What is abuse of a dominant position?
Abuse of a dominant position occurs whereby a company which holds a dominant position on a certain market uses that position to act in a way and enforce certain conditions which can severely affect those companies below them in the marketplace.
UK Law and EU Law
Under UK law we see two sets of laws working together simultaneously. If a UK company holds a dominant position on the UK market then the provisions contained within Section II of the Competition Act 1998 (amended by the Enterprise Act 2002) apply whereas if the UK company holds a dominant position on a market which extends out of the UK and imposes onto other European Union Member States then the provisions within Article 82 of the EU Treaty will be applied.
The EU law in this case has been adopted into the UK law so both systems require the same requirements to be established.
How do I know if my company is in a dominant position?
A variety of factors need to be taken into account to establish whether a company holds a dominant position on the market starting firstly with a full definition of the particular market in which the company is operating.
A good indicator is whether the company has a 50% market share. If this is the case they will usually accepted to be dominant. This is not a concrete indicator however as in some cases companies holding a market share of 40% have been found to be dominant.
Does my company have to have dominance over a substantial geographical area?
According to EU law the dominance must be across a substantial part of the EU, however, this exact wording has not been adopted into the UK legislation meaning that if you’re company was dominant in a market which only encompassed a small part of the UK you could still fall within Chapter II.
Does having a dominant position mean my company will fall foul of the legislation?
Simply having a dominant position on a certain market does not immediately infer a breach of the legislation. In order for a breach to happen there has to be an abuse of the dominant position.
What is abuse?
The following actions will constitute abuse:
- Directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions Limiting production, markets or technical development to the prejudice of consumers Applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage Making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature of according to commercial usage, have no connection with the subject of such contracts.
For more information on:
- Are there any exemptions?
- I own a small company; do I need to be aware of these provisions?