The German and Romanian Abuse of Market Dominance in the Light of Article 102 TFEU (Nomos, Baden-Baden)

Transcription

1 Durham University From the SelectedWorks of Anca Daniela Chirita Spring April 28, 2011 The German and Romanian Abuse of Market Dominance in the Light of Article 102 TFEU (Nomos, Baden-Baden) Anca Daniela Chirita Available at:

2 Schriften des Europa-Instituts der Universität des Saarlandes Rechtswissenschaft 82 Anca Daniela Chiriţă The German and Romanian Abuse of Market Dominance in the Light of Article 102 TFEU Chiriţă The German and Romanian Abuse of Market Dominance ISBN Nomos

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4 Committee of Honour Comité d honneur Hans Christian Krüger Michele de Salvia Henry G. Schermers Albert Weitzel Schriften des Europa-Instituts der Universität des Saarlandes Rechtswissenschaft Herausgegeben von Professor Dr. Werner Meng Professor Dr. Dr. Dr. h.c. mult. Georg Ress Professor Dr. Torsten Stein Band 82

5 Anca Daniela Chiriţă The German and Romanian Abuse of Market Dominance in the Light of Article 102 TFEU Nomos

6 Gedruckt mit freundlicher Unterstützung der Vereinigung der Freunde der Universität des Saarlandes e.v. und der Konrad-Adenauer Stiftung e.v. Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über abrufbar. Zugl.: Saarbrücken, Univ., Diss., 2010 ISBN Auflage 2011 Nomos Verlagsgesellschaft, Baden-Baden Printed in Germany. Alle Rechte, auch die des Nachdrucks von Auszügen, der fotomechanischen Wiedergabe und der Übersetzung, vorbehalten. Gedruckt auf alterungsbeständigem Papier.

7 Table of Contents Preface 11 Caveats 13 Acknowledgements 14 A. A Comparative Review of National Abuse of Market Dominance Laws 15 I. Introduction to the Comparative Review of the Abuse of Market Dominance Brief Historical Overview of National Competition Laws The Legal Background of the Abuse of a Dominant Position Stricter National Abuse of Market Dominance Rules The Challenges of EU Competition Law: The European Commission s Reform Efforts National Competition Authorities 25 II. Policy Objectives, Evolution, and Future Perspectives Overview of Major Policy Objectives 27 a) Safeguarding the Competitive Process and the Free Competition 28 b) The Furtherance of Consumers 29 c) Undistorted Competition and Market Integration 31 d) Non-Competition or Public Policy Objectives: Social Market Economy, Social Progress, and the Environment 33 e) Free Competition as Economic Freedom and Open Markets 34 f) The Interplay of Fair with Unfair Competition 35 g) The Public Interest and Unfair Competition 37 h) Economic Efficiency 38 i) The Future after Lisbon: the Interplay of Undistorted Competition with Industrial Policy A European Enterprise Act? Concluding Remarks on the Final Balancing of Policy Objectives, their Enforcement and Future Challenges The German Economic Thinking in the Light of an Economic Constitution Performance v Prevention-Based Competition and Economic Efficiency 55 5

8 5. The Market-Structure-Conduct Paradigm, Effective Competition, and the Objective Justification The European Commission s Standard: Total v Consumer Welfare Brief Overview of Short-Term or Other Policy Goals 68 a) The Origins of Un(Fair) Competition under EU Competition Law 68 b) The Un(Fair) Competition under the German Act against Restraints 69 c) The Balance of Fair Competition and its Interplay with Unfair Competition 71 d) Conclusion 72 III. Distinctive Features of Romanian, EU, and German Abuse of Market Dominance Establishing Market Dominance The Scope of Application of the Market Dominance Laws The Dominant Position and the Concept of Abuse 82 a) The Definition of a Dominant Position 82 b) A Comparative Understanding: An Objective v a Subjective Concept of Abuse 83 c) Understanding Performance v Competition on the Merits under EU Competition Law 89 d) Final Remarks on the Special Responsibility 96 e) Understanding the Inter Member-States Distortions of Competition 98 f) Understanding Broad Distortions of Competition 100 g) Conclusions The Relevant Markets 104 a) The Relevant Product Market 104 b) The Definition of the Relevant Geographical Market The Assessment of Market Dominance 112 a) The Presumptions of Market Dominance 115 b) Market Power 117 c) Market Shares 120 d) Barriers to Entry 125 e) Financial Strength Joint Dominance and Oligopolies 127 IV. Overview of the Key Common Features of the Abuse of Market Dominance Exclusionary Abuses Exploitative Abuse Discrimination as a Structural Abuse The Abuse of Economic Dependence 145 6

9 5. Distinctive Features in the Light of the Eighth German Amendment The Analysis and Interpretation of the Recent Romanian Amendment Brief Overview of Sharp Practices of the German Act against Unfair Competition 156 V. The Analysis and Criticism of the European Commission s Guidance Paper on the Application of Article 102 TFEU Introduction to the Challenges and the Gaps of the Guidance Paper Ambiguities: Where is a Clear Policy Standard? Reconcilable Tensions of the New Shift Consistency v Legal Certainty in light of the Form and Effects-based Approach Anti-competitive Foreclosure and Consumer Harm The Standard of Proof and the Evidentiary Requirements The Methodological Approach to Efficiencies and Case Law 180 a) Understanding the Net Impact on Consumer Welfare v Efficiency Defence 182 b) The Burden of Proof 183 c) The Objective Justification, Efficiency Defence, and the Balancing Test 184 d) A Comparative Analysis of Efficiencies The As-Efficient Competitor Test Selected Anti-competitive Practices of the Guidance Paper 192 a) Predatory Pricing 192 b) Tying 193 c) Refusal to Supply Brief Overview of Responses and Concluding Remarks 196 VI. A Future Interpretation of Article 102, Consumer Welfare, and the Way Forward under EU Competition Law Introduction Undistorted Competition and the Old Teleological Interpretation of Article Undistorted Competition: High Level Protection v Consumer Welfare The Comparative Understanding of Undistorted Competition within the Union s Internal Market The Competition Policy after Lisbon and the Interpretation of Article Protection v Consumer Welfare The Evolution and Role of Consumers Interests 211 7

10 8. A Shift to More Effects-based Competition, Consumer Harm, and Public Policy? The Teleological Interpretation of Article 12 to Article Concluding Remarks 220 VII. Brief Overview of Remedies, Penalties, and Judicial Review 222 B. The National Competition Authorities Analysis of Abusive Practices 230 I. An Empirical Classification of Abusive Practices and Future Challenges 231 II. (Non-) and Pricing Practices Monopoly Pricing Excessive or Unfair Pricing and Unfair Trading Conditions Excessive Prices in the Energy and the Gas Sector Predatory Pricing Selling below Costs Selling below Cost in the Food Trade Sector Cross-subsidisation Margin Squeeze in the Telecommunications Sector Export Sales below Cost and Dumping Pricing Discounts and Rebates Long-term Exclusive Agreements 279 III. Discrimination and Hindrance Abuses (Price) Discrimination Hindrance Abuse 286 IV. Tying and Bundling Contractual v Technological Tying Technological Tying v Interoperability in the Software Industry 294 V. Refusals Refusal to Deal Refusal to Supply Refusal to Grant Access to Essential Facilities Abuse of Intellectual Property Rights: A New Exploitative Abuse of Property Rights? 307 8

11 VI. Abuse of Economic Dependency Dependence upon a Certain Undertaking Scarcity Dependence Product Line-induced Dependence Leading Products or Producers Dependence Business or Demand-induced Dependence Abuse of Economic Dependency: A Gap under Article VII. Concluding Remarks on the Eighth German Amendment and the Case Law 325 VIII. Overview of Selected Features of German and EU Abuse of Dominance Super-dominance v Paramount Market Position Likelihood of Effects and Competition on the Merits The Lock-in Effect: Microsoft & Soda Club Efficiencies The Balancing Test: The Public Interest and Effective Competition Technical Bundling and the Unfair Interoperability Advantage Economically Viable or Surviving in the Market Final Concluding Remarks 342 IX. The EU Control of Unfair Competition Practices: The Interpretation of Unfair Pricing Introduction The Historical Background of the EU Unfair Competition Rules The Present Relevance of the Historical Interpretation of Article The Elements of Unfair Competition under Article The Union s Present Unfair Competition Case Law The Control of Unfair Competition Acts: A Dynamic Interpretation Conclusions and Reasons to Enact an Unfair Competition Control Regulation Union-wide 372 C. Summary of Final Remarks, Policy Recommendations, and Meeting Future Challenges for the Abuse of Dominance Final Remarks and Policy Recommendations for Romania Final Remarks for Germany Final Remarks for EU Competition Law 381 Bibliography 383 9

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13 Preface The purpose of this book is the comparative analysis and criticism of German and Romanian competition laws on the abuse of dominance and public enforcement by the national competition authorities in their most recent or leading cases. The core aim is therefore to stimulate an integrated approach to the most sensitive competition issues and to raise pertinent questions about key elements of the Lisbon Treaty s Article 102 TFEU and in the light of the modernisation of its former Article 82 EC. 1 In general, it aims to ensure a higher understanding of the legal and economic concepts of the abuse of dominance and to examine the similarities and distinctive features, in both law and practice, between the two Member States. A hermeneutic approach to the original ordoliberal task of translating the language of classical economics into the language of law facilitates the understanding of such various concepts as efficiencies; consumer harm; consumer welfare; the balancing test and objective justification; performance and prevention-based competition; a «more economic» or an effects-based approach; and free, fair, and unfair competition. By means of an analysis of competition policy objectives, the comparative perspective of the various competition goals is of crucial importance for an understanding of EU competition law and draws the right consequences for its enforcement. In particular, the analysis of key concepts of the German Act against Restraints of Competition (ARC) 2 aims to ensure a better understanding of the role of national competition law and of its influence upon EU competition law. Furthermore, the analysis of some key features of the German Act against Unfair Competition (AUC) 3 allows for an overall understanding of policy objectives and their enforcement as a distinct unfair competition law. 1 Consolidated Version of the «Treaties»: Treaty on European Union (TEU) and Treaty on the Functioning of the European Union (TFEU), OJ C83, 30 March 2010; Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community, signed at Lisbon on 13 December 2007, OJ C306, 17 December 2007, entered into force on 1 December Gesetz gegen Wettbewerbsbeschränkungen (GWB), 15 July 2005, Federal Law Gazette I- 2005, last amended by Article 8 Law of 17 March 2009, Federal Law Gazette I Gesetz gegen den unlauteren Wettbewerb (UWG), 3 July 2004; amended by law, Federal Law Gazette I-866, 10 April 2006; last amended on 22 December 2008, Federal Law Gazette I-2949/

14 The aim is, therefore, to examine the substantial differences between German and EU competition law while striving to underline both their similarities and their potential for harmonisation. Romania s competition law experience aims to show the extent to which the adoption of Article 6 of its Competition Law (RCL) 4 before and after its EU accession results in a better compliance, and to indicate whether identical competition rules applied under a different business environment and cultural tradition may lead to the same successful enforcement of competition laws. However, in order to complete this Member States perspective, there is a special focus upon the European Commission s Guidance Paper 5 on its enforcement priorities in applying Article 102 and upon the consumer protection function in the light of the Lisbon Treaty. Furthermore, the most extensively debated European dilemma on the reform of the former Article 82 EC aims to discuss the extent to which a «more economic» or an «effects-based approach» really fits the realities or traditions of its Member States. The understanding of consumer welfare, therefore, is replaced by a consumer protection function in the light of the Lisbon Treaty s Article 12 TFEU. This results in the Treaty balancing the objectives within the internal market with undistorted, effective, and free competition. Finally, the comparative understanding of distortions, consumer harm, and unfair competition rules offers invaluable support in redefining the concept of abuse of dominance, in establishing a coherent theory of harm, which distinguishes free and fair competition from EU unfair competition, and allows for the re-consideration of intervention and deterrence for the purpose of enforcement. In conclusion, the comparative perspective of the Union s Member States shows that EU competition law has been applied in the light of traditional concepts of competition, the understanding of which is sometimes misinterpreted or unclear. The analysis of the German doctrine and practice allows for a significant re-consideration of the law and practice of Article 102. Perhaps the new competition law experience of a new Member State, such as Romania, is incipient, but still highlights that the adoption of the common rules on the abuse of dominance results in a very similar European experience. Since the approximation of national competition rules may not always lead to their uniform application, emphasis is placed upon stricter rules and differences whilst integrating the abuse of dominance rules into national competition law. 4 Romanian Competition Law no. 21/1996, OJ I-742, 16 August European Commission s Guidance Paper on the Commission s Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings, Communication from the Commission, OJ C45, 24 February

15 Therefore, three sections cover an in-depth analysis and criticism of competition laws on the abuse of a dominant market position, their policy objectives and core principles, the analysis of selective case law, and the analysis of the decisional practice. These sections conclude with a follow-up perspective, and make overall policy recommendations. Caveats This contribution by no means exhausts all the theoretical and practical aspects of the abuse of dominance. Even its recourse to both the decisional practice and the case law aims only to emphasize existing differences in how cases are handled and to highlight most recent developments in practice. Its national comparative approach favours somewhat the analysis and criticism of competition law and policy based on the examination of EU competition law as an integration model. Therefore, the core aim of the book is not to conduct an extensive and exhaustive review of the laws and economics of Article 102, but rather to stimulate an integrated approach to its most sensitive, key competition issues. Specifically, it analyses their convergence in contrast to their divergence within the national competition systems and the Union by offering a constructive assessment of the European post-modernisation process to meet its new challenges. 13

16 Acknowledgements There are two people to whom I owe particular gratitude. Professor Helmuth Schröter, former hearing officer and director at DG COMP, has offered invaluable and insightful comments on this manuscript, while my thanks also go to Professor Torsten Stein, director of the Europa-Institut, Saarland University for his extraordinary support and encouragement for the completion of this doctorate. To both professors I owe the commitment to spend considerable time reading this text. Special thanks are also due to Professors Helmuth Rüßmann and Günther Hönn who completed the doctoral jury at my defence. The doctoral research would have been impossible without the financial assistance I received as a Konrad-Adenauer fellow, which is gratefully acknowledged. The financial support from Germany has been extremely generous, beginning with my post-graduate studies at the Europa-Institut where I have benefited from the Federal Foreign Office scholarship. Since 2006, I have benefited from the continuous support and advice from Dr Detlev Preuße and Dr H.C. Berthold Gees from the Konrad-Adenauer Foundation e.v., Sankt-Augustin. Remembered also are our doctoral seminars, particularly the Wendgräben Castle and Berlin seminars. During my doctorate I have owed special gratitude to my traineeships with the European Commission in Brussels, to my former colleagues, and with the Monopolies Commission in Bonn, where I exchanged insightful economic thoughts. I am particularly indebted to the London-based competition academia, especially to King!s College London and to Professor Richard Whish for encouraging me to publish my first journal articles on this topic; to University College London and Queen Mary College, for inviting me to four exciting international PhD conferences; to the Academic Society for Competition Law conference held in Bonn, and to all the panel members and professors who commented on earlier drafts or articles. Thanks are also due to the editors of the collection of scholarly monographs of the Europa-Institut, Saarland University for the publication in this collection, to the Vereinigung der Freunde der Universität des Saarlandes e.v. and to the Konrad-Adenauer Stiftung e.v. for the printing of this book. Finally, many thanks are due to Mrs. Claudia Palazzo for her kind formatting assistance. Special thanks go to my dearest friends Eva Gerhards and Viviana Meschitti for their encouragement and optimism. Saarbrücken, April 2010 Anca D. Chiri 14

17 A. A Comparative Review of National Abuse of Market Dominance Laws The comparative approach within this section aims to ensure a better understanding of the legal and economic concepts of the abuse of a dominant market position under EU competition law and the two Member States of Germany and Romania. The author is aware of the difficulty of such a mission; thus, the research has been completed, whenever possible, with a macrocomparative analysis of the key features of the German economic freedom approach to competition, including its stricter provisions, which originate in unfair competition law. Therefore, competition rules that cover substantially distinctive aspects or whose interpretation may lead to too divergent approaches need further examination. This section introduces the core principles of the Romanian and German competition systems, their competition authorities, and the defences or penalties available. Thus, it examines in detail how their national competition authorities are challenging the competitive behaviour of dominant or nondominant firms and gives examples of abusive practices. 15

18 I. Introduction to the Comparative Review of the Abuse of Market Dominance In the past decade, remarkable changes have taken place in the competition law and policy of the European Union. On the surface, there appears to be much in common among national competition laws within the EU since the harmonisation of competition rules has already taken place and national competition laws in the Republic of Romania and the Federal Republic of Germany have already been adjusted to meet European standards. However, the competition law systems of these Member States have been developed from different roots and from a different historical perspective, which makes obvious the difficulty of this comparative overview. Upon a closer examination, significant challenges in the two states laws, policy objectives, and enforcement become apparent. The aim of this first chapter is to analyse the two states common and distinctive key features under both law and policy as compared to the European model of harmonisation. The Lisbon Treaty s Article 102 is therefore only one instrument that allows for its comparative analysis with national competition laws on the abuse of dominance. One crucial question is whether having Article 102 as a means of harmonising the divergent approaches to EU competition law is, indeed, the right way to achieve effective competition under these two Member States. This is particularly important since, before the Lisbon Reform Treaty, its former Article 82 EC also needed to be challenged. However, the modernisation of Article 102 may not be achieved solely by a modernisation of the Commission s enforcement priorities. Before the courts, it is essential to challenge Article 102 s interpretation in the light of the Lisbon Treaty s policy objectives and other provisions relating to EU competition law and policy. As the possibility of reforming the content of Article 102 itself is limited, the European Commission s efforts, by its 2005 Discussion Paper, 6 and recently in providing its guidance on the application of Article 102, are the steps necessary to achieve the modernisation of the abuse of dominance. All these efforts, however, would have been futile without the Lisbon Treaty s shift of perspective on the Internal Market and Competition and on its other policy objectives. This 6 DG COMP s Discussion paper on the application of Article 82 of the Treaty to exclusionary abuses, (Discussion Paper), 19 December 2005, available at etition/antitrust/art82/discpaper2005.pdf, accessed on October

19 is even more obvious as the Commission s Communication as a soft law instrument does not make redundant any of the existing EU established case law line or its binding general principles on the abuse of dominance. Therefore, the successful path towards a real modernisation of the Union s competition law comes only by shifting the European courts interpretation of Article 102, which will be examined in Chapter VI. 1. Brief Historical Overview of National Competition Laws Competition laws had been enacted in Romania before World War II. In 1937, a German regulation regarding the abuse of economically powerful positions had influenced the enactment of a Cartel Law, 7 which aimed particularly to prohibit and control cartels. This law also punished undertakings that had abused their dominant market position, but it became invalid after 1945, since when the Romanian economy had been the subject of a centrally planned economy. World War II had a strong influence upon the development of German competition law. Its Act against Restraints of Competition (ARC) was adopted in 1957, the same year as the Treaty of Rome. 8 Some commentators have suggested that German competition law also had a decisive formative influence upon the development and interpretation of EU competition law. 9 Unfortunately, after World War II, Romania entered a grey area of a complete lack of domestic competition. Its legal system had been changed in order to maintain the objectives and priorities of the socialist, then communist regime. Economic law, therefore, was enacted by means of administrative acts, and such anticompetitive practices as price collusion, sales, and distribution monopolies were considered normal behaviour. Prices were protected from fluctuations whilst trade monopolies ensured the isolation of the domestic economy. This Romanian time gap lasted, however, until 1989, when the communist regime fell, but is still furthering or deepening a huge difference with Germany s development and 7 Decree no. 2173, 10 May 1937, see E. Mihai, Dreptul Concuren ei, All Beck, 2004, 56; A.D. Chiri, The Abuse of a Dominant Position under Romanian Antitrust Law, in: Al Doilea Colocviu Româno-German de Drept European, Universitaria, 2007, 221. See, the German Cartel Regulation, 2 November 1923, RGBl I-1067, Verordnung gegen Mißbrauch wirtschaftlicher Machtstellungen; I. Schmidt, Wettbewerbspolitik und Kartellrecht eine interdisziplinäre Einführung, Lucius & Lucius, 2005), 168; D. Zimmer, in: Immenga/Mestmäcker (eds.), Kommentar zum deutschen Kartellrecht, GWB, C.H. Beck, 2007, para 1, Gesetz gegen Wettbewerbsbeschränkungen, supra n 2. 9 Generally D. Gerber, Law and Competition in Twentieth Century Europe, OUP, 1998; J. Venit, Cooperation, Initiative and Regulation, in: Ehlermann/Marquis (eds.) European Competition Annual 2007, Hart,

20 solid evolution of an order of free competition. Furthermore, its major shortcoming is the lack of an «economic» constitution that safeguards business freedom, economic activity, and the competitive process within a domestic centralised economy. Thus, this historical background explains Romania s relatively unbalanced level of competitive and business culture and its imperative need to adopt a competition law after Post-World War II, the introduction of a strong German competition law was seen as one of the pillars that helped stimulate both the establishment of democracy and Germany s economic recovery. The Freiburg School of Law and Economics, therefore, identified the need for rules that could curb undue economic power as part of the establishing of a rule-of-law mechanism, which had been missing under their previous political regimes. This explains why the German competition system is strengthened and embedded as an economic constitution and underlines the crucial importance of a rule of law. 10 Comparatively, the Romanian experience after World War II shows that the economic constitution is a general «must» not only for the control, but also for the creation of a solid mechanism that guarantees free competition and a sound economic and monetary system of an open market economy. This, in turn, ensures the freedom of any individual engaged in any economic activity. Under socialist Romania, the planned economy deprived the private law system of fundamental economic functions and democratic values. Its historic decline disregarded competition law in general, whilst the lack of the rule of law created a legal vacuum. This background subsequently implies that only in the late 1990s was it possible for its domestic competition regime to be reborn. However, the Romanian restoration of a viable private law system with private property took even longer. Fortunately, a functioning and effective competitive law system was seen as a pre-requisite for Romania s accession to the European Union. Despite its historical regression, Romania is, however, the only formerly socialist country where both civil and commercial codes have never been abrogated. 11 Thus, none of these codes addressed the concept of the abuse of dominance. 10 Generally, for the ordoliberal doctrine s influence upon key features of the German competition law and policy, see Chapter II. 11 The Italian Code inspired the Romanian Commercial Code from 1887, whilst, since 1865, Napoleon s Civil Code has been adopted as Romanian Civil Code, see Y. Eminescu, Das Recht des unlauteren Wettbewerbs in Rumänien, 8/9(1994) GRUR Int., 688. Generally for socialist countries V. Dilek, Der Wettbewerbsschutz in Bulgarien und in der Russischen Föderation während des Übergangs vom Dirigismus zur Privatautonomie, Peter Lang, 2004,

21 The first Romanian law to represent a transitional period of the country s competition law development was Law no. 15/1990, 12 which was identical to Article 102 (ex Article 86 of the Maastricht Treaty). It was abrogated in 1996, when the current Romanian Competition Law (RCL) no. 21 came into force. 13 As the RCL applies only to anti-competitive practices and mergers, the title of competition law may be too broad, because it was properly enacted as an antitrust law. The Act against Restraints of Competition has been in force since 1 July Its Seventh Amendment introduced significant changes to anticompetitive agreements, which makes particularly this amendment a milestone in the history of German competition law and its move towards its European modernisation. Thus, the changes to both market dominance and restrictive practices have been rather modest. In the light of the Modernisation Regulation 1/2003, 15 the German legislator relied on its Article 3 in order to maintain stricter national rules. Therefore, under the ARC, several distinctive features of the German competition law, which do not correspond to any section of Article 102, have been retained. These features require further consideration, as the above regulation allows Member States to apply stricter national competition laws. 2. The Legal Background of the Abuse of a Dominant Position In order to join the Union, Romania had to bring its competition law and policy into conformity with the acquis communautaire. In 1996, the adoption of Article 82 EC 16 was a means of replacing the legal vacuum in the abuse of dominance policy area by incorporation in Article 6 RCL. Article 6 s prohibition of abuse of a dominant position, therefore, is similar to Article 102 TFEU, but extends its scope of application to some other distinctive features. 17 Article 6 prohibits any abuse of a dominant position in the Romanian market or on a substantial part of it and provides a non-exhaustive list of anti-competitive practices. This 12 Romanian Competition Law no. 15/1990 regarding the Reorganisation of State Undertakings as Autonomous Entities and Trading Companies, OJ 98/ Romanian Competition Law, supra n 4 as amended by the Governmental Ordinance no. 75, 30 June 2010, OJ I-459, 6 July 2010, which entered into force on 5 August See, Ch.IV Seventh Amendment to the Act against Restraints of Competition, Federal Law Gazette I-2005, , available at GWB /0712_GWB_mitInhaltsverzeichnis_E.pdf, last accessed January OJ L1-1/ Consolidated versions of the Treaty on European Union and of the Treaty establishing the European Community, OJ C321, 29 December See Ch.VI. 19

22 exemplificative list may, particularly, overlap the examples of abusive practices that are detailed under Article 102(2) (a)-(d). 18 Their identical adoption in Article 6, therefore, incorporates the same difficulties and demonstrates the need for their modernisation. It is worthwhile mentioning only one special feature of the RCL, specifically, the one that requires that the anti-competitive conduct of «one or more economic agents» must have as an «object or may have as an effect» the distortion of the economic activity or prejudice to consumers. Following the Competition Council s legislative initiative, this innovative feature has been repealed upon the entry into force of the recent amendment to the RCL. 19 Furthermore, this amendment included a new Article 6 identical to Article 102. The amendment is critical to the extent that it reduces the national abuse of dominance rules, which have already included more abusive practices, in order to have an «identical» European standard. The rationale of ensuring a consistent and coherent application of the latter is, however, insufficient since national competition authorities and courts are already bound by the direct applicability of Article 102 to national competition law. The Act against Restraints of Competition is definitely broader in scope and applicability than its Romanian and EU counterparts. The Act restricts the unilateral behaviour of both dominant undertakings in Section 19 and nondominant undertakings in Section 20. Generally, solely Section 19 deals with the abuse of a dominant position and is quite similar to both Articles 6 and 102. In particular, Section 20 deals with the abuse of a pre-dominant market position under the more severe prohibitions of discrimination and unfair hindrance. In addition to the above common competition rules, Section 20 covers both dominant and non-dominant undertakings whereas the latter refers to undertakings enjoying relative or superior market power. Section 20(4) is applied if an undertaking enjoys a superior market power in relation to small and medium-sized enterprises. Under certain circumstances, Article 6 (f) RCL also included a similar concept of «relative» market power between economic agents that are not market-dominant. The concept of relative market power is valid for the RCL to the extent that is applied to the particular case of economic dependence of an undertaking towards similar undertakings. 20 Before its amendment, the RCL did not refer to any distinctive legal presumptions that may 18 Generally A.D. Chiri, Abuzul de Pozi ie Dominant în Dreptul Românesc al Cartelurilor în Lumina Dreptului European i German, in: Al Doilea Colocviu Româno- German de Drept European, Universitaria, 2007, Supra n See B.Ch.VI. 20

23 apply to economic agents having this sort of relative market power, as applied under the ARC. Both the creation and the strengthening of a dominant position, however, fall within the scope of Section 35 ARC, whilst its Romanian identical provisions are banned in provisions of Article 12 RCL for mergers or economic concentrations. Consequently, under both Romanian and German competition law, the monopolisation of markets is not prohibited. Therefore, any undertaking may reach and enjoy a dominant position, but in a non-abusive manner. As has already been mentioned, the Seventh Amendment to the ARC is of major importance for reforming German competition law in order to meet the European challenge, particularly in light of the Modernisation Regulation. 21 The most important features that have been retained are the presumption of being dominant; 22 the «essential facilities» doctrine to network industries; 23 another specific provision that refers to unilateral conduct, but in relation to small and medium-sized enterprises; 24 and the specific prohibition of unfair hindrance for undertakings holding a superior or a paramount market power. 25 Furthermore, Section 20(3) has been tightened by prohibiting dominant undertakings the use of their market position not only to demand, but also to oblige other undertakings to provide them with preferential terms without any objective justification. These are, however, some of the special features that deserve further examination. In order to create a level playing field for national competition rules, Regulation 1/2003 aimed to harmonise them with the EU competition rules and to ensure a uniform application of competition rules within the Union. In light of this regulation, both Romania and Germany are required to apply Article 102 within their national territory. 26 According to Article 3(1) of this regulation and to Section 22(3) ARC, Article 102 is directly applicable despite certain exceptions, which will be outlined below. Its Article 3(1), therefore, requires national competition authorities and courts to apply Article 102 where an abuse of a dominant position has an effect on trade between Member States. 21 Regulation 1/2003, OJ L1-1/2003. Generally Immenga/Mestmäcker, supra n 7, paras Section 19(3) ARC. 23 Section 19(4) 4 th sentence. 24 Section 20(2) ARC. 25 Section 20(4). 26 See Articles 5 and 6 Regulation 1/

24 3. Stricter National Abuse of Market Dominance Rules According to Regulation 1/2003, Member States are not precluded from adopting or applying in their territory stricter national laws that prohibit or sanction unilateral conduct engaged in by undertakings. 27 Therefore, the exception of Article 3 allows Member States to continue applying national abuse of dominance rules and to achieve a stricter enforcement outcome than is possible under Article 102 TFEU. This, however, is without prejudice to the application of national rules that may predominantly pursue competition policy objectives other than those pursued in the name of Article The application of national laws must occur in a manner consistent with EU competition law, 29 as national legislation that protects legitimate interests other than the protection of competition on the market must be compatible with the general principles or provisions of the EU law. 30 In particular, the Modernisation Regulation allows both German and Romanian competition authorities to apply «stricter» rules under Section 20(1) ARC and Article 6 (f) RCL respectively. For example, Section 20 allows the Federal Cartel Office (FCO) to prohibit those practices aimed at abusing the situation of economic dependence of firms that are enjoying superior or relative market power, but are not dominant. Article 6 (f) is similar in scope, but not quite identical to the German concept of economic dependence. Indeed, Article 6 (f) prohibits an undertaking from exploiting the economic dependence of a similar undertaking that does not have an alternative solution under equivalent conditions, but it does not mention any specific presumption of relative market power of a non-dominant undertaking. Therefore, in practice, it infers flexibility in interpreting the concept of dependence. Section 20(4), which extends the prohibition of unfair hindrance to selling food products below cost, is also stricter than Article 3(2) of this Regulation. Therefore, Section 20 refers to conduct that is allowed under Article 102, by prohibiting marketing strategies that are at the disposal of all undertakings, and addresses the unfair hindrance of smaller competitors by non-dominant undertakings that have superior market power. Before the Commission s Modernisation Regulation, national competition authorities and courts were competent to apply their national laws on the abuse of dominance in parallel with Article 82 EC. The parallel application of the 27 Supra n 21, Article 3(2). 28 Ibid, Article 3(3). 29 This provision also allows the application of national rules directed against unfair practices under the German AUC, supra n Recital 9 Regulation 1/

25 abuse of dominance laws was, however, limited in scope, as national courts could not take a decision that would run counter to the Commission s decisional practice, or because national law could not sanction undertakings for conduct that had already been subject to action at the Union level. 31 From the perspective of consistency and legal certainty and of preserving the overall integrity of uniform, harmonised, competition rules, the regulation runs counter to EU competition law, as it still allows stricter standards than those applicable under Article Before the Lisbon Treaty, the combined application of Articles 82, 3 and 10 EC prevented Member States from adopting any measure that would deprive the competition rules of their effectiveness. 33 Therefore, under their domestic laws, Member States cannot approve measures that would be contrary to Article 102, particularly to the Treaty s objectives. Accordingly, Article 4(3) TEU requires Member States to «facilitate the achievement of the Union s tasks and refrain from any measure which could jeopardise the attainment of the Union s objectives». 34 This requirement is, however, not reciprocal and without prejudice to the reverse situation where the interpretation of the Lisbon Treaty would allow the pursuit of a competition policy, such as a public policy regarding the abuse of dominance, which could, eventually, run counter to the economic freedom-based competition in its Member States. Within this context, it is worthwhile suggesting that the Eighth German Amendment s short-term measures are critical to the extent that they introduce stricter rules. Particularly, Section 20(4) s prohibition of selling below cost as unfair hindrance, which extends further its application to the food trade sector, risks jeopardising the overall effectiveness of the abuse of dominance rule. 35 Despite the obligation to interpret national rules consistently with Article 102, divergent approaches are inevitable in practice. To a greater or lesser extent, identical substantive or procedural rules, however, may still reflect subtle diverging legal interpretations or slightly different legal standards or tests in practice Case C-344/98, Masterfoods v Ice Cream, 2000 ECR I-11369; Case 14/68, Walt Wilhelm v Bundeskartellamt, 1969 ECR Rittner/Kulka, Wettbewerbs-und Kartellrecht, C.F. Müller, 2008, para 80, Generally O Donoghue/Padilla, The Law and Economics of Article 82 EC, Hart, 2006, For a detailed analysis on the Union s objectives, see Ch.II. 35 In detail, see B.Ch.II See O Donoghue/Padilla, supra n 33, 49-51; R. Whish, Competition Law, OUP, 2009, 77, 173. See generally the national competition authorities practice in part B. 23

26 4. The Challenges of EU Competition Law: The European Commission s Reform Efforts Previous reforms in the areas of agreements and mergers based on legislative changes challenged the substance of EU competition law. 37 Article 102, however, cannot be changed by legislation because such a possibility of adopting block exemptions, as under Article 101(3) TFEU on types of conduct that may be admissible under Article 102, does not exist. It is therefore questionable the extent to which Article 102 could still be modernised. As mentioned previously, Article 102 s modernisation included the European Commission s review of Article 82 EC that began with the Discussion Paper in 2005, 38 which has led to the adoption of the Commission s Communication as a Guidance Paper on its enforcement priorities in applying Article 82 to abusive exclusionary conduct by dominant undertakings in Therefore, the scope of the Commission s review had been to undertake an assessment of the abuse of dominance in the light of Article 101 and merger provisions, 40 and to provide guidance for ensuring a consistent enforcement of general principles that apply to Article Its guidance is also intended to help refine sound economic analysis, as under the above areas, and draw the line between «anti»-competitive and «pro»-competitive behaviour. 42 The latter concerns the distinction between type I errors or false negatives, which occur where a competition authority incorrectly concludes that anti-competitive behaviour is not illegal and therefore allows it, and type II errors or false positives, which occur where a competition authority incorrectly concludes that pro-competitive behaviour is illegal. 43 Inter alia, the lack of clarity surrounding the definition of an abuse of a dominant position and the existence of relatively «fewer» decisions and cases at 37 Such as the adoption of Regulation 2790/99 on vertical agreements and Regulation 139/2004 which were completed by guidelines. 38 Supra, n Supra, n As no «comprehensive reassessment» of policy under Article 102 in the light of economic thinking has been made, see P. Lowe, Speech, Thirtieth Annual Conference on International Antitrust Law and Policy, Fordham Corporate Law Institute, 23 October For an exhaustive list of reform reasons, see J. Temple Lang, Article 82 EC, in: Panunzi (ed.) Institutions and Market Series. Providing guidance for pricing practices is particularly welcome, see Temple Lang/O Donoghue, Defining Legitimate Competition, 26(2002) Fordham Int.L.J., R.Whish, Making Sense of Article 82 EC, Jornadas Internacionales de Derecho sobre la Libre Competenca y Sectores Especiales (2007) R stica. 43 These aspects will be detailed in part B. 24

27 European level are other issues that require careful examination. 44 Whether this is the case and whether the reform s ambitious plans have also been fulfilled will be discussed in Chapter V. Furthermore, based on the existent case law, it is for the Court of Justice or for the General Court to decide whether their jurisprudence is really in need of a change by overruling their earlier case law line and developing a different direction in future judgments. An integrated EU case law approach and future interpretation is detailed in Chapter VI. 5. National Competition Authorities The Romanian authority responsible for competition is the Competition Council (CC). 45 According to Article 16 RCL, the CC was set up as an autonomous, independent, administrative authority in the field of competition. Its former competition authority, the Competition Office, had been subordinated to the Romanian government. However, currently, each administrative county of Romania has its own Competition Office with merely parallel functions. Whilst enforcing Article 6 on the abuse of dominance, the CC is bound to apply Article 102 TFEU, which has primacy and must follow the case law of the Court of Justice in interpreting the Union s secondary legislation. Accordingly, the second and third sub-paragraphs of Article 4(3) TEU enshrined the principle of co-operation amongst Member States in order to ensure the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union are met. As Romania has already adopted its rules on the abuse of dominance modelled upon the rules of Article 102, there are few remaining rules that may lead to a different application of the RCL. Similarly, the application of Section 20 ARC ensures the application of substantially stringent competition rules. Therefore, the principle of primacy of EU law applied to the largest possible extent may bring about convergence in the application of Article 102 and national laws on the abuse of dominance. The Bundeskartellamt or the FCO is set up as a federal, independent authority responsible for the enforcement of the ARC. 46 The FCO s powers have been strengthened by the Seventh Amendment to the ARC. 47 Where an abusive 44 For the definition of dominance see, Case 85/76, Hoffmann-LaRoche v Commission, 1979 ECR 461, para 91; generally O Donoghue/Padilla, supra n 33, 16-7; Whish, supra n 36, Since 2003, the CC s decisions have been available at 46 The FCO s decisions are available at dungen/missbrauchsaufsicht/entschmissbrauchsaufsichtw3dnavidw2640.php. See Section 48 ARC. 47 Rittner/Kulka, supra n 32, para 63,

28 practice extends its restrictive effect on competition beyond the territory of one German state (Bundesland), the FCO is the only responsible authority and where effects are limited to a single Land then its own competition authority, Landeskartellbehörde, sanctions the infringement of competition law. 48 As a regulatory policy objective, the FCO aims to protect competition against all restraints of competition that have an effect in the Federal Republic of Germany. 49 In terms of its general policy objectives, the FCO aims to restore the competitive conditions that would have existed in the absence of the abusive behaviour, to seek legal certainty, and to end the infringement by keeping the right balance in choosing the appropriate remedy for the alleged infringement See web.pdf, last accessed See Jan02.pdf, last accessed A.D. Chiri, The Analysis of Market Dominance and Restrictive Practices under German Antitrust Law in Light of EC Antitrust Law, 4(2008)2 Eur.Comp.J.,

29 II. Policy Objectives, Evolution, and Future Perspectives This chapter aims to present a brief overview of the multitude of national policy goals in light of the Lisbon Reform Treaty that are part of EU competition law. The methodological approach, therefore, requires an in-depth understanding of various both legal and economic concepts surrounding the abuse of dominance from a dynamic perspective. The chapter s caveat lies, however, in not offering a comprehensive historical overview of schools of thought. Contrarily, it tries to highlight solely the mainstream German ordo- or neo-liberal concepts that are vital for an understanding of the present or future developments at the European level. Furthermore, its purpose is to outline the European reform of the abuse of dominance in the light of various competition policy objectives and to find the basic arguments to support or reject them further in Chapter VI. Finally, the policy goals are de-constructed into major policy objectives and short-term measures, underlying the dynamics of competition. 1. Overview of Major Policy Objectives The present sub-chapter aims to highlight only the basics of the major policy objectives from a comparative perspective under the three competition law systems. Therefore, this sub-chapter introduces a comparative understanding of the safeguarding of free competition and the furtherance of consumers, undistorted competition and the market integration imperative. It also considers a few non-competition or broad public policy goals; the economic freedom-based competition and open markets; fair competition and its interplay with unfair competition, especially the public interest; and last, but not least, economic efficiency and scientific and technological advance as intellectual and industrial property law and policy. Their analysis is essential for conducting the balancing of the Treaty s other objectives for the enforcement of the abuse of dominance policy and beyond. Their extended analysis is detailed in Chapter VI, which offers the basis for a dynamic, evolutionary perspective of the competition law systems of the Member States and of the Lisbon Treaty in the light of a balancing of policy objectives. 27