Under Art. 82 of the Treaty, there are essentially three different tests for duties to assist competitors, one for termination, and two for refusals to start de novo supply.
I. Abusive termination under Art. 82
(1) Dominant position
(2) Abusive conduct
- Termination
- Harm to downstream competition, usually defined as “eliminating all competition in a neighboring market.”
(3) No objective justification.
II. Abusive refusal to start supplying under Art. 82
(1) Dominant position
(2) Abusive conduct
- Refusal to start supplying
- Harm to downstream competition
- Indispensability, i.e., no one could economically replicate the essential facility.
(3) No objective justification.
III. Abusive refusal to start supplying Intellectual Property under Art. 82
(1) Dominant position
(2) Abusive conduct
- Refusal to start supplying
- Harm to downstream competition
- Indispensability
- Prevents emergence of a new product, i.e., offering a mere “me too” product is not sufficient.
(3) No objective justification.
One of the most significant aspects of the Microsoft v. Commission decision is the relaxation of the “harm to downstream competition” criterion. In Commercial Solvents (1974), the court required behavior that “risks eliminating all competition.” In Magill (1995), the refusal to license TV listings “exclud[ed] all competition in that market,” and in Bronner (1998), the court required that the conduct “was likely to exclude all competition in the secondary market.” In other words, harm to downstream competition used to require (i) some degree of likelihood; and (ii) a threat to all competition. In Microsoft, the CFI held that the survival of some competition is not a defense, and that the “all competition” language should be replaced with “all effective competition.”
The court lays out the new formulation of the test in paragraphs 331-334.
[331] It follows from the case-law cited above that the refusal by an undertaking holding a dominant position to license a third party to use a product covered by an intellectual property right cannot in itself constitute an abuse of a dominant position within the meaning of Article 82 EC. It is only in exceptional circumstances that the exercise of the exclusive right by the owner of the intellectual property right may give rise to such an abuse. [332] It also follows from that case-law that the following circumstances, in particular, must be considered to be exceptional:- in the first place, the refusal relates to a product or service indispensable to the exercise of a particular activity on a neighbouring market;
- in the second place, the refusal is of such a kind as to exclude any effective competition on that neighbouring market;
- in the third place, the refusal prevents the appearance of a new product for which there is potential consumer demand.
[333] Once it is established that such circumstances are present, the refusal by the holder of a dominant position to grant a licence may infringe Article 82 EC unless the refusal is objectively justified.
Note how the “any effective competition” language replaced the traditional “all competition” standard. In paragraphs 561-563 the court explains that the apparent change is no departure from past precedent.
[561] The Court finds that Microsoft’s complaint is purely one of terminology and is wholly irrelevant. The expressions ‘risk of elimination of competition’ and ‘likely to eliminate competition’ are used without distinction by the Community judicature to reflect the same idea, namely that Article 82 EC does not apply only from the time when there is no more, or practically no more, competition on the market. If the Commission were required to wait until competitors were eliminated from the market, or until their elimination was sufficiently imminent, before being able to take action under Article 82 EC, that would clearly run counter to the objective of that provision, which is to maintain undistorted competition in the common market and, in particular, to safeguard the competition that still exists on the relevant market. [562] In this case, the Commission had all the more reason to apply Article 82 EC before the elimination of competition on the work group server operating systems market had become a reality because that market is characterised by significant network effects and because the elimination of competition would therefore be difficult to reverse (see recitals 515 to 522 and 533 to the contested decision). [563] Nor is it necessary to demonstrate that all competition on the market would be eliminated. What matters, for the purpose of establishing an infringement of Article 82 EC, is that the refusal at issue is liable to, or is likely to, eliminate all effective competition on the market. It must be made clear that the fact that the competitors of the dominant undertaking retain a marginal presence in certain niches on the market cannot suffice to substantiate the existence of such competition.
I’m not convinced that the difference is merely one of terminology. A threat to “all competition” is of a very different nature than a threat to “any effective competition,” particularly if, at the same time, the probability requirements for the harm to competition are being relaxed.
The Microsoft decision, in effect, turns Art. 82 into a full-fledged incipiency statute. The result, in my view, may well be justified in the context of interoperability disclosure and undeniable network effects. But the underlying reasoning would have been more convincing had the court expressly stated its departure from the (very restrictive) “all competition” standard.
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