Abuse of dominant position

What is an abuse of a dominant position?

Abuse of a dominant position is a practice that can be adopted by a company in order to limit or even prevent competition.

Like abuse of a dominant position, anticompetitive cartel is an often illegal practice that undermines free competition in a market.

An abuse of a dominant position by a company can only concern a specific market.

Which companies can abuse a dominant position?

In order for a company to be in a position to commit an abuse of a dominant position, it must have a certain influence on the market and significant economic power – therefore it must be in a dominant position. A company in a dominant position has a large share of the market.

A company in a dominant position is hardly influenced by its competitors and customers and can act to some 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 oligopoly .

What constitutes 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 even sometimes to strengthen it.

The abuse of a dominant position goes beyond the competitive practices accepted by the authorities, since it distorts the game of competition and goes against the principle of perfect competition .

It should be noted that each country and jurisdiction defines abuse of a dominant position 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 a dominant position

Abuse of a dominant position can take many forms. It may, among other things, relate to prices or conditions of sale.

Abuse of a dominant position in relation to prices

Abuse of a dominant position can relate to the prices of goods or services sold by the company.

For example, abuse of a dominant pricing position could be a situation in which a dominant firm sets its prices at a much reduced level that competing firms could not compete with.

Abuse of a dominant position relating to the conditions of sale

Besides the price, abuses of a dominant position can also relate to the conditions of sale.

Thus, a situation in which a company engages in tied selling , i.e. when a sale of product A requires the purchase of product B, may constitute an abuse of a dominant position. In fact, tied selling has a tendency to block the market for the tied product, and to make it difficult or even impossible for other companies to access this market.

Abuses of a dominant position in the law

If they can be proven, abuses of dominant positions are punishable under French law, but also at the level of the European Union.

Conditions necessary for the sanction of 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 met.

The conditions to be proved are as follows:

  • The dominant position of the suspected company in 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 game of competition in the given market

An abuse of a dominant position can only be sanctioned if these three conditions are met.

Abuse of a dominant position in French law

In France, like cartels, abuses of a dominant position are prohibited by the Commercial Code.

Sanctions are determined on a case-by-case basis and the amount of 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 worldwide turnover .

Abuse of a dominant position in the European Union

Abuse of a dominant position can be sanctioned by the European Commission.

The European Commission may 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 indeed taken place, the European Commission has the power to impose sanctions, including fines.

Their amounts are determined according to the seriousness 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 company in breach.

 

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