7. The prohibition of abuses of a dominant position
| Pages | 249-296 |
| Author | Alina Kaczorowska-Ireland |
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7
THE PROHIBITION OF ABUSES OF A
DOMINANT POSITION
Chapter contents
Introduction
The concept of ‘dominance’
The concept of ‘abuse’
Exclusionary abuses
Exploitative abuses
Price discrimination
Justifications available to dominant enterprises
7.1 Introduction
Article 177(1)(b) RTC prohibits actions by which an enterprise abuses its
dominant position within the Community. Article 177(2) RTC provides
some examples of abuse, whilst Article 177(4) sets out exemptions from the
prohibition.
Article 178 RTC is entitled ‘Determination of Dominant Position’.
Article 178(a) sets out factors that will allow the determination of a
dominant position, whilst Article 178(b) clarifies the concept of
‘interconnected enterprises’. Article 178(b) embodies the doctrine that is
known under EU competition law as the doctrine of the ‘single economic
unit’ (see Chapter 4, section 4.6.1). For the purpose of CSME competition
law, enterprises are interconnected ‘if one of them is a subsidiary of the
other or both of them are subsidiaries of the same parent enterprises’. For
the purpose of the determination of a dominant position, they will be
regarded as one enterprise.
Article 179(1) RTC is entitled ‘Abuse of a Dominant Position’. It
provides examples, additional to those set out in Article 177(2)(e)–(j) RTC,
of possible abuses of a dominant position that result in the frustration of the
benefits expected from the establishment of the CSME. Article 179(2) RTC
lists factors that should be taken into account when determining whether an
enterprise has abused its dominant position, although the factors listed are
relevant specifically to the determination of the existence of exclusionary
abuses (see section 7.4) rather than to the determination of all possible
abuses. Article 179(3) RTC specifies the circumstances in which a dominant
enterprise shall not be treated as abusing its dominant position. It is
important to note that abusive conduct on the part of a dominant enterprise
may also be exempted by the Council for Trade and Economic
Development (COTED) under Article 183(2) RTC or by the CARICOM
Competition Commission (CCC) if it is within the de minimis rule (see
Chapter 5, section 5.3.2). Further, when the CCC, under Article 180 RTC,
gives a negative clearance ruling in respect of business conduct, its ruling is
conclusive, although the Caribbean Court of Justice (CCJ) may, on the
application of the CCC, review the Commission’s decision in circumstances
under which that decision was induced by deceit or improper means (see
Chapter 9, section 9.7.2.1).
The structure of Chapter VIII, Part One, of the Revised Treaty of
Chaguaramas (RTC) regarding the prohibition of abuses of a dominant
position by an enterprise seems rather chaotic. Examples of abuses are
scattered between Articles 177(2) and 179(1) RTC. Some examples given in
Article 177(2) RTC are repeated in Article 179(1) RTC, such as Article
177(2)(e) RTC and Article 179(1)(f) RTC. Other so-called ‘abuses’ are the
results of abuses rather than abuses per se, for example Article 179(1)(a)–
(c) RTC (see section 7.7.2.3). Finally, the provisions of the RTC relating to
the justifications available to an enterprise in a dominant position for its
abusive conduct are unclear.
As can be seen from the above, it is not easy to interpret some of the
provisions of the RTC in relation to the prohibition of abusive conduct by a
dominant enterprise. It is clear from Chapter VIII, Part One, however, that
the RTC prohibits neither a dominant position nor its creation. Once an
enterprise is in a dominant position on the relevant market, CSME
competition law imposes on it a standard of conduct different from that
required of an undertaking that is not in a dominant position. The European
Court of Justice (ECJ), when interpreting Article 102 TFEU, which
prohibits abuses of a dominant position, emphasised that an undertaking in
a dominant position ‘has a special responsibility not to allow its conduct to
impair genuine undistorted competition on the [internal] market’.1 When
applied to CSME competition law, this means that an enterprise in a
dominant position may breach the prohibition if it engages in conduct that,
if it were to be carried out by its competitors rather than by it, would be
lawful. The imposition of a different standard of conduct on an enterprise in
a dominant position from that required of a non-dominant enterprise is
explained by the fact that the former has greater capacity to distort
competition on the relevant market than the latter.2 For example, if an
enterprise that is not in a dominant position grants loyalty discounts or
concessions to its customers on the condition that, over a long period of
time, they buy all of their requirements exclusively from it, such practices
are normal business practices, which raise no competition law concerns.
However, when an enterprise in a dominant position grants similar loyalty
discounts or concessions to its customers, its conduct is severely
detrimental to the competitive structure of the relevant market. Customers
so tied to a dominant enterprise will not purchase from its existing
competitors and it will be impossible for potential competitors to enter the
relevant market. Accordingly, such practices lead to foreclosure of the
relevant market and are unlikely to be justified under either of Articles
177(4) or 179(3) RTC.
In order to show a breach of the prohibition of abuses of a dominant
position, it is necessary to establish that (i) an enterprise (for a definition of
which, see Chapter 4), (ii) in a dominant position within the Community,
(iii) has abused that position, and that (iv) the abuse has appreciable cross-
border effects on trade and competition within the Community (see Chapter
5), and that (v) there are no justifications for the abuse.
In examining these elements, reference to EU competition law is useful,
particularly in light of the fact that the European Commission has revised
its approach to the enforcement of Article 102 TFEU. As a result of the
modernisation of EU competition law, which started in the late 1990s and
aimed at developing a more economic-based approach to the enforcement
of EU competition law (often referred to as the ‘effects-based approach’),
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