User:Godurjj/sandbox

Across the European market, article 102 TFEU governs the conduct of unilateral or dominant firms. Article 102 TFEU outlaws any activities individually or collectively that would lead to a market dominance status within the EU.[1] To this extent, Article 102 TFEU bestows a special requirement to dominant enterprises. These special rules prevent the dominant enterprises from distorting markets, undue treatment of customers or stifle competitors unfairly from business rivals .across the EU firms with a market share of more than 40% are deemed dominant. An industry with one dominant player is called an oligopoly

 Article 102 TFEU places a ‘special responsibility' on dominant undertakings—aiming to ensure that powerful firms do not distort markets, act unfairly towards customers or reduce the threat of competition by excluding rivals, in particular by imposing of unreasonable high commodity prices alternatively they could drive smaller businesses out of the market by maintain artificial low prices.[2]They could also prevent competitors from doing business by forcing to purchase a commodity which has a relationship with a more popular product. Some could discriminate against some customers by offering selective discounts to customers who exclusively buy from the dominant company. At times they can make the purchase of one product mandatory when a customer buys another

The threshold separating abusive and permissible business practices by an enterprise that has been deemed dominant may be difficult to point out in black and white. For instance a reduction in consumer price due to an efficient production process and not a predatory price reduction. ^[3]

Dominant firms face a tough balancing act. They are expected to trickle down the effects of their status to the consumer by offering low prices and high-quality standards. At the same time, they are expected to allow competitors to thrive Article 102 TFEU is made up of three unique elements confirming ‘dominance establishing prima facie restrictive unilateral, characteristics and lastly establishing if there is a reason to believe that the dominant status can lead to situations where it is abusive.

Definition of dominance Article 102 TFEU can only come into force when a business enterprise acquires a dominant position that can lead to abuse of that status. In Hoffmann-La Roche v Commission the European court pronounced itself by saying a dominant undertaking benefited from economic powers that went beyond the normal market demand laws.^[4]

Assessing dominance It is not until a company has been previously subjected to competition law reviews especially prior to a merger it may be impossible to prove dominance conclusively in the eyes of the law. However special scenarios may arise and as such a case by case initiative is adopted. Intellectual property rights and patents in some circumstances give a monopoly to the establishment that owns them. This by extension becomes a barrier to competitors for instance drug patents. Illustrated below are types of dominance.^[5]

Collective dominance This happens when independent companies when clustered together hold a dominant position. This is possible especially in situations where the companies share similar economics links that would necessitate them to behave as if they were one entity. An example is a tacit collusion a situation that leads to mergers.^[6]

Super-dominance This happens when a firm commands a large swath of the market due to its appeal to consumers. This firm commands a large market share that competitors are virtually stifled out. In view of such a company it also views its part of their responsibility to ensure that competitors thrive

Significant market power In the electronic market, sector-specific ex-ante rules are imposed in the retail and wholesale sectors. This is more so when one or several players enjoy significant market power ('SMP'). A study into SMP concluded that it was equivalent to dominance. The study differentiates by examining SMP “going forward” and dominance looking backward” ^[7][8]

Exclusionary abuse These are practices that may be done by a dominant undertaking with the sole purpose of preventing competitors from profitably doing their business or maintain a going concern status. These practices, in the long run, will prevent small or new competitors achieving positions that can challenge the dominant undertaking. In the long run, consumers don't get to enjoy the benefits of competition and more importantly choice.^[9]

Some of the practices that are deemed exclusionary abuse are Predatory pricing. This practice is aimed at getting rid of weakening a competitor by forcing them out of the market. Sometimes it is employed to discourage new entrants. Ideally, the dominant firm will forgo profits in the short run.[10]

After achieving its intended purpose- of strengthening its market position the firm can now impose to its consumers any price.

Refusal to deal. A dominant market player can exercise the discretion to choose whom to do business with.^[11]lThis is more so when the dominant player holds an intellectual property right that is a prerequisite to do business, by denying rivals access to the facility, the dominant player effectively harms the ability of rival companies to effectively do business.

Margin squeeze. This is a scenario where a dominant player’s rivals are wholesale suppliers of an essential commodity. The dominant player can squeeze the profits margins of its competitors by reducing consumer prices and increasing the wholesale price. ^[12]

Objective justification Where a dominant firm can provide an objective justification of its actions, then it shall not in be a contravention of Article 102 TFEU. In order to do this, the dominant firm will have to prove that its actions were to achieve a legitimate motive. In most cases, these motives have to be in defense of public interest, or in defense of its commercial interests. In addition, these actions may have been intended to improve internal efficiencies. ^[13]

Article 106(1) TFEU in conjunction with Article 102 TFEU

Article 106(1) TFEU demands that European union member states ensure that undertakings who have been bestowed exclusive or special rights will comply with the treaty at all times. These include competition rules. , Article 106(1) TFEU cannot be applied singularly rather in conjunction with other sections of the treaty. This will include Article 102 TFEU which will come into place when dominance is as a result of these special rights. Across the EU, cases emanating from Article 106(1) in conjunction with Article 102 TFEU are not often prosecuted.^[14]

Prohibitions in Article 106(1) TFEU are mainly referencing to the member states while Article 102 TFEU addresses itself to the undertakings. In instances where both provisions are applied, Article 106(1)^[15] cannot be triggered unless the state actions themselves are a contravention of Article 102 TFEU.#REDIRECT Article 102 of the Treaty on the Functioning of the European Union