors are not explicitly colluding. Such a wide interpretation could help the ECJ to fill what is regarded as one o f the gaps in the Treaty: the lack o f control over unilateral facilitating devices and exclusionary practices by oligopolists which may be extremely important in heavily concentrated markets such as some in the communications sector. ^7

In CFI introduced the long awaited clarification and extension o f the concept o f c o lle c tiv e ., d o m in a n c e .^ ^ ^In that case, in open contrast to the Almelo precedent and an entire line o f case law which referred to h,40 stated that the Court ...referred to links o f a structural nature only by way o f example and did not lay down that such links must exist in order fo r a finding o f collective dominance to be made.'^^^ It then added that there is no reason whatsoever in legal or economic terms to exclude fro m the notion o f economic links the relationship o f interdependence existing between the parties to a tight olisopoly within which, in a market with the appropriate

R. Whish, “Collective Dominance”, in O’Keeffe (Ed.), Judicial Review in European Union Law - Liber Amicorum in Honour o f Lord Slynn o f Hadley, (Kluwer Law International, 2000), at 581.

See V. Korah, “The Competition Act Some Foreseeable Problems”, in Green and Robertson (Eds.) The Europeisation o f UK Competition Law, (Hart, 1999), 61, at 66. The scenario was possibly more confused after the Kali und Saltz judgment {supra note lV-33 above) in which the ECJ, in accepting the extension o f the doctrine to the EC Merger Regulation, used the expression “correlative factors” instead o f “economic links.” Korah argues, based on a literal interpretation o f the judgment, that the correlative factors test is not exhaustive. The Court in fact describes collective dominant position as “a situation in which effective competition in the relevant market is significantly impeded by the undertakings involved in the concentration and one or more undertakings which together, in particular because of correlative factors which exist between them, are able to adopt a common policy on the market and act to a considerable extent independently...” (emphasis added) supra, para 221. This approach seems to subscribe entirely. She also suggests that the expression used by the Court in Kali und Saltz might have a looser meaning than “economic link”. Unfortunately however this expression was not intended to introduce a new test for collective dominance (comments made by Judge Edward during the UCL Conference on The Europeisation o f UK Competition Law, 10 September 1998). Advocate General Fennelly also confirmed that the expression “factors giving rise to a connection between them” or “correlative factors” did not seem to him to be any different from economic links (see Compagnie Maritime Beige NV, supra note lV-31 above, p e r AG Fennelly Opinion o f 29 October 1998) and therefore the ECJ case law cannot be seen as having taken any step in tackling the oligopolistic practices mentioned above that may arise in a highly concentrated sector such as that o f communications.

Case T-102/96, G encorL tdv. Commission, [1999] ECR H 753; [1999] 4 CMLR 971.

See F.E. Gonzâlez Diaz, “Recent Developments in EC Merger Control Law”, 22 World Competition (1999), 3; C. Caffarra and K. KUhn, “Joint Dominance: the CFI Judgment in Gencor/Lonhro”, (20) ECLR (1999), 355; A. Bavasso, “Gencor: A Judicial Review o f the Commission’s Policy and Practice - Many Lights and Some Shadows”, 22 World Competition (1999), 45.

Alm elo, supra note lV-34 above, paras 41 and 42. Para 273.

product homogeneity those parties are in a position to anticipate one another's behaviour and are therefore strongly encouraged to align their conduct in the market, in particular in such a way as to maximise their profits by restricting production with a view to increasing prices. In such a context, each trader is aware that highly competitive action on its p art designed to increase its market share (for example a price cut) would provoke identical action by others, so that it would derive no benefit from its initiative More recently the ECJ in the Compagnie Maritime appeal clarified that whilst it is clear from a literal reading o f Article 82 that it applies to dominant positions held by several undertakings, the very concept o f undertaking presupposes economic

i n d e p e n d e n c e / ^ It follows that the expression "one or more undertakings" used in ^ Article 82 "implies that a dominant position may be held by two or more economic J entities legally independent o f each other, provided that from an economic point o f view

they present themselves or act together on a particular market as a collective entity. This is the current definition o f collective dominant position in ECJ case law. The Court went on to say that the existence o f an agreement or o f other links in law is not indispensable to a finding o f collective dominant position; such a finding may be based on other connecting factors and would depend on an economic assessment and, in particular, on an assessment o f the structure o f the market in q u e s t i o n . ' ^ ^ Furthermore

the Court was very careful in stressing that as for single firm dominance a finding o f a dominant position is not in itself a ground for criticism and does not prejudge the fundamental question as to whether the collectively dominant undertakings have abused that position.'^^

3.1.1 Joint dominance in communications

Some types o f examples mentioned by the CFI in Gencor by way o f examples are likely to occur often in the communications sector. The CFI expressly referred to certain

"^2 Para 276.

See, supra note IV-31 above, para 35 referring to Case 22/71, Béguelin Import v. G.L. Import Export, [1971] ECR 949. Para 36.

Para 45. Paras 37 and 38.

Chapter IV Antonio F. Bavasso

circumstances which are conducive to a situation o f collective dominance, namely ''market concentration, transparency and product homogeneity’'* as a result o f which firms are "in a position to anticipate one another's behaviour and are therefore strongly encouraged to align their conduct in the m arket^ In a situation o f collective dominance the analysis o f abuse and that o f dominance are strictly linked and not easily severable. If collective dominance equates to tacit co-ordination and for tacit co-ordination to occur “it is necessary for firms to indulge in a common form o f behaviour”'^'^ there is a behavioural (or dynamic) element in what is normally a static assessment o f market dominance. In economic terms the “credibility o f co-ordination” is a distinctive element o f what lawyers call collective dominance. In other words collective dominance requires that the jointly dominant companies are able to monitor quickly and easily each other’s behaviour and to punish deviators, hence Gencor*s reference to concentration and transparency.

Furthermore large chunks o f it are subject to regulation which by definition increases transparency, for instance by requiring publication o f prices. This could have the side effect o f supporting oligopolistic behaviours.'^* However the notion o f credibility o f co­ ordination also entails the possibility o f retaliatory mechanisms, to be put in place to impose sanctions on those firms that deviate from the common behaviour. It is unclear whether under EC law an effective retaliatory mechanism is accepted as a legal requirement to establish collective dominance. The doctrine o f joint or collective dominance has been applied by the Commission, not without controversy, in relation to the activities o f tour operators. The Decision in Airtours/First Choice, which is still one o f the most elaborate applications o f the doctrine to date, stated that the Commission did not regard "a strict retaliation mechanism, as that proposed by Airtours in its reply to the Statement o f Objections, as a necessary condition fo r collective dominance in this case; where, as here, there are strong incentives to reduce competitive action, coercion may be unnecessary**'^^ The case is under appeal. These uncertainties as to the legal