Abuse of a dominant position is a practice that can be adopted by a business in order to limit or even prevent competition.
Like the abuse of a dominant position, anti-competitive cartel is an often illegal practice which interferes with free competition in a market.
An abuse of a company’s dominant position can only concern one market in particular.
Which companies can commit an abuse of a dominant position?
In order for a company to be able to commit an abuse of a dominant position, it must have some influence on the market and significant economic power – that it should therefore be in a dominant position. A dominant company has a significant share of the market.
A dominant company is hardly influenced by its competitors and customers and can act to a certain extent independently of them. It can be in a monopoly situation .
Dominance in itself is not illegal, it is even relatively common in practice.
In a market, a dominant position can be held by one or more companies – in the latter case, we speak of an oligopoly .
What is an abuse of a dominant position?
The practice of abuse of a dominant position is intended to maintain the dominant position of the company which uses it, and sometimes even to strengthen it.
The abuse of a dominant position goes beyond the competitive practices accepted by the authorities, since it distorts competition and goes against the principle of perfect competition .
Be aware that each country and jurisdiction defines abuse of dominance differently. Consequently, a practice which is considered to be an abuse of a dominant position in France will not necessarily be so in other countries.
Types of abuse of dominance
Abuse of dominance can take many forms. Among other things, it may relate to prices or conditions of sale.
Abuse of dominance over prices
Abuse of a dominant position can concern the prices of goods or services sold by the company.
For example, an abuse of dominance over prices could be a situation in which a dominant firm sets its prices to a very low level with which competing firms could not compete.
Abuse of a dominant position relating to the conditions of sale
In addition to the price, abuse of a dominant position may also relate to the conditions of sale.
Thus, a situation in which a business practices tied selling , that is to say when a sale of product A requires the purchase of product B, may constitute an abuse of a dominant position. Indeed, tied selling tends to block the market for the linked product, and to make it difficult, if not impossible, for other companies to access this market.
Abuse of dominance in law
If they can be proven, the abuse of dominant positions is liable to sanctions in French law, but also at the level of the European Union.
Conditions necessary for sanctioning the abuse of a dominant position
For an abuse of a dominant position to be penalized, the competition authorities must first assess whether or not several conditions have been fulfilled.
The conditions to be proven are as follows:
- The dominant position of the suspected company on the given market
- The existence of a practice relating to the abuse of a dominant position
- The existence of negative effects due to this practice on the competition in the given market
Abuse of a dominant position can only be penalized if these three conditions are met.
Abuse of dominance in French law
In France, like cartels, abuse of a dominant position is prohibited by the French Commercial Code.
The sanctions are determined on a case-by-case basis and the amount of the fines is based on the value of sales made in France linked to the abuse of a dominant position. The most important sanction is a fine amounting to 10% of world turnover .
Abuse of dominance in the European Union
Abuse of a dominant position can be penalized by the European Commission.
The European Commission can decide to investigate a possible abuse of a dominant position on its own initiative or after having received a complaint from another company.
If it is concluded that an abuse of a dominant position has effectively taken place, the European Commission has the power to impose sanctions, including fines.
Their amounts are determined according to the gravity of the effects of the abuse of a dominant position. The maximum amount of the fine that the European Commission can impose is equal to 10% of the annual turnover of the infringing company.