Collective dominance

 

Author Definition

 

Definition

Article 102 of the Treaty on the Functioning of the European Union (TFEU) is the statutory provision governing the abuse of dominance in the European Union. The provision captures both single and collective dominance. Article 102 TFEU states that any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Certain markets – oligopolistic markets – lend themselves to collective dominance due to the market structure with a small number of operators who can observe each other’s competitive actions. Both Article 102 TFEU and the European Union Merger Regulation capture collective dominance.

 

Commentary

The conduct of several operators can approximate that of a single dominant firm and if they are found to be collectively dominant such behaviour could fall under the prohibition of abuse of dominance. The notion of collective dominance under Article 102 TFEU was first accepted by the General Court in Italian Flat Glass (1992). In the Compagnie Maritime Belge (2000, paragraph 45) the Court of Justice of the European Union stated that collective dominance is a position ‘held by two or more economic entities legally independent of each other, which from an economic point of view, present themselves of act together on a particular market as a collective entity’.

Collective dominance is also a known concept in merger cases. The leading case is Airtours (2002, paragraph 62) where the General Court established a three-prong test for a finding of collective dominance. First, each operator must have the ability to monitor the behaviour of the others as to whether they are adopting a common policy. This means there must be a certain level of transparency. Second, the situation of tacit collusion must be sustainable over time. Third, the reaction of actual or potential competitors (countervailing competitive pressure) and consumers (countervailing buyer power) must not jeopardise the results of the common policy. The Court of Justice of the European Union confirmed the Airtours test in Impala II (2008, paragraph 251) and held that the three Airtours criteria can also be established indirectly.

Airtours confirmed collective dominance under merger control. Laurent Piau (2005, paragraphs 109-111) clarified that the assessment of collective dominance under Article 102 TFEU and merger control should be based on the same principles. If collective dominance is proved, each individual undertaking is in principle subject to the special responsibility of dominant firms under Article 102 TFEU. One collectively dominant company can commit an abuse even if not acting jointly with the others, but the General Court held in Irish Sugar (1999, paragraph 66) that conduct must be ‘one of the manifestations of such a joint dominant position being held’.

National competition law follows European competition law and collective dominance is no exemption. On the national level, most of the cases concerning collective dominance arise in the context of merger control rather than abuse of dominance. It appears from national case law that certain industries such as the media, telecommunications, banking and energy are more likely to create collective dominance concern than others, although collective dominance allegations might arise in any other sector. National case law follows the legal standard developed by in Airtours although the UK Competition Appeal Tribunal held in Brannigan (2007, paragraph 106) that it is not always necessary to show that there is price transparency in the relevant market. In AEM/ASM Brescia (2007), the Italian Competition Authority considered that post merger the structural links between the second and the third largest electricity supplier may induce them to coordinate their behaviour regardless of the presence of a dominant market leader – ENEL. The competition authority did not consider the market characteristics and the ability of the firms to monitor, detect and punish deviations from the collusive outcome.

 

Bibliography

Robert O’Donoghue and Jorge Padilla, The law and economics of Article 102 TFEU (2th edn, Hart Publishing 2013).

N. Petit and N. Neyrinck, ‘Collective dominance: An overview of national case law’, e-Competitions N° 39129, October 2011.

This article is being reviewed by the Editors of the Dictionary.

Author

  • British Institute of International and Comparative Law (London)

Quotation

Liza Lovdahl Gormsen, Collective dominance , Global Dictionary of Competition Law, Concurrences, Art. N° 85893

Visites 3536

Publisher Concurrences

Date 1 January 1900

Number of pages 500

 

Institution Definition

"(...) The decision then goes on to examine the existence of a ’collective dominant position’. It states that ’FP, SIV and VP, as participants in a tight oligopoly, enjoy a degree of independence from competitive pressures that enables them to impede the maintenance of effective competition, notably by not having to take account of the behaviour of the other market participants’ (point 78)." SIV v COMMISSION Judgement of the Court (First Chamber)10 March 1992

 
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