In contrast to abuse of dominance whereby a party that holds a dominant position abuses such position vis-à-vis another party for its own benefit and hence falls foul of provisions such as Article 102 TFEU, for abuse of economic dependence to come into play there is no need for a position of dominance to exist. This becomes particularly relevant in situations where an abusive practice may have taken place but by a party that does not hold a dominant position in the market. A typical setting where this might occur is, for example as where a large scale retailer with buying power (e.g. a supermarket chain) takes advantage of its stronger bargaining position vis-à-vis its smaller suppliers and imposes unfavorable trading conditions on them. In order to address such situations, some jurisdictions have established separate rules from abuse of dominance provisions.
Recently a trend is developing whereby this type of provision is newly introduced, or existing legal provisions are re-interpreted, in order to address growing concerns in digital markets. Often in digital markets it is difficult to prove dominance, including because of the speed of technological evolution and market innovation, which often means that regulators find it very hard to grasp what the exact boundaries of the market might be.
A number of leading jurisdictions in Asia, including Japan, Korea and Taiwan have competition law provisions that provide for abuse of superior bargaining position which corresponds to abuse of economic dependence.
In Japan, Article 2(5) of the Anti-Monopoly Act (AMA) prohibits the abuse of a superior bargaining position, referring to a situation in which a party makes use of its superior bargaining position relative to another party to take, unjustly in light of normal business practices, certain acts that are further specified in the Act and its guidelines. The abuse provision has been applied typically to a mass retailer’s abusive conduct against its suppliers, such as retrospective discounts, requiring monetary contribution or the practice of requesting the dispatching of employees from the suppliers when the retailer is opening a new or refurbished store, or even the practice of compelling the suppliers to purchase products unrelated to those stipulated in the contract. Along these lines, the Japan Fair Trade Commission (JFTC) has concluded by way of its commitment procedure an abuse case against Amazon for its acts against its supplier, and also filed for an emergency injunction against Rakuten, an e-commerce platform, regarding its acts against the merchants using the platform. Both cases suggest that the JFTC has developed a strong appetite toward applying the abuse provision against digital platform operators. Further, in 2019, the JFTC took a further step by issuing new guidelines that suggest it may enforce the ASBP provision in the context of the collection and use of personal information by digital platform operators.
In Korea, Article 45(1)(6) of the Monopoly Regulation and Fair Trade Act (MRFTA) defines abuse of a superior bargaining position as an enterpriser’s act of unfairly taking advantage of his/her position in trade when trading with others, and the Korea Fair Trade Commission provides further details in its enforcement decree and guidelines. In Taiwan, the abuse of a superior bargaining provision will likely violate the general competition provisions such as Article 20, or the unfair trade provisions under Article 25, of the Taiwan Fair Trade Act. Further details are provided in the Principles Governing the Application of Article 25 of the Fair Trade Act.
In Europe, while the EU competition rules do not provide for a provision addressing abuse of bargaining position or economic dependence, at EU Member State level Germany, France, and Italy provide for such a provision, and there are member states such as Belgium that have recently added such a provision.
In Germany, section 20 of the Act against Restraints of Competition (Competition Act – GWB) prohibits conduct of undertakings with relative or superior market power, addressing situations of abuse of economic dependence. Until recently, relative market power was defined as where small or medium-sized enterprises as suppliers or purchasers of certain types of goods or commercial services depend on the undertaking in a way that sufficient and reasonable possibilities of switching to other undertakings do not exist. However, as part of an amendment effective 2021, the provision is no longer limited to small or medium-sized enterprises, and consideration would be given instead to whether there is a clear imbalance vis-a-vis the countervailing power of the other companies. In France, abuse of economic dependence is addressed in Article L. 420-2, paragraph 2, of the French Commercial Code, where abuse of the state of economic dependence of a client or supplier by an undertaking or group of undertakings is prohibited, if it is likely to affect the functioning or structure of competition. This abuse may include, but is not limited to, a refusal to sell, tie-in sales or certain discriminatory practices referred to in Articles L. 442-1 to L. 442-3 of the French Commercial Code. The provision explicitly requires three cumulative conditions: (1) the existence of a state of economic dependence of one company on another; (2) the abusive exploitation of this state; and (3) an actual or potential effect on the functioning or the structure of competition in the market (such effect must be sufficiently tangible). If, however, a company deliberately puts itself in a position of economic dependence it will not be able to claim the benefit of Article L. 420-2. In addition, for an infringement it is necessary to show the absence of an equivalent solution (e.g. that there is no alternative supplier). The French Competition Authority may open a case ex officio or upon a complaint from the victim of an abuse, as was the case for Apple, which was recently fined 1.1 billion euros for abusing the economic dependence of its commercial partners. In Italy, Article 9 of Law no. 192 of 18 June 1998 provides for the prohibition of abuse of the state of economic dependence. The law provides that a state of economic dependence exists when a business finds itself in a position to bring about excessive imbalances in the rights and obligations pertaining to its commercial relations with another business, and the assessment of economic dependence also accounts for any real possibility for the weaker party to find satisfactory alternatives elsewhere in the market.
In contrast to the above EU Member States’ legislation, in the U.S. there are no equivalent provisions. In its response to a questionnaire prepared by the International Competition Network (ICN) in 2008, the U.S. responded that “U.S. antitrust and related laws and regulations do not prohibit acts referred to as ’abuse of superior bargaining position’ under this questionnaire.” In the questionnaire, “abuse of superior bargaining position” was defined as a concept that “typically includes, but is not limited to, a situation in which a party makes use of its superior bargaining position relative to another party with whom it maintains a continuous business relationship to take any act such as to unjustly, in light of normal business practices, cause the other party to provide money, service or other economic benefits. (For example, acts such as request for provision of supplier’s labor without compensation and coercive collection of contributions, exercising buying power, are considered abusive in Japan.)” A party holding a “superior bargaining position does not necessarily have to be a dominant firm or firm with significant market power.” In its 2019 Final Report of the Task Force on International Divergence of Dominance Standards, the American Bar Association’s Antitrust Section confirmed that “exploitative abuse is not a recognized concept in the United States, and the regulation of prices is viewed as inconsistent with the competition principles on which antitrust is based. Indeed, the [U.S.] Supreme Court stressed in the Trinko case that ‘The opportunity to charge monopoly prices—at least for a short period—is what attracts ‘business acumen’ in the first place; it induces risk taking that produces innovation and economic growth.’”