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Topic: Review of Irish Sugar case.
For copy of CFI judgement go to http://europa.eu.int/comm/competition/court/ Click on 'Competition'. This will provide access to a list of Court judgements in chronological order. The case is case number T228/97 and judgement was delivered on 7.10.1999.
- Essential Facilities
- Tying/Bundling
- Refusal to Supply
- Raising Rivas Costs
- Dealing with Abuse of Dominance
- Is a more economics based approach to abuse of dominance required?
- Plaintiff must show that:
- The essential facility is controlled by a monopolist;
- The competitor cannot practically or reasonably duplicate the facility;
- The competitor has been denied the use of the essential facility; and
- It is feasible to provide access to the facility.'
MCI Communications Corp. v. American Telephone & Telegraph Co., 708 F.2d 1081, 1132-33 (7th Cir.), 464 US 891 (1983).- Mid-South Grizzlies v. National Football League,
720 F.2d 772 (3rd Cir. 1983), cert. denied,467 US 1215 (1984).- Football league not an essential facility.
- News Limited v. South Sydney District RLFC
, 13.8.2003 www.auttii.edu.au Appeal court upheld right of league to reduce number of teams.
EU Commission has described an essential facility as 'a facility or infrastructure, without access to which competitors cannot provide services to their customers.'
Sea Container/Stena Sealink, OJ 1994 L15/8, [1995] 4 CMLR 84.
[1995]ECR I-743.
- RTE & ITP v Commission (Magill)
Implication IP an essential facility. Very different from US where facility interpreted as relating to a piece of physical infrastructure, e.g. a railway bridge. United States v. Terminal Railroad Association of St. Louis , 224 US 383 (1912).
- Refusal by newspaper publisher to grant access to a competitor to a nationwide home delivery service which publisher had built up.
- ECJ refusal to supply would be abusive if likely to eliminate competition on the part of the firm seeking supply. Not only must access be indispensable to the customer's business - must be no actual or potential substitute for the facility. ECJ concluded that home delivery service not indispensable. No 'legal, technical or economic obstacles' that made it impossible or unreasonably difficult to establish a competing home delivery service.
- Traditional leverage argument.
- Rejected by Chicago
- Commitment to tying may allow firm to leverage monopoly power.
- Are Goods Complements?
- Scepticism by US Courts about possibility of predation has caused shift of attention among economists to Raising Rivals' Cost Theories.
- RRC explanation of Standard Oil case (see earlier notes on predation).
- Strategies such as predatory pricing may deter entry but involve some cost to the dominant firm.
- A more attractive option for a dominant firm is to engage in strategies that raise its rivals' costs, especially if it can do so without significantly raising its own. (Martin, 2002)
- Concept of raising rivals' costs well documented in the economics literature.
- For a summary see Scheffman, D. and Higgins, R.: 20 Years of Raising Rivals' Costs: History, Assessment and Future, George Mason University Law Review, 2004, www.ftc.gov/be/rrcgmu.pdf
- RRC will generally raise firm's own costs
- RRC profitable as long as it enables firm to raise selling price by more than it raises its average costs.
- RRC effects are ambiguous
- Serious limitation in that it does not provide clear guidance to distinguish between pro and anti-competitive strategies.
- Important lesson of cases such as Microsoft lawyers and judges 'could not be convinced that economics could suitably draw the line determining when a dominant firm was doing ‘too much' of what are otherwise normal competitive strategies and tactics, particularly with respect to product innovation and introduction, expansion and pricing.'
- Scheffman and Higgins
- Where a dominant firm is vertically integrated or has a strong distribution or agency network, this may make it more difficult for existing competitors or new entrants to gain access to customers.
- In those circumstances, vertical integration may represent a means of raising rivals' costs because distribution costs are fixed over a large range of output. If a new entrant's output is lower than the incumbent, then its fixed costs per unit will be higher than those of the incumbent.
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- Scherer and Ross (1990, p.486) - penalising firms for abuse of dominance rather than tackling the dominant position itself requires continuous monitoring of dominant firms' behaviour, if it is to be anything other than an occasional lightening bolt'.
- 'It is better…to take once and (one hopes) for all whatever structural actions are needed to restore effective competition and then stand back and let market processes do their job.'
- Massey (1996) argued that Article 82 should be adjusted to allow for structural adjustment where appropriate.
Break up imposed in limited number of US cases
- Standard Oil
AT&T .Microsoft – but overturned on appeal
- Court may apply structural remedies, such as requiring an undertaking that has abused its dominant position to sell off part of its assets. Updates provision in s14 of the 1991 Act originally introduced in the Mergers Act 1978.
- Regulation 1/03 gives the Commission power to impose such a remedy.
'In the antitrust field the courts have been accorded…an authority they have in no other branch of enacted law….They would not have been given, or allowed to keep, such authority in the antitrust field, and they would not so freely have altered from time to time the interpretation of its substantive provisions, if courts were in the habit of proceeding with the surgical ruthlessness that might commend itself to those seeking absolute assurances that there will be workable competition.'
Judge Wyzanski US v. United Shoe Machinery Corporation, 110 F.Supp. 295, 348 (1953).
A more economics based approach to abuse of dominance needed?
See Vickers, J., Abuse of Market Power, speech to European Association for Research in Industrial Economics, September 2004, www.oft.gov.uk/NR/rdonlyres/948B9FAF-B83C-49F5-B0FA-B25214DE6199/0/spe0304.pdf
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