1 ABSTRACT An analysis of the abuse of dominance prohibition in the UK courts Markets, Commercial Logic, Fairness, Formalism and Freedom of Contract Professor Barry J Rodger, The Law School, University of Strathclyde Glasgow Prepared for the Ascola 2015 Conference, May 2015, Tokyo-­‐ Abuse Regulation in Competition Law There has been considerable academic debate regarding the underlying purpose and objectives of the ‘abuse of dominance’ prohibition, primarily as developed under Article 102 TFEU. In particular, there has been considerable tension between what may be perceived as an ordo-­‐liberal, structural or formal conception of the prohibition and a more economic effects-­‐based approach which has been advocated in recent years, and this tension is evident particularly in the academic debate on the Commission’s 2009 Art 102 Prioritisation Communication and in relation to the recent Intel judgment of the General Court. These approaches may reflect more fundamental differences about the extent to which competition law should intervene in markets and the allegedly normal competitive commercial strategies of businesses, and whether we should be more critical of the legitimacy and impact of the free play of market forces. This theme is inherent in the relatively recent seminal article by Maurice Stucke (‘Reconsidering Competition and the Goals of Competition Law’ Mississippi Law Journal 2011) but it is important to be consider this in a particular enforcement context. The author has undertaken considerable work in recent years in providing quantitative and qualitative analysis of private enforcement of EU and UK competition law in the domestic courts of the legal systems in the United Kingdom. The author is currently undertaking an analysis of all EU and UK (since the introduction of the Competition Act 1998) abuse of dominance cases to the end of 2014. Many of the cases in the early periods were relatively straightforward Art 102 defences to claims based on IPRS or judgments dealing with procedural issues. However, in the last 10-­‐15 years there have been considerably more substantive judgments by the UK courts determining what constitutes abusive conduct and the paper will outline this case-­‐law. The outline hypothesis (and there has been some related historical work in this conduct recently by Nicolo Gioicoli on Classical Competition and Freedom of Contract in American Laissez Faire Constitutionalism) is that there has been a change in understanding of the nature of the ‘abuse’ concept by the judiciary away from a more formalistic freedom of contract/property based approach (akin to the Irish courts’ approach in the infamous Walls/Mars Ice cream exclusivity saga) to an appreciation of the harm that could be caused by market behaviour that would be acceptable under a laissez-­‐faire free market based ideology. The paper will provide an in-­‐depth analysis of the case-­‐law and develop understanding of judicial approaches and attitudes in the UK courts towards the abuse of dominance concept and thereby the extent to which competition law impacts upon notions of the free market and traditional conceptions of contractual and property rights. 2 An analysis of the abuse of dominance prohibition in the UK courts Markets, Commercial Logic, Fairness, Formalism and Freedom of Contract∗ BACKGROUND DEBATE Markets, Fairness and Formalism The focus and discussion in this paper are partly inspired by recent and arguably ‘controversial’ work by Ayal in Fairness in Antitrust: Protecting the Strong from the Weak,1 where he argues, relying on so-­‐called basic maxims in society about freedom of contract and property rights that monopolists have not received a fair deal, for greater protection of the property and contract rights of companies with market power. This approach is indeed a reflection of his belief in markets, and their self-­‐
correcting nature as opposed to an interventionist regulation-­‐based approach to markets. An appreciation of this broader context in which ‘monopoly’ laws function was also evident in Stucke’s recent seminal article, ‘Reconsidering Competition and the Goals of Competition Law’,2 albeit he posed the question whether post-­‐financial crisis one could have the same trust or faith in the functioning of markets. In that context he questioned what is meant by the term ‘competition’ and stressed that the term is normative, with different conceptions of what we perceive as an appropriate degree of competition, noting for instance the perjorative use of the term ‘cut-­‐throat’ competition. Ayal’s thesis also allows us to reflect on judicial approaches to the abuse doctrine, in relation to the UK at least in this paper, in the wider context of jurisprudential theory which is relevant in looking at that UK case-­‐law and approaches by the judiciary. His thesis is redolent of legal formalism and a laissez-­‐faire world view based on the freedom of the individual to strike private bargains. 3 As Duxbury notes,4 legal formalism focuses on private interests; views state regulation as undesirable and unnecessary and asserts that private rights should be governed solely by contractual rights and Professor Barry J Rodger, Law School, University of Strathclyde, Glasgow
Idi Ayal, Fairness in Antitrust: Protecting the Strong from the Weak, (Hart Publishing: Oxford 2010). 2
(2011) 81 Mississippi Law Journal 107; University of Tennessee Legal Studies Research Paper No. 123' SSRN, 20 July 2010 3
N Duxbury, Patterns of American jurisprudence (OUP:Oxford 1995), in particular, Chapter 1 ‘The Challenge of Formalism’. See also e.g. P.S. Atiyah, The Rise and Fall of Freedom of Contract (Oxford Clarendon Press: Oxford, 1979) at pp 226-­‐231. 4
Duxbury Ibid, Chapter 1. ∗
1
3 duties:-­‐ an approach epitomised by the Supreme Court in Lochner v New York.5 This Lochner style laissez-­‐faire approach was subsequently subjected to considerable criticism focused on the need for real economic freedom, based on equality of bargaining power.6 Giocoli7 recounts the progressive interpretation of laissez faire constitutionalism as driven by social Darwinists who ‘identified the only function of the State the protection of property and enforcement of contracts’. Accordingly laissez-­‐
faire liberalism was tied up with individualism and freedom of contract and non-­‐ interference with property rights and their value.8 ‘In affirming and applying the core constitutional principles of economic freedom and liberty of contract, LFC judges did nothing more than ensuring that state action supported, rather than threatened, those natural rights of property and exchange that were fundamental to both classical liberalism and classical political economy.’9 In contrast with the debate on formalism in a specific EU competition law application context, formal rationality or legal formalism signifies the exclusion of non-­‐legal considerations from law-­‐making and adjudication: ‘formalism implies a narrow...approach to legal control-­‐the use of clearly defined, highly administrable rules, an emphasis on uniformity, consistency and predictability, on the legal form of transactions and relationships and on literal interpretation..according to rule.’10 This jurisprudential debate also clearly impacts on antitrust/competition law where opponents of Chicago have promoted alternative theories of antitrust based on non-­‐efficiency goals and a policy of legislative activism. The relevance of the debate is epitomised by Posner’s conservative ideology based on wealth maximisation which essentially upholds the ‘legitimacy of existing power relations’.11 Sunstein has for instance stressed that the law -­‐ even of the liberal formalistic legal tradition -­‐ has an inevitable role in shaping preferences, i.e. preferences for autonomy and private property.12 The Irish freezer exclusivity case saga highlighted the inherent paradox in competition law.13 The Irish High Court found no convincing reason why HB should unilaterally abandon the widespread practice of freezer exclusivity and noted that:-­‐‘ ‘It may well be that strategies adopted 5
1905, 198 US 45. Duxbury supra Chapter 5, ‘Economics in Law’, for example at p324:-­‐ ‘Lawyers such as Robert Hale, Karl Llewellyn, John Dawson and John Dalzell endeavoured to show that the economic freedom by which the Supreme Court swore was not really freedom at all. That it was merely freedom to engage in economic coercion.’ 7
N. Giocoli, ‘Classical competition and freedom of contract in American laissez faire constitutionalism’ 10 June 2014, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2448419. 8
See also J Mill Principles of Political Economy ( Longmans, Green & Co: London, 1848 [1909]) II ii 3. 9
Giocoli supra at 48. 10
McBarnet and Whelan, ‘The Elusive Spirit of the Law; Formalism and the Struggle for Legal Control’ MLR Vol. 54, 1991, 848. 11
nd
Duxbury supra at 402. See A. Posner Economic Analysis of Law (2 ed, 1977). 12
See C. R Sunstein, After the rights revolution: Reconceiving the regulatory state (Harvard: Harvard University Press, 1993) and Free Markets and Social Justice, (OUP: Oxford, 1997). 13
See B Rodger, and A MacCulloch, Competition Law and Policy in the EU and United Kingdom 5th Edn (Routledge: London, 2014) at p.x. 6
4 by a firm in a dominant position would prevent competitors from eroding its market power: that is what they are intended to do.’14 This may partly be a manifestation of the historical formal legal tradition in emphasising the sanctity of property rights.15 One of the reasons, for instance, that competition law was introduced in the UK was the perceived laissez-­‐faire attitude by the judiciary to competition law market failures.16 Article 102: Rationale, uncertain scope and the concept of ‘normal competition’ This backdrop clearly has implications for the proper interpretation of and scope of the relevant laws for dealing with market power abuses, in this context Article 102 TFEU and its copycat UK provision, Chapter 2 of the Competition Act 1998. Given that the paper will analyse the UK courts’ application of the abuse of dominance provision, it is crucial at the outset to try and identify the parameters of the prohibition. The starting point is to reaffirm Colomo’s statement that there remains ‘considerable uncertainty about the exact boundaries of Article 102’. 17 He identified the core problem with the notion of abuse in that ‘multiple substantive standards co-­‐exist, overlapping and contradicting one another. As a result it is difficult to anticipate how a particular case will be decided..’18 and that this leads to legal uncertainty where there appears to be no unifying rationale, albeit Colomo develops a critique of a potentially expansive interpretation of the prohibition as a consequence. Two further interesting and recurrent themes are raised by Colomo-­‐ the ‘pigeon holing’ or formal approach to the treatment of certain type of behaviour as abusive and the elusive nature of the scope of the ‘abuse’ concept which is predicated on conduct which departs from normal competition. How far the methods of the dominant undertaking have to differ ‘from those governing normal competition’ is indeed a controversial question. The European Court has arguably taken a broad pro-­‐competitive approach, condemning methods of competition which in practice could be exclusionary but which many critics would argue were ‘normal’ in competitive situations, but this has led to regular heated debates regarding case-­‐law developments under Article 102 relating to abuse, most recently in relation to Intel.19 These again reflect broader debates about the 14
H.B. Ice-­‐cream Limited, Plaintiff, v. Masterfoods Limited trading as Mars Ireland, High Court, [1990] 2 IR 463. See Murphy, K ‘Irish Court Rules on Freezer Exclusivity in the Ice Cream market’ [1992] 6 ECLR 270. See also B Rodger, ‘The big chill for national courts: reflections on market foreclosre and freezer exclusivity under Article 81’ Irish Journal of European Law, (2004) Vol. 11, 77-­‐116. 15
See the discussion on the legal formalism tradition in American jurisprudence in Duxbury, N, Patterns of American Jurisprudence, supra particularly Chapter 1. 16
See brief discussion in Rodger and MacCulloch supra Chapter One, pp21-­‐23. 17
See P Ibanez Colomo ‘The Law on Abuses of Dominance and the System of Judicial Remedies’ Yearbook of European Law Vol 32 No 1 (2013) 389-­‐431 at 389. 18
Ibid at 395. 19
See for example P I Colomo ‘Intel and Article 102 TFEU Case Law: Making sense of a Perpetual Controversy’, LSE Law, Society and Economy Working Papers 29/2014, available at 5 goals and objectives of competition law, as Wils stressed recently in defending the Intel judgment and rejecting an approach to competition based on Chicago School tenets which neglect the process values of undistorted competition including the right to compete on the merits and equality of opportunity.20 The argument based on the central importance of the principle of freedom to compete as a distinct goal of EU competition law, primarily relevant in relation to Art 102,21 is often linked with a reliance on the Ordoliberal School22-­‐ whereby the competitive process has a normative value.23 This principle does not rely on economic effects or require proof of exclusion and appears to fit better with court based adjudication, albeit it provides more of a general principle than an ‘operational standard for adjudication’. 24 As Lianos has stressed, in the absence of a clear understanding of the term ‘competition’ 25 the teleological method of EU law judicial law-­‐making facilitated a more goal oriented legal interpretation of the competition rules.26 Indeed, a relevant factor for this paper which is focused on national court interpretation and application of the abuse prohibition, is an appreciation that the institutional enforcement context clearly impacts on the way in which substantive laws are interpreted and outcomes achieved-­‐ ie a focus on national court based approaches to competition law issues will necessarily differ in context, approach, methodology and outcomes to regulatory public enforcement processes.27 This leaves the key issue of how we construct, interpret and apply rules to distinguish between normal competition on the merits and abusive behaviour. This is a reflection of one’s general standpoint as to belief in markets, the consequent view on the role and objectives of competition policy and how this consequently applies to market power behaviour. In this context, there has been http://www.lse.ac.uk/collections/law/wps/WPS2014-­‐29_Colomo.pdf, and see the debate at the chillin competition blog at http://chillingcompetition.com/. 20
See W Wils ‘The judgment of the EU General Court in Intel and the so-­‐called ‘more economic approach’ to abuse of dominance’ (2014) 37(4) World Competition 405-­‐434. See also Sen ‘Markets and Freedoms: achievements and Limitations of the Market Mechanism in Promoting Individual freedoms’ (1993) 45 Oxford Economic Papers 519 at 536. 21
See L Lovdahl Gormsen A principled Approach to Abuse of Dominance, (CUP: Cambridge, 2010); cf P Akman ‘The role of ‘freedom’ in EU Competition Law’ (2014) 34(2) Legal Studies 183-­‐213. 22
See generally, I Lianos and D Geradin (eds) Handbook on European competition Law, Substantive aspects, (Edward Elgar Cheltenham, 2013) Chapter 1, I Lianos, ‘Some reflections on the goals of EU competition Law’. see also L Lovdahl Gormsen ‘The Concept between economic Freedom and Consumer Welfare in the Modernisation of Article 82 EC ‘ European Competition Journal 3(2) (2007) 329-­‐344. 23
Ibid p56. See H G Grosskettler, ‘On Designing an Economic Order: The Contribution of the Freiburg School’, Part I Chapter 3 in D A (ed.), Walker, Perspectives on the History of Economic Thought Volume II, Twentieth Century Economic Thought, Selected Papers from the History of Economics Society Conference 1987, (Edward Elgar Publishing Ltd: Aldershot 1987). 24
Lianos supra at 53. 25
See for instance Stucke supra. 26
Lianos supra at 69. 27
See N Komesar, Imperfect Alternatives: Choosing Institutions in law Economics and Public Policy (University of Chicago Press, 1997) and Law’s Limits (CUP: Cambridge, 2001). 6 sustained academic discussion and critique of the underlying rationale of the abuse prohibition in the EU in recent years, notably Rousseva, Rethinking Exclusionary Abuses in EU Competition Law,28 Nazzini, Foundations of European Union Competition Law: The Objective and Principles of Article 102, 29 Akman, The Concept of Abuse in EU Competition Law: Law and Economic Approaches. 30 Akman reaffirms that art.102 TFEU and the rather abstract term of "abuse" is quite flexible but rejects the notion that the provision was driven by an ordoliberal approach, which puts more emphasis on protecting the economic freedom of market participants. This debate is certainly not restricted to the EU, and there has been of course considerable literature comparing and contrasting the approaches to market power in the EU and the US.31 As Schweizer notes:-­‐-­‐ ‘Like US antitrust law, EU law struggles with formulating an adequate test for distinguishing between pro-­‐competitive conduct, or “competition on the merits”, on the one hand, and anti-­‐competitive, exclusionary conduct on the other…’32 At this stage one has to acknowledge the two key strands of abuse case-­‐law, exclusionary and exploitative abuse behaviour,33 which are also of interest in assessing the UK case-­‐law. Jones and Lovdahl Gormsen provide an excellent overview of the former in this passage:-­‐ ‘ in seeking to identify unlawful exclusionary behaviour, the EU courts have not, in contrast to their US counterparts, been unduly concerned about their interpretation of Article 102 giving rise to false positives and chilling, rather than fostering, competition. …the judgments seem to prefer a construction of Article 102 that will ensure the process of competition and rivalry between firms is preserved and protected. The anti-­‐competitive effects of a dominant firm’s conduct thus tends to be assumed where it is capable of excluding equally efficient competitors or is liable to remove or restrict a buyer’s freedom to choose its sources of supply, to bar competitors from access to the market, to apply dissimilar conditions to equivalent transactions with other trading parties or to strengthen the dominant position by distorting competition. Critics complain that the EU rules in this 28
Hart Publishing: Oxford, 2010. OUP: Oxford, 2011. 30
Hart Publishing: Oxford, 2012. See also P Akman and L Garrod 426 ‘When are Excessive prices Unfair?’ Journal of Competition Law and Economics (2011) 7(2) 403. See also Akman, ‘The role of ‘freedom’ in EU competition law’ supra. 31
See for example Baker, D I ‘An Enduring Antitrust divide Across the Atlantic over whether to Incarcerate Conspirators and when to restrain Abusive Monopolists’ [2009] 5(1) European Competition Journal 145-­‐200; E Fox, ‘Monopolization and abuse of dominance: why Europe is different’ The antitrust bulletin Vol 59 No 1 spring 2014 129-­‐152. See also H Schweitzer ‘Parallels and Differences in the Attitudes Towards Single-­‐Firm Conduct: What are the Reasons? The History, Interpretation and Underlying Principles of Sec 2 Sherman Act and Art.82 EC’ EUI Working papers Law 2007/32. 32
Schweitzer ibid at 38. 33
See for instance Rodger and MacCulloch supra 2014 Chapter 4. 29
7 area may, in consequence, be over-­‐inclusive..’34 However, despite the relative absence of any EU jurisprudence in relation to exploitative abuses in recent years, the debate on the potential role of the prohibition in relation to exploitative abuses remains important and problematic, and evidenced to a certain extent in the UK case-­‐law. Gal has provided a majestic account of exploitative abuses which chimes with the themes in this paper, 35 noting the excessive prices prohibition as a ‘microcosm’ of competition law in seeking to balance ‘social Darwinism with… social justice’.36 He analyses the ordliberal influence regarding fairness in market relationships, but notes that fairness is a flexible concept, as demonstrated by Ayal, and that indeed it is derived from the rules of the game which can vary over time.37 The central paradox is how to deal with market processes which lead to and result in ‘earned monopoly rewards’,38 although Gal also notes that the prohibition ‘can’t be explained by a simplistic property or freedom of trade argument’.39 Such a formalistic approach to freedom of contract and property rights would, he explained, effectively annul the competition laws.40 Fairness and Freedom of Contract The nature and context of exploitative abuses, the role of fairness and freedom of contract in relation to such abuses, and their relationship to the contractual concept of economic duress have been exploited by Akman in a fascinating paper which sheds further insights into the scope of Art 102.41 Both economic duress and Article 102 she points out concern ideas of fairness and the ‘use of power to obtain advantageous terms’,42 and that there is overlap between economic duress and the abuse prohibition in relation to the exploitation of bargaining positions in trade contracts,43 noting that lack of freedom to choose different suppliers has been a concern in many Article 102 cases. The broad notion of ‘fairness in contractual relations and its potential application as an underlying principle in the application of Article 102, has been explored more fully by Akman in The Concept of 34
See A Jones and L Lovdahl Gormsen ‘Abuse of dominance: exclusionary pricing abuses’, Chapter 10 in Lianos and Geradin (eds) supra, p472. 35
See M Gal, ‘Abuse of dominance-­‐ exploitative abuses’, Chapter 9 in Lianos and Geradin (eds) supra. 36
Ibid at p385. 37
Ibid at p388. See also Stucke supra. 38
Ibid. at p397. See also Rodger and MacCulloch supra 2014 Chapter 1. 39
Ibid. at p398. 40
Ibid. 41
P Akman ‘The relationship between economic duress and the abuse of a dominant position’ (2014) LMCLQ 99-­‐ 131 42
Ibid at p101. 43
See in particular the discussion on Situational v structural monopolies. See M J Trebilcock, The Limits of Freedom of Contract Law (Harvard University press: Cambridge MA, 1997) 92; H, Hovenkamp, ‘Harvard Chicago and transaction costs in antitrust analysis’ (2010) 55 the antitrust bulletin 613 particularly at 633. 8 Abuse in EU Competition Law: Law and Economic Approaches. 44 While the notion of fairness underlies the abuse prohibition to some extent, its role is unclear, and although Akman suggests a tension with ordoliberalism 45 (based on freedom) this can be reconciled to the extent that, in contrast with Ayal, fairness is concerned with market participants other than the dominant undertaking. A central question posed by Akman for Article 102 in the context of both the jurisprudential debate here and the case-­‐law analysis infra, is the extent to which fairness may impede the concept of freedom of contract. In this context, one may consider fairness at both the vertical and horizontal levels, and although there is some overlap in the case-­‐law,46 the UK case-­‐law has primarily been in relation to the former. Indeed the focus in the abuse prohibition on inequality of bargaining power involving a dominant party, as Akman highlights, may reflect the idea of procedural fairness which underpins the role of fairness in contemporary contract law. 47 Nonetheless, it should be noted that Akman concludes that a fairness based approach to the abuse prohibition would be too vague, a threat to freedom of contract and would produce unwanted uncertainty for businesses in B2B relations.48 These themes of the uncertain scope of the prohibition, the potential for intervention in market-­‐
ordered outcomes, and possible tensions with respect for formal contract and property rights that may result from fairness based approaches, provide a canvass for viewing the case-­‐law developments in the UK, and particularly the hypothesis that more recent case-­‐law may evidence a broader application of the abuse doctrine. OUTLINE OF UK COURTS’ ABUSE CASE-­‐LAW Introduction This is the key section of the paper in which we will provide an overview of the case-­‐law in the UK courts, primarily England and Wales. This will not be a comprehensive coverage of all case-­‐law since accession by the UK to the EU in 1974.49 We will be assessing case-­‐law both in relation to different periods and the stage at which a judicial determination was made. These are linked in that more recently there have been more substantive final judgements involving the application of the abuse 44
Akman (2012) supra, Chapter 4 ‘Fairness’. Ibid at 151 et seq. 46
See eg Purple Parking discussed further infra. 47
Akman supra at 159-­‐167. 48
Ibid at 182. 49
See B. Rodger ‘Competition Law Litigation in the UK Courts: A Study of All Cases to 2004-­‐ Part I’[2006] ECLR 241; ‘Competition Law Litigation in the UK Courts: A Study of All Cases to 2004-­‐ Part II’ [2006] ECLR 279; ‘Competition Law Litigation in the UK Courts: A Study of All Cases to 2004-­‐ Part III’ [2006] ECLR 341 Rodger, B. ‘Competition Law Litigation in the UK Courts: a study of all cases 2005-­‐2008’-­‐ Parts I and II [2009] 2 Global Competition Litigation Review 93-­‐114 and 136-­‐147 and ‘Competition Law litigation in the UK Courts: A study of all cases 2009-­‐2012’ [2013] 6(2) GCLR 55-­‐67. 45
9 of dominance prohibition under both EU law and UK law:-­‐ Articles 102 TFEU and the Competition Act 1998 Chapter II prohibition respectively. It should be stressed that the paper will focus on case-­‐law where there has been judicial consideration of the scope of the abuse doctrine, and accordingly there will be little emphasis and analysis of case-­‐law involving other key aspects of the prohibition, for instance in relation to determination of issues regarding what constitutes an ‘undertaking’, the test for the relevant market, whether or not there is dominance or an effect on inter-­‐state trade. These are important issues, pre-­‐requisites for the application of the prohibition, but they fall outside the focus of this paper which concentrates on the scope of ‘abuse’ and in particular how this may limit or impact upon the commercial competitive strategy of dominant undertakings, and how this has been viewed by the judiciary. Accordingly, we will categorise case-­‐law according to stages of judicial determination. We will also focus on the period since the introduction of the Chapter 2 prohibition in UK competition law, which mirrors the Article 102 prohibition and came into force as of 1st March 2000.50 This is not because we will be focusing simply on the domestic abuse provision, which is in identical terms to Article 102 and requires to be interpreted consistently with the CJEU interpretation of that provision,51 but because there have been more substantive final judgments in this period and considerably more judicial discussion of the scope of the abuse doctrine. As highlighted, the UK courts in applying Article 102 and the domestic prohibition, must follow and apply the CJEU jurisprudence,52 but as indicated above, the abuse doctrine and the case-­‐law afford considerable scope for variable interpretation according to the circumstances of the case, and one’s view of the competitive process and the role for competition law intervention in that process. It should also be stressed here that we will be focusing on the case-­‐law in the English courts, although there will be a brief outline of any relevant judicial pronouncements in the Scottish courts. We shall often refer to success, but in this context success does not relate to the claim but the success of the competition law issue, raised either by the claimant or the defendant, in whatever context. 53 It should also be clear that success does not necessarily entail final success on the substantive merits of the action, but may for instance be at an interim stage of the litigation. Accordingly, it should be recognised that there are degrees of success in terms of their overall significance to developing competition law jurisprudence, dependent for instance on the stage of the litigation process and the relationship between substantive and procedural rules. Moreover, the focus of the analysis will be 50
on cases where the courts have delivered substantive final judgments on the application of the See Rodger and MacCulloch (eds), The UK Competition Act: A New Era for UK Competition Law, 2000, Hart:Oxford; Rodger, BJ (ed), Ten Years of UK Competition Law Reform, 2010, Dundee: DUP. 51
Under s60 of the Competition Act 1998. See B Rayment, ‘The Consistency Principle: Section 60 of the Competition Act 1998’ and R Nazzini, ‘A welfare Based Competition Policy under Structuralist Constraints: Abuse of Dominance and OFT Practice’ Chapters 4 and 5 in Rodger (ed) 2010 supra. 52
Ibid. 53
See further infra. 10 abuse doctrine, although we will also cover cases where there have been interesting discussions concerning the scope of the abuse doctrine and its potential application in some (but certainly not all) of the cases involving summary judgments or interim process. For the purposes of this paper, we shall not be focusing on the jurisprudence of the Competition Appeal Tribunal in relation to the abuse prohibition, which takes place in the public enforcement context.54 Case-­‐Law Categories We consider the case-­‐law in categories according to different stages of the litigation process. 1) Substantive final judgments The most straightforward and important involves a substantive final judgment on the competition law issue, normally following trial.55 Inevitably these cases have generally attracted greatest public profile and interest, and perhaps not surprisingly they have been historically relatively relatively rare (though increasing recently), reflecting partly the prevalence of settlements and the limited development of mechanisms to enhance the attraction of private competition law enforcement. 2) Summary judgment The second group basically involve cases where the defendant or the claimant has sought a summary judgment in order to dismiss the action or to strike out the defence.56 In this context, success does not denote whether or not the application to dismiss or strike out is successful, but whether the competition law plea is successful in that process. The following cases in this category are illustrative:-­‐ For instance, In An Bord Bainne Co-­‐operative Limited (The Irish Dairy Board) v The Milk Marketing Board,57 where the claimant sought damages and an injunction partly based on an alleged abuse of dominance, the defendant’s application to strike out was dismissed. Other interesting cases in this category include:-­‐Valor International Ltd v Applications des Gaz SA, where an action under article [101] and primarily [102] was dismissed due to the lack of detail regarding the facts establishing an abuse noted by the court to be embarrassing for lack of peculiarity;58 Wireless group plc v Radio Joint Audience Research ltd, which involved a claim for compensation under 54
For a discussion of the role of the CAT, see D Bailey, ‘The early Case Law of the Competition Appeal Tribunal’ Chapter 2 in Rodger(ed) 2010 supra. Note that the CAT has a role in private enforcement in follow-­‐on actions, and following the introduction of the Consumer Rights Act 2015 also in stand-­‐alone actions, but in undertaking its role in follow-­‐on actions the CAT is bound by prior infringement decisions (of the Commission or OFT/CMA) and only considers issues of causation and quantum:-­‐ see Rodger n 1 supra and ‘UK Competition Law and Private Litigation’ Chapter 3 in Rodger(ed) 2010 supra. 55
Or proof as it is known in Scots law. 56
Note there are some potential overlaps here with the interim process cases, discussed further infra. 57
18 May 1984, CA, [1984] 2 CMLR 584 (15 February 1984 QBD [1984] 1 CMLR 519). 58
Whitford J at para 16, p35:-­‐ ‘The number of cases in which it may be appropriate to strike out a pleading rather than to give leave to amend may be small, but I am bound to say that I am in no doubt that this is very clearly a case in which the appropriate order is the order sought by the defendants.’ 11 Chapter 2 of the 1998 Act, but the defendant’s application for summary judgment was successful and it was noted that ‘the expense may be enormous. The pre-­‐trial and trial costs of competition cases, with the need for expert evidence from economists, are notoriously high.’59 There have also been successful cases involving the claimant seeking summary judgment to strike out a competition law defence, success denoting that the defence is successful, albeit in allowing the defendant to proceed with their defence to the action to later stages in the litigation process.,60 In Intel Corp v Via Technologies Inc,61 an appeal against summary judgment in favour of the plaintiff was successful in respect of defences based on articles [101] and [102]. On appeal it was stressed that for summary judgment to be granted, the defendant must have no real prospect of succeeding, and real prospect is to be contrasted with a fanciful one for this purpose. Furthermore, where European Court jurisprudence was being developed,62 it would be dangerous to assume existing case-­‐law would not be extended or modified so as to encompass the defence being advanced, and cases involving arts [101] and [102] often raised questions of mixed law and fact which were not suitable for summary determination. 63 There have been many unsuccessful cases in this sub-­‐category, including the following:-­‐ Imperial Chemical Industries Ltd v Berk Pharmaceuticals Ltd, where Goulding J noted:-­‐ ‘I think that the English courts must be ready to scrutinise a Euro-­‐defence with care, notwithstanding any apparent complexity..’ but that the power to strike out a defence ‘should be exercised only in plain and obvious cases which are clear beyond all doubt’; Duracell International Inc v Ever Ready Limited where the allegations of abuse in a defence and counterclaim were considered to be tortuous and baffling and accordingly struck out. 3) Interim process The final category is denoted by the broad banner of ‘interim process’ which covers a range of situations in which judgments are given in a competition law dispute during the procedural phases of the litigation; some judgments in this category are closely related to the summary judgment category, for instance where a party seeks to amend to include a competition law defence or claim. There are a considerable number of unsuccessful interim process actions, the vast majority involving applications for interlocutory injunctions, including the following:-­‐In Garden Cottage Foods Ltd v 59
At para. 53. For instance, in British Leyland Motor Corp Ltd v TI Silencers Ltd CA 24 Nov 1980, [1981] FSR 213. 61
November 26-­‐28, December 20, 2002 [2003] F.S.R. 33 [Intel Corp v Via Technologies Inc, April 11-­‐12, June 14 2002 [2003] F.S.R. 12]. 62
For instance, it was possible that the exceptional circumstances test per Magill (Cases 241-­‐242/91P RTE and ITP Ltd v Commission [1995] 4 CMLR 718) and IMS (Case C-­‐418/01 IMS Health GmbH & Co OHG v NDC Health GmbH & Co KG [2004] 4 CMLR 28) may apply to other circumstances. It was held to be arguable with a more than fanciful prospect of success that the range of exceptional circumstances could extend to the facts pleaded. 63
There was also the important requirement for the material facts to be ascertained at trial because a reference to the European Court may subsequently be necessary. 60
12 Milk Marketing Board,64 the House of Lords allowed an appeal against the Court of Appeal, and the order of the judge at first instance was restored. This was of course a crucial ruling for the domestic development of competition law remedies in confirming the right to pursue remedies for breach of Article [102], but in practice the House of Lords limited the scope for interlocutory remedies; however in Network Multimedia Television ltd and another v Jobserve ltd, 65 in an action for injunction for alleged breaches of section 18 of the Competition Act 1998 [the Chapter II prohibition], an appeal was rejected as the judge was right to hold that there was a seriously arguable case.66 Abuse Case-­‐law Pre and Post Competition Act 1998 There has been considerable discussion of all competition case-­‐law before the UK courts over various periods by the current author to 2012, but the focus here is on abuse case-­‐law to the end of 2014, and for these purposes we will examine the case-­‐law pre and post 1 march 2000, when the 1998 Act Chapter 2 prohibition came into force. Generally it should be stressed that there have been relatively few case-­‐law judgments involving article 102 since 2000, and the clear preponderance of article 102 cases was in the 1980s and 1990s and these were primarily in cases where article 102 was used as a euro-­‐defence, for the most part unsuccessfully and primarily in intellectual property-­‐related cases as a defence to some form of IPR infringement action, for instance in Duracell International Inc v Ever Ready Limited.67 Since the 1998 Act, there has been a clear prevalence of Chapter 2 cases, with various cases involving chapter 2 alone for example:-­‐ Claritas(U.K) Limited v The Post Office and Postal Preference Service limited,68 Network Multimedia Television ltd and another v Jobserve ltd,69 Getmapping PLC v Ordnance Survey,70 Wireless group plc v Radio Joint Audience Research ltd,71 and the Scottish case of Fotheringham & son v The British Limousin Cattle Society Ltd.72 64
HL, 23 June 1983, [1984] AC 130, [1983] 3 WLR 143; [1983] 2 AllER 770, [1983] 3 CMLR 43 [Garden Cottage Foods Ltd v Milk marketing Board [1982] QB 1114; [1982] 3 WLR 514 [1982] 3 AllER 292; [1982] 2 CMLR 542]. 65
December 21 2001 [2001] EWCA Civ 2018 [Network Multimedia Television ltd (T/A Silicon.com) v Jobserve Ltd, April 5 2001 Ch D]. 66
Rodger ‘Early Steps to a Mature Competition Law System; Case Law Developments in the First Eighteen Months of the Competition Act 1998’, [2002] 2 ECLR pp52-­‐67; Robertson A ‘Litigating under the Competition Act 1998: the early case law’ Comp. L.J. 2002 1(2) pp 335-­‐344. 67
Ch D, 10 March 1989 [1989] RPC 731. 68
November 2 2000 [2001] E.C.C 12. 69
December 21 2001 [2001] EWCA Civ 2021 [Network Multimedia Television ltd (T/A Silicon.com) v Jobserve Ltd, April 5 2001 Chancery Division (Transcript) 5 April 2001]. 70
May 31 2002 [2002] EWHC 1089 (Ch), [2002] UKCLR 411. 71
December 16 2004 [2004] EWHC 2925 (Ch), [2005] E.C.C. 99. 72
8 April 2004, 2004 SLT 485, Ex Div. See also the unsuccessful case involving Article 82 and Chapter 2, Land Rover Group ltd v UPF (UK) Ltd (in Administrative receivership) and others January 25 2002 [2002] EWHC 303 (QB). 13 Pre-­‐Competition Act 1998 Case-­‐Law In the 1970s, there were two successful competition law cases involving abuse. In Aero Zipp Fasteners Ltd and Lightning Fasteners Ltd v Y.K.K. Fasteners (UK) Ltd,73 a plaintiff’s application to strike out a defence based on arts 85 and 86 was rejected as the court held that the defence was not vexatious, frivolous or an abuse of process. In Application des Gaz SA v Falks Veritas Ltd, 74 an application for leave to amend defences, to include defences based on arts 85 and 86, was successful.75 In the 1980s there were four successful cases. In British Leyland Motor Corp Ltd v TI Silencers Ltd,76 the defence to an action for copyright infringement in relation to spare parts was struck out at first instance, but this was overturned on appeal. In Lansing Bagnall Limited and Others v Buccaneer Lift Parts Limited,77 where the judge at first instance refused to strike out a Euro-­‐defence based on art 86, this was upheld on appeal and Templeman LJ noted the difficulties and lack of ECJ guidance at that stage in development of the law, such that if Euro defences were properly pled and particularised, the pleadings would be allowed to stand. Although Garden Cottage Foods Ltd v Milk Marketing Board,78 is one of the more famous competition law cases in the UK and confirmed in principle that parties would be entitled to claim damages for breaches of EC competition law, the application for an interlocutory injunction was refused. Interestingly Lord Denning noted in this relatively early case in the Appeal court that ‘Applying those principles, I do not think that the Milk Marketing Board can escape by saying they were only protecting their own commercial interests.’ Subsequently in An Bord Bainne Co-­‐operative Limited (The Irish Dairy Board) v The Milk Marketing Board,79 it was noted at first instance that Garden Cottage Foods provided compelling support for the proposition that direct effect creates direct rights which courts are to protect, and an application to strike out an action for damages and injunction under article [102] was refused and the subsequent appeal dismissed. In the 1990s, in Intergraph Corporation v Solid Systems CAD Services Ltd and Others80 the plaintiffs in a copyright infringement action unsuccessfully sought to strike out certain parts of the defences based on articles 85 and 86. In this period there were also two partially successful cases. In Pitney 73
Ch D, November 7, 1973 [1973] CMLR 819. See also at Ch D, 14 February 1978 [1978] FSR 301 [1978] 2 CMLR 88. 74
CA, March 27-­‐29, May 24 1974 [19784] CH 382 (see also Ch D 20 May 1975 [1975] 2 CMLR 177). 75
Lord Denning stated at p396:-­‐ ‘So we reach this important conclusion: articles 85 and 86 are part of our law. They create new torts or wrongs.’ 76
CA 24 Nov 1980, [1981] FSR 213. 77
CA, July 27, 1982 [1984] 1 CMLR 224. 78
23 June 1983, [1984] AC 130. 79
18 May 1984, CA, [1984] 2 CMLR 584 (15 February 1984 QBD [1984] 1 CMLR 519). 80
Dec 7, 1993, Ch D, [1995] E.C.C. 53. 14 Bowes Inc v Francotyp-­‐Postalia GmbH and another,81 a patent infringement action, the defence and counterclaim asserted that the plaintiff had breached article [102] by charging unfairly high prices and discriminating against the home market by exporting at lower prices. A motion to strike out was rejected, the dispute required a trial and leave to amend the defendant’s pleadings was granted as it was essential to ensure all matters were before the court. Nevertheless, not all allegations constituted a reasonable ground of defence or counterclaim, accordingly certain parts were struck out and defence amendments were allowed only in part. The competition law issue failed in cases after trial in a very limited number of cases prior to 2000; 82 including the following:-­‐ Felixstowe Dock and Railway Co v The British Transport Dock Board, where the court emphasised the need for considerable factual material to establish dominance in relation to article [102] which was lacking in this case; Hoover plc v George Hulme (Sto) Limited and George Hulme where the need to establish an effect on inter-­‐state trade was emphasised; and Shearson Lehman Hutton Inc and another v MacLaine Watson & Co Ltd and others where a claim for damages and declarator that a rule of the London Metal Exchange was unsuccessful under articles [101] and [102] as a high standard of proof was required. There was little or no discussion in any of the pre 2000 case-­‐law of the precise nature of the abuse concept. Post-­‐Competition Act 1998 Case-­‐law There have been a number of private court disputes in this period post 1 March 2000 which the domestic or EU prohibition has been raised by one of the parties.83 The first judgment on the substance of the Chapter II prohibition was delivered eight months after its introduction, on 2 November 2000, by Lawrence Collins J in the High Court, Chancery Division, in Claritas (UK) Ltd v The Post Office and Postal Preference Service Ltd.84 This judgment was in the context of an action for an interim injunction to restrain the despatch of consumer preference questionnaires using the Royal Mail brand and logo throughout the UK by the Royal Mail. The Post Office owned 30% of Postal Preference Service Ltd (PPS), and Claritas, a company involved in procuring, supplying and analysing consumer information for a fee for businesses, claimed that this 81
Ch D, December 12 1990, [1991] FSR 72. Felixstowe Dock and Railway Co v The British Transport Dock Board, CA 29 July 1976 [1976] 2 CMLR 655 [QBD, July 19, 1976 [1976] 2 CMLR 405]; Hoover plc v George Hulme (Sto) Limited and George Hulme, Ch D, May 27, 1982, [1982] 3 CMLR 186; Shearson Lehman Hutton Inc and another v MacLaine Watson & Co Ltd and others QBD, March 16, 1989 [1989] 3 CMLR 429; 83
See Robertson, A, ‘Litigating under the Competition Act 1998: the early case law’ [2002] Comp Law 335; Rodger, B, ‘Competition Law Litigation in the UK Courts – A Study of All Cases to 2004’ [2006] ECLR Parts I, II and III at 241, 279 and 341 and ‘Competition law litigation in the UK courts : a study of all cases 2009-­‐2012’ (2013) Global Competition Litigation Review, 6 (2) 55-­‐67. 84
[2001] UKCLR 2. This was followed by the DGFT Decision in relation to the same dispute, Consignia plc and Post Preference Service Ltd, Decision CS 98/4/2001, 15 June 2001. 82
15 amounted to an abuse of the Royal Mail’s dominant position. The key question was whether, at this interim stage, there was a serious issue to be tried. Different strands of European jurisprudence were analysed. First, the possibility of an abuse based on refusal to license IP rights was rejected as Claritas would not be excluded from the market because it could not use the Royal Mail logo.85 Secondly, the application of the essential facilities doctrine was deemed inappropriate as Claritas retained full access to the postal facilities. Finally, in any event, given that the alleged abuse was not in a market in which the Post Office was dominant, Claritas had failed to demonstrate that this situation fell within the scope of the Tetra Pak II requirement for close links between the dominant market and abuse market. 86 Although the application was dismissed, this early resort to the prohibition in private litigation demonstrated an awareness of the possibilities under the Act for aggrieved competitors. It is interesting to note the way that Lawrence Collins J applied the s 60 ‘consistency with Community law’ requirement seamlessly applying European jurisprudence to the Chapter II prohibition as the Act intended. There was a comparatively limited degree of success in the English courts between the years 2001-­‐
2003. An interim process judgment case-­‐ Network Multimedia Television ltd and another v Jobserve ltd,87 concerned an appeal as to whether the judge at first instance was wrong to hold that there was a “serious issue” to be tried in an action for injunction for alleged breaches of section 18 of the Competition Act 1998. The appeal was rejected, damages were not an adequate remedy for the claimant, and the balance of convenience favoured the grant of interim relief and the court was not convinced that Oscar Bronner disposed of the issue and the judge was right to hold that there was a seriously arguable case. 88 Intel Corp v Via Technologies Inc, 89 outlined above, demonstrated a reluctance by the court to simply dismiss competition law defences and that there existed the need for facts to be ascertained at trial, partly because a reference to the European court may subsequently be required. Accordingly, this litigation reflects the recognition of the courts of the developmental nature of competition law, and also the role of the European Court in that process.90 Many of the cases in the interim process category are in effect little different to the summary 85
See Case T-­‐68/89 Radio Telefis Eireann v Commission [1991] ECR II-­‐485. Case C-­‐333/94P [1996] ECR I-­‐5951. 87
December 21 2001 [2001] EWCA Civ 2021 [Network Multimedia Television ltd (T/A Silicon.com) v Jobserve Ltd, April 5 2001 Ch D]. 88
See Rodger ‘Early Steps to a Mature Competition Law System; Case Law Developments in the First Eighteen Months of the Competition Act 1998’, [2002] 2 ECLR pp52-­‐67. 89
November 26-­‐28, December 20, 2002 [2003] F.S.R. 33 [Intel Corp v Via Technologies Inc, April 11-­‐12, June 14 2002 [2003] F.S.R. 12]. 90
See Rodger ‘Early Steps to a Mature Competition Law System; Case Law Developments in the First Eighteen Months of the Competition Act 1998’, [2002] 2 ECLR pp52-­‐67; Robertson A ‘Litigating under the Competition Act 1998: Recent Case-­‐law: Part 2’ Comp. L.J. 2004 3(2) pp 85-­‐100. 86
16 judgment cases, where the effect of the application is to strike out the particular competition law claim or defences.91 In Her Majesty's Stationary Office and another v The Automobile Association limited and another, where the defendant applied for permission to put in an amended rejoinder based on an alleged abuse by the claimant of article [102], the court held that the defendant’s claim would not give rise to a viable plea of abuse of a dominant position, noting that:-­‐ ‘because the adverse consequences of allowing a plea under Article [102] into a case are so severe and may involve enormous cost, not just to the parties but to court time, it is incumbent upon the court to look carefully at what is and what is not pleaded.’92 The claimant in Adidas-­‐ Solomon AG v Draper,93 was a leading sportswear company and the defendants were the owners, organisers and promoters of the tennis Grand Slam tournaments and the ITF umbrella organisation for all national governing bodies-­‐ all of which comprise the Grand Slam Committee. They had promulgated a Code of Conduct including dress rules, and had proposed a new rule to clarify that the limits on manufacturers’ logos on clothing had been exceeded by the Adidas trade-­‐mark three stripes. The claimant relied on Article [101] and [102] and sought interlocutory injunctions. Reference was made94 to earlier dicta in Intel Corporation v Via Technologies95:-­‐ ‘(a) claims and defences under Articles [101] and [102] require careful scrutiny so as to prevent cases lacking in merit going to long and expensive trials but (b) often raise questions of mixed law and fact which are not suitable for summary determination.’ The court noted that a cautionary approach was also appropriate in the context of the developing shape of European jurisprudence and was satisfied that there was a real prospect of success under Articles [101] and [102]. Software Cellular Network v T-­‐Mobile (UK) Ltd96 concerned the provision of mobile telephony services and the launch of a new service-­‐ Voice over Internet Protocol (‘VoIP’) technology. T-­‐Mobile refused to activate numbers associated with Truphone, the trading name of the claimant, who contended that this amounted to an unlawful abuse of a dominant position. It was considered to be seriously arguable that between 22-­‐30% market share may be sufficient to create dominance. Crucially, in relation to the adequacy of damages as a remedy, the claimant argued that its commercial survival would be in doubt if it would be required to await trial, even speedy trial, before launching a full service. On the balance of convenience, and taking into account the cross-­‐
undertaking in damages, the potential impact on Truphone favoured the grant of interim remedies. 91
See, for example, Chiron Corporation v Murex Diagnostics Limited (No 2), CA 7 April 1993 [1994] 1 CMLR 410. In The British Horseracing Board Ltd v William Hill Organisation Ltd, Ch D, July 19, 2000, certain parts of the defence were struck out. 92
At para. 21. 93
[2006] EWHC 1318 (Ch). 94
At para. 24. 95
[2002] AER (D) 346 at para. 32. 96
[2007] EWHC 1790 (Ch). 17 The court relied on the dicta in Sea Containers Ltd v Stena Sealink Ports and Stena Sealink Line97 to the effect that if an opportunity is denied to provide a new service ‘there is sufficient urgency to justify interim measures.’ Otherwise, a final decision may be ‘rendered “ineffectual or even illusory”.’98 In the context of the focus of this paper, the two most significant (interim process and/or summary judgment) cases in this early period following the introduction of the Chapter 2 prohibition both involved Laddie J,99 where he focused on the relationship between commercial decisions taken by a dominant undertaking and the scope for intervention under an abuse based prohibition. In Suretrack Rail services Limited v Infraco JNP Ltd,100 he stressed that the abuse prohibitions are ‘not designed to allow the courts or the relevant regulatory authorities to interfere on a day by day basis with the running of business. Even big businesses are entitled to win in the market place. Even big businesses are entitled to take rational decisions which are beneficial to them and harmful to competitors or others in the market.’101 He emphasised the point made earlier by him in Getmapping,102 that ‘an abuse which is incapable of being objectively justified is one which no rational and fair person could justify. A decision which respectable and fair-­‐minded businessmen could disagree with is not thereby made incapable of being objectively justified. There may be many views as to whether a particular course is objectively justified or not. The need to demonstrate that the dominant trader's actions are incapable of being objectively justified means that a person alleging abuse on that basis has a high hurdle to cross.’103 This indicates Laddie’s view that the bar for intervention on the basis of the abuse prohibition should be set high and that considerable deference should be afforded to rational commercial business decisions by dominant undertakings. It is the contention of this paper that we may be able to observe a shift in some of the more recent English court judicial pronouncements on the abuse prohibition (and the relationship between commercial legitimacy and the objective justification defence under Article 102) towards an approach which is more likely to be critical of the commercial justifications for competitive strategies-­‐ and for judges to engage in the debate over the merits of such strategies. This appears to have widened the potential scope for the application of Article 102/the chapter II prohibition. Moreover, unless there are preliminary references in the types of cases involving interference with commercial decision-­‐making, it is unlikely that the European Court will make any rulings on the theme given that the types of infringing 97
[1995] 4 CMLR 84 paras 58-­‐59. At paras. 58-­‐59. 99
See also supra re n Her Majesty's Stationary Office and another v The Automobile Association limited and another [2001] E.C.C 34 which highlighted the difficulties in pleading an abuse case. 100
[2002] EWHC 1316 (Ch) 101
Ibid. para. 20. 102
Getmapping plc v Ordnance Survey, [2002] EWHC 1089 (Pat). 103
Suretrack supra at para 26. 98
18 behaviour are unlikely to fall within the Commission’s enforcement priorities in its public enforcement capacity. This re-­‐emphasises the scope for divergent interpretation and application of the abuse prohibition. This is not a criticism of a wider interpretation of the prohibition, and indeed the author welcomes an approach which is more critical and interventionist than a more formalistic reliance on freedom of contract and the exercise of property rights. Indeed, this partly reflects the tension which has been evident in the EU case-­‐law over the last 20 years with the interaction of competition law and IP rights, and the jurisprudence concerning refusal to supply and essential facilities, noting that the latter been the focus of much of the recent case-­‐law in the English (and Scottish) courts. Substantive final rulings in abuse cases In Hendry and others v The World Professional Billiards and Snooker Association limited (WPBSA),104 it was held that the rule that players could not enter tournaments organised elsewhere without prior written consent was held to breach s 2 and 18 of 1998 Act, articles [101] and [102] and also constituted an unreasonable restraint of trade, but otherwise the claim was dismissed. The competition law issue failed in various cases after trial:-­‐ in Arkin v Borchard Lines ltd and others, following a 49 day trial, the claimant was unsuccessful in claims of alleged infringements under articles [101] and [102] regarding the market for liner services to and from Israel. It was held that as prices never fell below average variable costs and the failure to pursue a policy of undercutting competitors was strong evidence against eliminatory intent and therefore there was no breach of either articles [101] or [102]; Leeds City Council v Watkins & Whiteley concerned alleged breaches of Chapters 1 and 2 Competition Act 1998 and Arts [101] and [102] which were dismissed due to insufficient and unconvincing evidence regarding the relevant market and dominance; in Ineos Vinyls Ltd v Huntsman Petrochemicals (UK) Ltd105 the claimant manufacturers had failed to establish that the defendant supplier of ethylene had a dominant position and abused it by charging prices and delivery charges that were unfair within the meaning of the EC Treaty Art [102] and the Competition Act 1998 s.18, as they had failed to analyse the costs incurred in producing the product, compare those costs with the price charged or evaluate the resulting profit. In English, Welsh and Scottish Railway Ltd v E.ON UK plc 106 the claimant was an operator of bulk freight services and the defendant was in the business of electricity generation. In 1997 they entered a Coal Carriage agreement. In 2006 the ORR found that EWS had foreclosed the Great Britain coal haulage by rail market by abusing its dominant position by inter alia the exclusionary terms of the 104
October 5 2001 [2002] E.C.C. 8. [2006] EWHC 1241 (Ch). 106
[2007] EWHC 599 (Comm). 105
19 CCA. They were fined £4.1m, and EWS and E.ON then disputed the CCA. EWS applied for a declaration to the effect that the ORR Directions rendered the CCA void. It was held that the exclusionary terms were illegal and void ab initio in terms of Art. [102], and also subsequently in relation to Chap 2,107 that that there could be no severance of the exclusionary term and the whole contract was void and unenforceable. In Attheraces Ltd v British Horseracing Board, the claimant, which supplied websites, TV channels, and other media relating to British horse racing, alleged that the defendant, which had a central role in the organisation and promoting of British horse racing and which kept a computerised database of pre-­‐race data, including the date and place of the race meeting, name of the race, list of horses entered, etc., had abused a dominant position and thereby infringed both Article [102] and the Chapter 2 prohibition. BHB effectively held a monopoly in the provision of the pre-­‐race data and it was held in the High Court that it had abused its dominant position by excessive, unfair and discriminatory pricing.108 It was held, following the Court’s jurisprudence on refusal to supply, that the pre-­‐race date constituted an ‘essential facility’, essential to ATR’s business, and that a constructive refusal to supply was caught by the prohibitions. Referring to court case-­‐law on excessive and discriminatory pricing, the price was excessive in comparison to the cost to BHB plus a reasonable return, and discriminatory in being markedly higher than the sum normally charged to other broadcasters. On appeal, this ruling was overturned by the Court of Appeal, which was sceptical about Article [102]/Chapter II becoming a general provision for the regulation of prices.109 The Court stated that exceeding cost was a necessary but not a sufficient test for abuse of dominance, there was little evidence that competition on the market was being distorted by BHB’s demands and that the value to ATR of the pre-­‐race data was relevant in determining whether the price was excessive. Furthermore, differential pricing was not necessarily abusive, and prices essentially were dependent on market forces. Accordingly, BHB’s pricing strategy was not abusive and the Court of Appeal clearly advocated a restrained approach to court involvement in claims of excessive or discriminatory pricing. The two most significant subsequent cases have both involved abusive behaviour by airport operators.110 In Purple Parking Ltd v Heathrow Airport Ltd,111 Mann J in the High Court held that the defendant airport operator had abused its dominant position by changing existing arrangements to effectively exclude ‘meet and greet’ car park operators from the airport terminal forecourts while 107
The courts are required to apply the doctrine of severance and the same approach is held to apply where a contract is void by reason of Article 82 and the Chapter II prohibition. 108
[2005] EWHC 3015 (Ch) Ch D. 109
[2007] EWCA Civ 38, CA. 110
See also Arriva Scotland West ltd v Glasgow Airport Ltd, [2011] CSOH 69. 111
[2011] EWHC 987 (Ch). 20 maintaining its own ‘meet and greet’ operations there. Mann J undertook a comprehensive analysis of the existing EU (and UK) jurisprudence on the essential facilities doctrine and margin squeeze abuse. However, it was stressed that the defendant’s ‘pigeon-­‐hole’ approach whereby a claim should fit within the category of essential facilities or fail was not accepted by Mann J: ‘a court is entitled to look at conduct, and ask the overall question of whether there is an abuse by reference to various ways of committing that abuse, and is not forced to find one single appropriate label to that abuse … and apply some test only applicable to that form.’112 The claimant’s claim was based on an allegation of the application of dissimilar conditions to equivalent transactions, resulting in anti-­‐competitive behaviour, and this was upheld on the basis of the effect on consumers. It was stressed that commercial justification did not constitute an objective justification for abusive behaviour, and the objective justification arguments based on security and congestion were rejected on the facts; it was clear that the airport operator was motivated by an anti-­‐competitive intent. In Arriva The Shires Ltd v London Luton Airport Operations Ltd,113 ATS had a concession agreement with the operator of Luton Airport (‘Luton Operations’) to carry passengers (over 1 million a year) on the 757 bus service from the airport direct to London Victoria. Following a tender process, the concession was awarded to a rival bus operator. ATS claimed that Luton Operations was dominant in the market for granting rights to operate bus services and that they had abused it in two ways: 1) the tender procedure in awarding the new concession was unfair, and 2) through the abusive terms contained in the award of the new concession to the rival bus operator. The first part of the claim was unsuccessful as the tender process was fair, but the seven year exclusive period awarded to the successful tender bid operator was deemed to be abusive. The analysis and application of the abuse and objective justification in this judgment merits further analysis. It was noted that exclusionary abuses fall into two categories, where the dominant undertaking: a) competes on the downstream market and is acting to foreclose that market to its own advantage; 114 or b) distorts competition on the upstream market between itself and its competitors by entering contracts with customers to buy exclusively from the dominant undertaking.115 This case clearly did not fall within the second category but Rose J rejected the defendant’s assertion that to fall within the first category the dominant undertaking had to derive a competitive advantage or commercial benefit through the exclusionary conduct; for instance, by 112
Ibid. at para. 102. [2014] EWHC 64 (Ch). 114
See Commercial Solvents v Commission [1974] ECR 223. This is also the type of abuse involved in Purple Parking. 115
See for instance Case C-­‐549/10 P Tomra Systems ASA v Commission [2012] 4 CMLR 27. 113
21 using its dominance in one market to improve its own position in a downstream market.116 Clearly, Luton Operations were not active on the downstream bus services market, but in any event they gained important commercial and financial advantages from the concession which gave them a percentage of revenue earned by the bus operator. Rose J also held that the grant of an exclusive right to the bus route for a lengthy period of seven years affected competition on that downstream market and was anti-­‐competitive. This reasoning is analogous with European Commission decisions in relation to the grant of media rights to broadcast football matches over an extended period.117 As in Purple Parking, it was stressed that the objective justification defence was not available simply where a business decision was commercially rational; prohibited abusive conduct normally invariably furthers the business interests of the dominant undertaking. Both these cases demonstrate a robust approach to abusive conduct and a restrictive approach to defences based on the objective justification for dominant undertakings’ business decisions.118 Scottish Case-­‐Law In Scotland, there has been very limited case-­‐law and/or judicial consideration of the scope of the abuse doctrine. The claimant was unsuccessful in the first ever Scottish ruling to consider the application of Article [102] in Argyll Group plc v The Distillers Company plc,119 where the balance of convenience lay against the grant of interim interdict to prevent a takeover from proceeding In Millar & Bryce Limited v Keeper of the Registers of Scotland,120 the Keeper of the Registers of Scotland terminated contractual arrangements allowing firms to provide public facilities to search the Register of Inhibitions and Adjudications. In a judicial review action, the pursuer sought ad interim to suspend the decision, and to obtain an order ad factum praestandum to prevent the Keeper from restricting access. It was held that there was a prima facie case that this was an economic activity and abusive behaviour, but judicial review was not an appropriate method for regulation of contractual decisions made by public officers by way of suspension. Accordingly the motion for interim order ad factum praestandum was granted. In Fotheringham & son v The British Limousin Cattle Society Ltd,121 at first instance a plea as to the competency of an action in which the 116
See for example Case T-­‐128/98 Aeroports de Paris v Commission [2000] ECR II-­‐3939, and SEL-­‐Imperial Ltd v The British Standards Institution [2010] EWHC 854 (Ch). 117
See Commission Decision, Case COMP/38173, Joint Selling of the Media Rights to the FA Premier League, 22 March 2006. 118
Nonetheless, in practice claimants have often struggled to satisfy all the elements required for a successful abuse of dominance claim See for instance: PIK Facilities Ltd v Watson’s Ayr Park Ltd (2005) CSOH 32; Chester City Council v Arriva plc [2007] EWHC 1373 (Ch); and, BHB Enterprises Ltd v Victor Chandler International Ltd [2006] EWHC 1074 (Ch). 119
4 April, 1986, 1987 SLT 514. 120
1997 SLT 1000, 2 May 1997. 121
8 April 2004, 2004 SLT 485, Ex Div. 22 pursuer claimed that the defendant’s conduct, in discriminating against their black polled limousine cattle, breached the Chapter 2 prohibition was repelled and proof before answer allowed. The Inner House rejected an appeal on the basis that the jurisdiction of the defenders could only be challenged by way of judicial review. unsuccessful cases included:-­‐ PIK Facilities Ltd v Watson’s Ayr Park ltd ,122 where the defender’s pleadings were inadequate in a Chapter 2 defence based on the essential facilities doctrine, when the pursuers, proprietors of Glasgow Prestwick International Airport, sought interdict against the defenders from trespassing on airport roads, by buses and taxis, to collect and drop off passengers being conveyed by them from their off-­‐airport car parking facilities; In PIK Facilities Ltd v Watson’s Ayr Park Ltd, 123 the pursuers were proprietors of Glasgow Prestwick International Airport and sought interdict against the defenders from trespassing on airport roads, by buses and taxis, to collect and drop off passengers being conveyed by them from their off-­‐airport car parking facilities. A defence was raised based on infringement of Chapter 2 of the Competition Act 1998, relying on the ‘essential facilities’ doctrine as developed to a limited extent under EU jurisprudence. 124 However, this defence failed at the first hurdle of establishing the relevant market. 125 Subsequently, in Arriva Scotland west ltd v Glasgow Airport Ltd,126 an application by operators of a bus service for interim interdict (injunction) against the airport in relation to their exclusion from bus stands following an unsuccessful tender bid in reliance on the Chapter 2 prohibition was unsuccessful: on the basis that an abuse claim was complex and best resolved after detailed evidence was heard and the balance of convenience did not favour the grant of the remedy as there was arguably objective justification based on capacity constraints. TYPOLOGY OF CASES In this section we will simply map the broad categories of abuse cases which have been raised in the UK courts. Of course, any pattern is primarily dependent on independent private party action rather any instrumental choice by enforcement agencies or by courts. However it does help to paint a picture of the context in which the abuse prohibition has been considered by the courts. For the purposes of this article, we can split the post 1998 Act case-­‐law into three distinct categories, while recognising that there are inevitably overlaps between those categories. The three primary 122
[2005] CSOH 32. [2005] CSOH 132. 124
At para. 43 :-­‐ ‘The defenders’ averments in answer 5 touching upon the issue of the relevant market display, in my opinion, vagueness, ambiguity and confusion. I conclude that the defenders have not relevantly averred what is the relevant market in this case.’ 125
At para. 43:-­‐‘The defenders’ averments in answer 5 touching upon the issue of the relevant market display, in my opinion, vagueness, ambiguity and confusion. I conclude that the defenders have not relevantly averred what is the relevant market in this case.’ Furthermore, it was held that the requirement of indispensability was not satisfied. 126
[2011] CSOH 69. 123
23 categories suggested here are regulation context abuses; abuses in the context of business/contractual relationships and exclusionary abuses directed at rivals. The second category of business relationship abuses may be purely exploitative but they may also overlap with the rivalry exclusion category, and may indeed be exclusionary even although there is no competitive rivalry between the parties. 127 Regulation context abuses This category of regulation context type abuses are exemplified by two cases considered earlier:-­‐ Wireless group plc v Radio Joint Audience Research ltd, 128 where the defendant, the United Kingdom's only radio ratings provider, sought summary judgment on a claim brought by the claimant broadcaster (W) for abuse of a dominant position under the Competition Act 1998 s.18. It was claimed that there had been a breach of s.18 by a decision by the defendant not to introduce modern technological methods to its method of calculating radio audiences, instead continuing to rely on the diary system which had been in use for several decades, but summary judgment was granted in favour of the defendant. The claimant was partially successful in Hendry and others v The World Professional Billiards and Snooker Association limited (WPBSA),129 where it was held that the rule that snooker players may not enter tournaments organised elsewhere without prior written consent was in breach of various competition rules, including Article 102 and the Chapter 2 prohibition, and was accordingly void and prohibited. Business/Interference with contract There have been various cases concerned with fairness-­‐based issues in existing and ongoing contractual relationships or in relation to the renewal of existing business relationships. Here generally we see a clear reticence in early cases by the English courts to become involved in exploitative behaviour. In AttheRaces Ltd v British Horseracing Board,130 the Court of Appeal was sceptical about Article 102/Chapter II becoming a general provision for the regulation of prices,131 and in determining that the prices to be charged in this context were essentially dependent on market forces/the economic value to the purchaser, it held that BHB’s pricing strategy was not abusive and clearly advocated a restrained approach to court involvement in claims of excessive or discriminatory pricing. In Ineos Vinyls Ltd v Huntsman Petrochemicals (UK) Ltd132although there were no general pronouncements by the court regarding the nature and scope of the abuse prohibition in 127
See Akman supra 2012 Chapter 4. At para. 53. 129
October 5 2001 [2002] E.C.C. 8. 130
[2005] EWHC 3015 (Ch) and [2007] EWCA Civ 38. 131
[2007] EWCA Civ 38, CA. 132
[2006] EWHC 1241 (Ch). 128
24 relation to fairness/excessive prices, the claimant manufacturers failed to establish that the defendant supplier of ethylene had a dominant position and abused it by charging prices and delivery charges that were unfair within the meaning of the Art [102] and the Competition Act 1998 s.18, as they had failed to analyse the costs incurred in producing the product, compare those costs with the price charged or evaluate the resulting profit. Nonetheless there have been clear signs that the Courts have more recently been willing to explore and consider contractual bargains which have been reached between parties, as demonstrated by Arriva The Shires Ltd v London Luton Airport Operations Ltd,
133
discussed above. The case which straddles the two categories of business/interference with contract and exclusionary abuses directed at rivals was inevitably an offshoot ‘essential facilities’ case in Purple Parking Ltd v Heathrow Airport Ltd134 -­‐ and these types of case tend to involve a combination of ongoing or prior business relationships with some intent to eliminate on a downstream or related market. Exclusionary abuses targeted at rivals The only pure exclusionary abuse rivalry case was Arkin v Borchard Lines135 as this involved an allegation of the adoption of a predatory strategy against a rival and inevitably therefore the key issues resonated around what may be considered to be legitimate and aggressive competition. It also clearly established the need for eliminatory intention to be demonstrated where there are predatory allegations and in this context confirmed the departure from the objective abuse test as set out in Hoffman La Roche for such cases. The court approach in Arkin suggests a resilience, at that stage in 2003, to consider aggressive business behaviour as crossing that eliminatory intent line into illegal and prohibited market conduct, and indeed generally it may be very difficult to satisfy an eliminatory intent threshold.136 SPECIFIC ISSUES IN THE ABUSE CASE-­‐LAW In this section of the paper, we will address various specific issues relating to the nature and scope of the abuse prohibition dealt with by the UK case-­‐law; namely: 1) The competition test inherent in the prohibition; 2) The way in which abuses can be pigeon-­‐holed; 3) Analysis of the objective/subjective nature of the prohibition; 133
[2014] EWHC 64 (Ch). [2011] EWHC 987 (Ch). 135
[2003] EWHC 687 (Comm). 136
See the debate at http://chillingcompetition.com/2015/03/30/some-­‐thoughts-­‐on-­‐alfonsos-­‐theory-­‐of-­‐
article-­‐102-­‐tfeu/ 134
25 4) Commercial decisions and the scope for the objective justification defence; and 5) The interface between abuse infringements and contract/property rights 1) The competition test There is very little in-­‐depth analysis of the type of restriction of competition required in the case-­‐law, although aspects of this have been considered, first by the CAT in Burgess, and by the High Court in the more recent cases of Purple Parking and Arriva respectively. Albeit formally outside the scope of this paper, as an appeal ruling as part of the public enforcement process under the Competition Act 1998, it is instructive to quote the Tribunal’s discussion of the scope of the abuse concept and the justifications for competition law intervention in the competitive process, in particular the CAT’s robust response on the issue of the extent to which the abuse prohibition is designed to protect competition generally as opposed to the protection of competitors, as critics often suggest137: We accept therefore that the OFT is correct, up to a point, in submitting that the aim of the Chapter II prohibition is not to protect competitors, but to protect competition. On the other hand, where effective competition is already weak through the presence of a dominant firm, there are circumstances in which competition can be protected and fostered only by imposing on the dominant firm a special responsibility under the Chapter II prohibition not to behave in certain ways vis-­‐à-­‐vis its remaining competitors, particularly where barriers to entry are high. In such circumstances the enforcement of the Chapter II prohibition may in a sense ‘protect’ a competitor, by shielding the competitor from the otherwise abusive conduct of the dominant firm. However, that is the necessary consequence of taking action in order to protect effective competition. In a case such as the present, intervention under the Chapter II prohibition should not therefore be seen, as the OFT seemed to suggest, as merely ‘protecting a competitor’, but from the point of view of the wider interest of preserving effective competition for the ultimate benefit of consumers. While Burgess is not entitled to be protected against normal market forces, it is in our view entitled under the Act not to be eliminated as an efficient operator in the market by the abusive practices of a dominant firm.138 This passage reinforces the central notion of the special responsibility of a dominant undertaking and confirms that competitors require to be protected from certain abusive practices in order for 137
Ironically in this case the UK competition authority which was defending its original non-­‐infringement decision. 138 Burgess and Sons v OFT [2005] CAT 25, at para 312. 26 effective competition generally to be preserved. The dicta also anticipated the adoption of the as efficient competitor test under Article 102.139 The question of whether competition requires to be eliminated was considered in Purple Parking. It was held that the prohibition would be ‘potentially contravened if the effect on the competition was less than an elimination of effective competition, but still had some real and serious effect. Distortion is not synonymous with elimination.’140 True ‘essential facilities’ cases were contrasted on the basis that: ‘If something is essential to competition on the market, then if only the dominant person has access to it then, a fortiori, there cannot be competition. Competition will inevitably be eliminated. If there can be competition then the facility is not essential.’141AG Bronner’s Opinion in Oscar Bronner was ‘not setting out the requirements of liability in an essential facilities situation’ but the references to elimination reflected the facts of particular cases and even in ‘essential facilities’ type abuses, Mann J, doubted ‘if elimination of competition, as opposed to a significant enough distortion, is required.’ This indicates a clear scepticism towards an abuse test, even in essential facilities cases, which would require the ‘elimination of competition’ and can be viewed as in synch with the General Court approach in Microsoft.142 The more recent Arriva case, discussed above, re-­‐emphasised that the dominant undertaking need not benefit from any distortion of competition. Accordingly the exclusive grant of rights in the new concession in that case was considered to be similar in effect to the grant of rights to broadcast football matches, assessed in various earlier cases by the Commission.143 ‘The grant of exclusivity for a long period to a single downstream provider of rights has a distortive effect on competition where competitors cannot enter the downstream market to compete with the undertaking to whom the rights have been granted.’144 The grant of exclusivity dampened competition on downstream coach services market by preventing other operators from providing direct services to London, and this would impact on customer choice and prices. Again, ‘dampening’ of competition as opposed to a higher threshold of elimination was sufficient to trigger the abuse prohibition. 2) Pigeon holing of behaviour/abuses There is a clear tension in the case-­‐law and academic commentary about the appropriate balance to be maintained between dealing with specific abusive behaviour in its specific context and on the 139
Guidance on the Commission's enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ 2009, C45/7. See also Case C-­‐209/10 Post Danmark A/S v Konkurrenceradet [2012] 4 CMLR 23. 140
Para 94. 141
Para 82. 142
See the debate at http://chillingcompetition.com/2015/03/30/some-­‐thoughts-­‐on-­‐alfonsos-­‐theory-­‐of-­‐
article-­‐102-­‐tfeu/ 143
Particularly Joint selling of the media rights to the FA Premier league (Case 38173) decision of 22 March 2006 (‘ FAPL ’). 144
Supra para 106. 27 basis of the circumstances of the case, and a legal approach which provides greater certainty and predictability in the application of the law, particularly given that commercial behaviour which constitutes a breach of Article 102/the Chapter II prohibition may be illegal, fined and lead to contracts being unenforceable. The modernised focus on effects-­‐based competition law enforcement creates further tension between specific enforcement and a categorisation based approach. The latter can be criticised for being too formalistic and rigid in prohibiting market behaviour without a proper analysis of its competitive effects,145 yet also be used in a perjorative sense where there are perceived limits on the scope of application of the abuse doctrine based on earlier formulaic legal tests set out by the courts, notably the CJEU. It is in the latter sense that the term pigeon-­‐holing has been adopted by the CAT and High Court recently. Again it is instructive to note the CAT’s ruling in the predatory pricing case of Aberdeen Journals,146 where the CAT applied the existing EU jurisprudence, primarily AKZO, in determining what constituted a predatory price based on the relationship between cost and price. However, the Tribunal recognised that there were difficulties, both on the facts of the case and in guidance from the EU case law, in determining the precise approach to quantifying costs for the purpose of ascertaining the existence of predatory pricing. In any event, the Tribunal stressed that the cost-­‐based predatory pricing rules were not to be applied rigidly:-­‐ In our view, the cost-­‐based rules set out in AKZO and Tetra Pak II, while providing guidance, are not an end in themselves and should not be applied mechanistically. The ultimate aim of the 1998 Act is to secure conditions of undistorted and effective competition. With that primary aim in view, a principal role of the Chapter II prohibition is to prevent dominant firms from defending or strengthening their dominant position in ways that are unreasonable and disproportionate, particularly by using methods different from those found under normal competitive conditions. In our view, the decision of the Court of Justice in Compagnie Maritime Belge itself shows that the guidance available in AKZO and Tetra Pak II is open to further development.’147 The scope of the ‘essential facilities’ doctrine and its potential application has been a recurring theme in the case-­‐law in the English courts. For instance in The Wireless group plc v radio Joint Audience Research Ltd,148 albeit a summary judgment case, Lloyd J stressed at para 47:-­‐ ‘Equally, the categories of conduct which may constitute abuse are not exhausted by the examples considered in cases already decided. I do not propose to elaborate on the existing case law in relation to essential 145
See W Wils ‘The judgment of the EU General Court in Intel and the so-­‐called ‘more economic approach’ to abuse of dominance’ (2014) 37(4) World Competition 405-­‐434; Cf P I Colomo ‘Intel and Article 102 TFEU Case Law: Making sense of a Perpetual Controversy’, LSE Law, Society and Economy Working Papers 29/2014, available at http://www.lse.ac.uk/collections/law/wps/WPS2014-­‐29_Colomo.pdf, 146
[2003] CAT 11. 147
Para 380. 148
December 16 2004 [2004] EWHC 2925 (Ch), [2005] E.C.C. 99. 28 facilities, which would best be done in a case where facts have been established, or at least are clearer than they can be on a summary application of this kind. I am not prepared to dismiss this claim on the basis that the conduct alleged cannot be an abuse because it does not fall within the essential facilities doctrine’. The rejection of the all-­‐encompassing scope of the essential facilities doctrine149 is also evident in Purple Parking Ltd v Heathrow Airport Ltd,150 Mann J in the High Court held that the defendant airport operator had abused its dominant position by changing existing arrangements to effectively exclude ‘meet and greet’ car park operators from the airport terminal forecourts while maintaining its own ‘meet and greet’ operations there. Mann J undertook a comprehensive analysis of the existing EU (and UK) jurisprudence on the essential facilities doctrine and margin squeeze abuse. However, it was stressed that the defendant’s ‘pigeon-­‐hole’ approach whereby a claim should fit within the category of essential facilities or fail was not accepted by Mann J. He recited the CJEU in Deutsche Telekom v European Commission case C-­‐280/08P at para 173: “173 ‘Furthermore, the list of abusive practices contained in Article 82 EC [an equivalent to section 18 for practical purposes] is not exhaustive, so that the practices there are merely examples of abuses of a dominant position. The list of abusive practices contained in that provision does not exhaust the methods of abusing a dominant position …” Lloyd J was critical of counsel for the defendants’ ‘pigeon-­‐holing’ approach151:-­‐ ‘79 Mr Brealey's submissions require one to treat each of those examples, and the “essential facilities” type of abuse, as being individual pigeon-­‐holes into which one must fit a case, and having thus fitted it to fulfil a list of criteria said to be applicable to that pigeon-­‐hole. That is an erroneous approach. The statutory examples, and those developed by subsequent case law, are ways in which the basic wrong can be committed, but at all times an eye must be kept on the basic wrong itself’. The case did not have to fit into the category of essential facilities or fail, but ‘a court is entitled to look at conduct, and ask the overall question of whether there is an abuse by reference to various ways of committing that abuse, and is not forced to find one single appropriate label to that abuse … and apply some test only applicable to that form.’152 3) Objective/subjective test 149
There was a backlash against the ‘rising tide’ of the essential facilities doctrine prior to Oscar Bronner, but ironically, this case is a judicial rejection of the straight-­‐jacketing effect of the perceived limited scope of the essential facilities abuse requirements. 150
[2011] EWHC 987 (Ch). 151
Para 99. 152
Ibid. at para. 102. 29 It is generally considered in the case-­‐law and literature that abuse is an objective concept, generally requiring neither an intention to harm nor any morally reprehensible dimension. The Court of Justice gave what has become a benchmark test of abuse in Hoffmann-­‐La Roche: "The concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened and which, through recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition".153 However, intent may be of real significance in relation to specific abuses, such as predatory pricing. There is no formal exception incorporated in to the text of Article 102 that corresponds to Article 81(3), but conduct may escape condemnation as abuse if it can be objectively justified. For example, there is considerable room for debate whether particular conduct is a firm's rational response to meet the challenge of competition or if it is abusive. Accordingly this section shades into the following section on objective justification and commercial strategies which may be legitimately employed under Article 102. There is very little in the UK private enforcement case-­‐law regarding the objective/subjective divide in the abuse case-­‐law but certainly more in the public enforcement CAT jurisprudence, which has focused more on predatory elimination of rivalry. This has really only been considered in any depth by the English courts in one case, Arkin v Borchard Lines ltd & others,154 Colman J observed as follows:-­‐ 303 ..The question whether particular abnormal conduct of a dominant party has or is likely to have the effect necessary to amount to an abuse because it hinders competition is judged objectively: see Hoffmann-­‐La Roche at paragraph 91 and BPB Industries and British Gypsum [1993] 5 CMLR 32 paragraphs 69 et seq. However, where the conduct is not intrinsically *327 abnormal market conduct, such as price reductions, it may amount to an abuse if its purpose is to hinder competition for example by eliminating a competitor or by other means. ‘ 304 Where it is necessary to investigate eliminatory intent, however, the test is clearly subjective and not objective. There is, in particular, nothing in the authorities relied on by the Claimant (Musique Diffusion Francaise [1983] ECR 1825, Hoffmann-­‐La Roche, supra, BPB Industries, supra,) to suggest that as a matter of law the fact that the eliminatory consequences were reasonably 153
Case 85/76 Hoffmann-­‐La Roche v Commission [1979] ECR 461 at 541. [2003] EWHC 687 (Comm), [2004] 2 C.L.C. 242, Colman J. 154
30 foreseeable must lead to the conclusion that those consequences were intended. The test is essentially subjective — Did the undertaking have the necessary intention to procure the hinderance of competition? — but intention must be proved by inference from its conduct.’ Here, the issue of intent merges with the issue of the commercial justification or purpose for the alleged anti-­‐competitive business strategy. Although Colman J noted that the ‘the rate war was .. unusually fiercely fought’155 he considered there to be no direct evidence of an intent to eliminate and that the evidence constituted no more than ‘an ordinary operation of a participant in a fiercely competitive market and…. is not indicative of exclusionary intent.’156 This combination of need to prove intent together with a benevolent approach to aggressive competition by a dominant company certainly makes proving an abuse infringement in these circumstances problematic. However, more recently, in the context of analysis of commercial justifications for behaviour and analysis of the objective justification defence to an abuse infringement, the English courts have clearly taken a more intrusive and critical approach. 4) Commercial decisions and Objective Justification Given that a central theme of this paper was to consider the limitations imposed on the way businesses act in a free market economy, a core aspect of this is the way in which business justifications are considered and dealt with by the courts-­‐ whether in a deferential or critical way, and/or in a way which acknowledges the damage that can be done to competitive markets by firms with a dominant position. Although judicial consideration of this issue is primarily undertaken at the stage of assessing whether conduct is abusive-­‐ in concretising the application of the abstract terminology adopted by the European court in Hoffman la Roche and Michelin of conduct which departs from normal methods of competition or which cannot be characterised as competition on the merits-­‐ the same underlying issues resonate in the often separate and subsequent consideration of whether conduct which is prima facie abusive can be objectively justified. This is a doctrine developed by the European Courts to allow undertakings to justify their otherwise infringing conduct, and the 2009 Commission Guidance on its Enforcement priorities, also explicitly recognises that the Commission may not challenge behaviour which is ‘objectively necessary’. This was neatly encapsulated by Collins J in Global Knafaim Leasing Limited & CGTSN Limited v The Civil Aviation Authority, BAA Limited v Eurocontrol, NATS (En Route) Plc, Nats (Services) Limited, Secretary of State for Transport, Aviation Working Group, 157:-­‐ ‘There may, if an abuse and an adverse impact on 155
Para 319. Para. 320. 157
[2010] EWHC 1348 (Admin). 156
31 competition is found, be a justification. Such an objective justification can exist if the conduct in issue is proportionate to any legitimate commercial interest or public policy objective which may be identified. That is the position here.’158 The issue of how commercial/objective justifications are to be considered by the courts has come to the fore in both Purple Parking and Arriva. In the latter Rose J contrasted the approach in two earlier interlocutory decisions in the High Court where the test for objective justification was not particularly stringent. In Getmapping plc v Ordnance Survey159 Laddie J noted that it had not been suggested that the particular commercial ‘choice was irrational or even unreasonable’.160 Subsequently in The Wireless Group v Radio Joint Audience Research Ltd161 Lloyd J struck out a claim for abuse of dominance, describing the defendant undertaking’s business decision as ‘a rational commercial approach’. Lloyd J referred to the decision of Laddie J in the Getmapping case as requiring an assessment of objective justification by the court which ‘must allow undertakings to take business decisions on normal commercial bases and in a normal way.’-­‐ which equally begs the question as to what is normal. This approach was criticised and deemed inappropriate for all abuse cases in Arriva by Rose J at para. 133 as follows:-­‐ ‘133 …Those decisions were not purporting to decide that conduct will always be objectively justified provided it is not ‘irrational or arbitrary’ or provided that it can be described as a normal business decision. As ATS point out, such an approach would be self-­‐defeating since anti-­‐competitive behaviour usually is entirely rational from a commercial point of view, and abusive conduct usually promotes the business interests of the dominant undertaking engaging in it. That is why we need laws and enforcement agencies to prevent it.’ Indeed, in Purple Parking the commercial justifications were viewed by the court as demonstrating an anti-­‐competitive effect and thereby negating any potential reliance on an objective justification. It was stressed that HAL’s acts in excluding Purple (and Meteor) from the forecourts was about ‘the picking up of business’162, that ‘these commercial effects can be seen as part of the rationale behind the first proposed change, that at T5’163 and ‘that what was ultimately proposed was all about commerce and what the meet and greet operators got out of use of the car park.’164 Accordingly ‘the principal motivation which was to disadvantage the meet and greet operators and to make competition more difficult’ 165 and there ‘were commercial reasons for this change.’ 166 Mann J 158
Para 81. [2002] EWHC 1089 (Pat). 160
Ibid, at para. 55. 161
[2004] EWHC 2925 (Ch). 162
Para 145. 163
Para 151. 164
Para 152. 165
Para 153. 159
32 subsequently addressed the related issue of objective justification, noting that ‘this way of looking at objective justification (considering whether the conduct is prima facie abusive, and if so then considering whether it is objectively justified) is apparently required by the authorities, as opposed to treating the factor as one going to the overall inquiry as to abuse. This approach is exemplified for instance in Mann J’s assessment of the Terminal I forecourt exclusion, stating that motivations are key167 and the claimant could test whether there is an objective justification by seeing whether the evidence shows that that justification was indeed the basis on which the dominant company acted., and a commercial motivation is insufficient for these purposes:-­‐ ‘216…I find that the real motivation for the change in relation to Terminal 1 was a commercial one. That commercial one was to force the off-­‐airport meet and greet operators off the forecourts and into the car park, in order to increase revenues from the car park and to decrease the effectiveness of those operators in their valet parking operations. There was no real eye on the other factors referred to above. 217 That commercial justification is not a good objective justification for the purposes of the section. The other purported justifications are either non-­‐existent or weak, and do not amount to good objectively justifiable reasons for creating the anti-­‐competitive environment that HAL created (or wishes to create) there, taking them each individually and in aggregate.’ Accordingly, objective in the view of Mann J would require to be some factor extraneous to the simple commercial interests of the dominant undertaking-­‐ a view which harks back to the tenor of the Commercial Solvents ruling.168 Moreover, Mann J set a rigorous standard of proof required for an objective justification test,169in stating that the law ‘requires a high degree of necessity if objective justification is relied on to justify what would otherwise be forbidden anti-­‐competitive conduct’170 and the ‘…essence is that there is no justification if there is another solution. …’171 5) Interface between the Abuse prohibition and Freedom to Contract/property law One aspect of the paper was an intention to develop understanding of judicial approaches and attitudes in the UK courts towards the abuse of dominance concept and thereby the extent to which competition law impacts upon notions of the free market and traditional conceptions of contractual 166
Para. 157 As noted by Rose J in Arriva at 134, He held that it was open to the claimant to show that even if the conduct of the dominant company could be objectively justified, if the undertaking's motivation was in fact to suppress competition, then the plea of objective justification was not open to it 168
And see United Brands supra. 169
See Arriva at para. 134. See also European Commission in Flughafen Frankfurt/Main AG (34.801) OJ 1998 L72/30 (‘ Flughafen ’). 170
Para 234. 171
Para. 236. 167
33 and property rights, including intellectual property rights. The treatment of refusal to supply is a particularly controversial area; due, in no small part, to competition law’s interaction with other long-­‐standing legal principles in the law of contract and intellectual property as alluded to in the introduction. Most legal systems have shied away from insisting that an undertaking be forced to contract when it does not see it to be in its best interests to do so. However, under EU law the basic rule is that a refusal to supply by a dominant undertaking must be objectively justified. However, this interface is wider than simply the refusal to supply doctrine. As we have already discussed Article 102 potentially intrudes beyond simple exclusionary anti-­‐rival competitive strategies such as predatory pricing, and despite the Commission’s more limited enforcement priorities, private competition law disputes may involve long standing and ongoing business relationships and aspects of the contractual or property rights of the parties. We can witness an aspect of this willingness to engage and unravel engagement with commercial decisions and agreements in Hendry and others v The World Professional Billiards and Snooker Association limited (WPBSA).172 Subsequently, albeit in a summary judgment we can witness the tensions between IP rights and a relatively wide view of the role of competition, by Mummery LJ in the Appeal Court in Intel Corp v Via Technologies Inc.173 Despite the jurisprudence in EU law in United Brands and General Motors, the Commission has focused its enforcement over the last 30 years on exclusionary anti-­‐competitive behaviour, as evidenced by its 2009 Guidance on Enforcement priorities. Nonetheless there have been some commercial contract disputes in the English courts concerning fairness issues, albeit these have demonstrated a clear reticence by the courts to unravel prices alleged to be unfair and/or excessive. In Ineos Vinyls Ltd v Huntsman Petrochemicals (UK) Ltd174 the claimant manufacturers had failed to establish that the defendant supplier of ethylene had a dominant position and abused it by charging prices and delivery charges that were unfair within the meaning of Article [102] and the Competition Act 1998 s.18, as they had failed to analyse the costs incurred in producing the product, compare those costs with the price charged or evaluate the resulting profit. This reluctance to become involved in market pricing mechanisms was more evident in AttheRaces Ltd v British Horseracing Board,175 in which BHB’s pricing strategy was not abusive and the Court of Appeal clearly advocated a restrained approach to court involvement in claims of excessive or discriminatory pricing. Nonetheless, and on a parallel with case-­‐law under the anti-­‐competitive agreements provision in Calor Gas ltd v Express Fuels (Scotland) Ltd176 the recent case of Arriva demonstrates that courts will 172
October 5 2001 [2002] E.C.C. 8. November 26-­‐28, December 20, 2002 [2003] F.S.R. 33 [Intel Corp v Via Technologies Inc, April 11-­‐12, June 14 2002 [2003] F.S.R. 12]. 174
[2006] EWHC 1241 (Ch). 175
[2005] EWHC 3015 (Ch) and [2007] EWCA Civ 38. 176
[2008] CSOH 13. 173
34 consider behaviour to be abusive, even if the contract/procurement process or contract terms are not unfair per se, but where, primarily as a result of the duration and extent of the exclusivity requirements, competition may be restricted. It was held that the twin factors of market power and duration ensured that ‘if a nationwide network of principal dealers is tied to the brand leader for at least five years, this will restrict competition, especially in a mature market.’177 The difference is that Calor concerned a horizontal restriction of competition as a result of the single-­‐branding, whereas Arriva demonstrated that the courts may assess the contracts of a dominant undertaking where the exclusivity affects parties on a downstream market, and the dominant undertaking is not operating or directly benefiting from that market. Concluding remarks and reflections The case-­‐law and the issues that we have teased out of the judicial pronouncements certainly reflect many of the issues that were discussed in the background debate:-­‐ namely the uncertain scope of the abuse prohibition and the concomitant uncertainty for businesses in ascertaining what may constituted legitimate business justifications for their market behaviour:-­‐ despite the ruling in Arkin confirming the difficulties in identifying eliminatory intent where required, and whilst it is accepted that the Court of Appeal in AttheRaces certainly advocated a restrained judicial approach to alleged contract based ‘market failures’, the more recent case-­‐law hints at notions of fairness and freedom to compete, and a wider legitimacy for court intervention in contractual rights. It is difficult to extrapolate a particular theory or approach of the judiciary to the scope of Article 102 and the role of fairness and there has admittedly been very limited judicial consideration of the issues but the recent case-­‐law certainly suggests a lower level of deference to the natural market order, the legitimacy of business decisions and market outcomes and the sanctity of the principle of freedom to contract. These were already vulnerable under Article 102 and dicta and case-­‐law of the European Court but one can trace a subtle change in underlying approach from the earlier pronouncements of Laddie J to the recent dicta and outcomes, albeit first instance decisions as opposed to the Court of Appeal in Attheraces, in Purple Parking and Arriva. 177
At para. 35. In relation to severability, it was noted that:-­‐ ‘the proper approach is to view [the clause] as an integral and non-­‐severable part of the overall anti-­‐competitive aspects of the agreement, and thus it, along with other relevant clauses, is void in terms of Article [101(1)].’