RTD. Refusal to deal
< > cocoo will identify RTDs by:
-analysing the implicit/explicit t&c between a domfirm and nondom firms…..
-analysing both upstream and downstream rtd effects…eg: rtds can have unexpected effects in adjacent markets
< > cocoo will also identify unlawful (non demolegit) remedies imposed by courts/cma on domfirms
non-dominant firms have a right to choose with whom they deal/give access…nondoms can rtd)…..but, doms cannot rtd.
“refusal to deal” (=refusal to supply = refusal to give access to EF (essential facilities)) is where a dominant firm refuses to deal with another firm, or deals only at a price “too high” , or under unacceptable t&c….
thus, courts/cmas impose remedies involving amendments to such t&c, but they are not demolegitimised to take such regulatory role (belongs to gov)….thus, some remedies may be unlawful…. to prevent this, the law sets higher thresholds for RTDs to infringe cl…however, courts/cma are allowed to take such regulatory role when there is:
- rtd has a pattern (existing/past), or
- rtd has a material impact on competition to the detriment of consumers, or
- rtd has no commercial justification:
-if the dominant firm rtds even if the rtd would not harm competition
-if the dominant firm rtds even if the rtd would not risk its safety, environment, undue disruption, loss of economies of integration, or loss of flexibility
rtd egs:
-
- exclusive dealing (“I won’t deal with you if you deal with my rivals”)
- tying (“I won’t deal with you unless you carry my other products”)
- rpm: resale price maintenance (“I won’t deal with you if you discount my products”)
RTD CRITICISMS
-is hard to det a price that is so high to be an unlawful RTD.
-if dominant firms are not allowed to rtd rivals, they might react by raising the
price to non-rivals.
-The EFD [essential facilities doctrine: the EFD is STRICT LIABILITY: does not require proof [or even likelihood] of harm to competition]: thus, efd is sharply criticised…efd is still in EU case law, but only on RTDs where the product/service is “indispensable.”….thus, Today, it is quite difficult to win an adp case based on an RTD in either the EU or the US. Some other OECD countries treat RTDs rather harshly by comparison.
-Article 82 EU TREATY + case law on Article 82: types of rtds :
(i) refusal to supply a (potential or actual) downstream competitor,
(ii) refusal to supply a (potential or actual) competitor in the upstream market, and
(iii) refusal to supply a customer in a market where the dominant firm has no presence.
art 82 and its caselaw contains so much legal uncertainty, that is discouraging doms from competing aggressively, even where would not be anticomp
RTEFA = refusal to ef access
[essential (facility=service=product) doctrine]=efd
RTEFA is a type of RTD….but could still be challenged on both cl(efd) grounds, and onwpi grounds [below: chatham bus station]
The impact of an efd on major infrastructure projects, involving billions of pounds in expenditure, is quite severe and makes planning very difficult. eg EuroTunnel
egs of facilities that may raise EFD/RTD: harbour facilities, television programme listings, bank check clearing facilities, computer reservations systems, airports, telecommunications networks, electricity transmission grids, natural gas pipelines, performing rights societies, interface information, ip rights that span an entire market, “a raw material, a service, or access to a physical thing or place, such as a harbour or an airport
efd requires two markets: -upstream market; -downstream market
efd usually arise where the EF owner/controller is regulated, or is State-owned/related. Hence, there is often a public policy DECISION on whether to amend such regulation, or instead, apply EFD
<> cocoo can challenge these decisions
EF access requirements
- must promote competition also in other markets… e.g. access to a natural gas pipeline might be mandated
- it would be uneconomical for anyone to develop another facility
- access is not be contrary to the wpi. eg. if giving EF access would deter investment
if so, a dom can be mandated to provide access to their EF, but usuallly only where there is price regulation
possible EFs:
- Networks, especially of public utilities eg.computers or software interfaces, are like a railway terminal, or a port.
- Horizontal agreements such as ATM networks, clearinghouses, performing rights societies, computer reservation systems;
- IP (intellectual property)
EF can cause 3 anticomps:
– refusal of access / RTD
– monopoly pricing of access
– collusion [between the owner of the facility and the rival] which results in monopoly profits
De Montis Catering Roma v Aeroporti di Roma case: aeroporti di roma is a state-owned company controlling both of the Rome airports under an exclusive license, denied access to the airports, to a company wishing to compete in airline catering, a service in which the licensee had only a de facto monopoly [not covered by its exclusive rights]….The downstream market is airline catering services on flights beginning at Rome…..The upstream market, where the EF are [the Rome airports]….The italian Cma held: the airport premises as an EF, and no justification for the RTD , thus was an ADP
Holyhead case: Sealink boats arrived when there were trains in the port; B&I boats arrived when there were no trains in the port. There was not an issue of “access” — B&I had it – – but rather an issue of discrimination….Geographical market definition was an important aspect
the Port of Rødy (Denmark) case,: there was no other short time crossing between Denmark and Germany….. geographic market definition is critical to det EF, and ADP
the Magill case : the IP was necessary for the work of the tv firms, but ecj held that it was not an ef, thus, gave no access
Case: the Bus Station in Chatham was not an EF, but merely desirable. however, planning constraints and the absence of available land, made impractical the duplication of the bus station at a suitable location..…cma mandated access on wpi grounds, not on EFD grounds
Even where there are EF entry barriers, mandating EF access is not necessarily the preferred solution:
case: (ATM) network owned and operated by the major Canadian (dominant) banks
held: co-operation uas must be provide for access to new members. the ATM network was dissolved and a web of bilateral agreements replaced it…the atm network had engaged in: — denial of access to the network by potential entrants/members — collusive setting of access charges for new entrants — collusive setting of consumer charges at ATMs — deterrence of creation of a competing network — preventing, through the master network agreement, bilateral upgrading of service.
problems: can the bilateral agreements (that replaced the atm network) be an EF?….what degree of access is sufficient?….what is a legitimate reason to refuse EF access? eg: the EF refusing firm’s reputation or quality may suffer, might be a legitimate reason to deny access.
IBM case: 1980s, the interface was an EF for providers of peripheral devices. As a remedy, IBM was asked to give access.
– “competitive displacement”: if a competitor gains a contract to supply at the expense of the owner of the EF, he can be mandated to give EFA (ef access) to the competitor.
-the EF user pays the cost of capacity expansion.
– A firm with exclusive license that rtd (eg refuse access to EF) is adp only if it anticomps other firms without justification.
-case: EFA [to a gas pipeline network] was denied because would have resulted in competition between the dominating incumbent and a new competitor.
– is not relevant if a facility is essential to an entrant, but rather whether the entrant is essential to increasing consumer welfare or other policy goal.
– a firm builds a railway line to operate its trains… does it have an obligation to build enough capacity for competitors’ trains? Must it permit competitors to run trains?…. this is solved by amending regulation, or using efd….eg: court held: the incumbent should build (in new builds) spare capacity for competitors
UK
The UK wishes to continue its path of liberalisation [ =the lessening of government regulations (thus, allowing more and more anticomps) in exchange for greater participation by private entities]….the UK even wishes infrastructure to be privately funded….. so they are against recognising EFs, so as not to deter private investment.
cma/courts will rule ADP if:
- RTEFA , when there is spare capacity, unless the operator shows justification.
- EFA on non transp/ec.efficienteterms,
- Refusal to facilitate the creation of additional capacity
- RTEFA where capacity becomes available through competitive displacement of the incumbent(s)
to refuse to reserve capacity to potential new entrants lacking evidence that the capacity is required, is not adp.
EU
a dom can rtefa, if allowing efa would result in: less consumer welfare, or less EF safety or technical standards, or interference with the EF proper/efficient use [eg EFA would cause serious congestion, access can be refused temporarily
EFD cases are more suited to national courts or arbitration, than to ec, because ec has no power to award compensation
Article 86 + Articles 85 and 90, 94 …. implement Article 3(f) of the EC Treaty, to ensure that competition in the common market is not distorted.
The only two ECJ decisions — Commercial Solvents and United Brands –impose doms a duty to supply, unless obj. justified [ refusal based on the firms’ best commercial interests, is not objectively justified]
Article 86 + ec: the dom owner of the facility has a duty to deal/EFA, BUT, subject to the principles of:
- proportionality [= should not exceed what is necessary to achieve the objective],
- equality, and
- non-discrimination.
-If the dom changes the use of the EF, such that is no longer available downstream, the dom has a duty to provide users in time with the information they need to exercise their rights, to make arrangement and to negotiate in good faith.
-When a dom owns or controls a EF, and also uses that facility, there is a conflict of interest (coi) which may justify refusal.
-if competitors have an alternative, there is no barrier to entry, so there is no duty to provide EFA
-A dom has a duty to provide efa to competitors, only if it is in the business of providing services they need. Thus, a vertically integrated company is not obliged to provide EFA, if it is not providing EFA to independent users.
-The test is whether the dom’s upstream or downstream operations are part of the same business or separate
-The practice on an industry and the expectations of buyers or users, may make it crucial to be given EFA, which in other circumstances might not be essential (e.g. banks and cheque clearing facilities, airlines and computerised reservation systems, performing rights societies).
-New entrants must be given EFA if there is spare capacity ….but where there is no or insufficient, EFA will depend on existing contractual commitments. Provided that these are of reasonable duration, the new entrant must be given an opportunity to compete for access when the contracts expire.
-A new entrant is entitled to buy (part of the essential facility/service) only if there are other companies to whom the dominant company sells.
-The EF owner cannot be obliged to invest in new capacity to provide facilities for more competitors
-under Article 85, ec may mandate the parents not to discriminate competitors, in favor of their joint venture if they have large market shares, even if they are not dominant nor controlling an ef
Horizontally integrated doms
Horizontally integrated firms supply products/services which have to be bought or used together by consumers. [eg companies selling computers, software and peripherals]…when two products must be used together, one may be an EF for the other.
Article 86 prohibits horizontally integrated doms from tying-in unrelated products
The dom may not put a user who combines its product with its competitor’s in a less satisfactory position than if the user used both of the dom’s products. It also has a duty not to refuse its competitors compulsory licences or alter the interfaces without improving them.
in the IBM case, ec: access to interface information is an EF for competition