EU Antitrust Law Bucharest, 2-3 March 2020 Abuse of a dominant position Daniel Severinsson - AD/2020/01

EU Antitrust Law
                              Bucharest, 2-3 March 2020
                             Abuse of a dominant position
                                      Daniel Severinsson

                                            [AD/2020/01]

With financial support from the Justice
Programme of the European Union

Article 102

    • Any abuse by one or more undertakings of a dominant position within the internal
      market or in a substantial part of it shall be prohibited as incompatible with the
      internal market in so far as it may affect trade between Member States.
    • Such abuse may, in particular, consist in:
    • (a) directly or indirectly imposing unfair purchase or selling prices or other unfair
      trading conditions;
    • (b) limiting production, markets or technical development to the prejudice of
      consumers;
    • (c) applying dissimilar conditions to equivalent transactions with other trading
      parties, thereby placing them at a competitive disadvantage;
    • (d) making the conclusion of contracts subject to acceptance by the other parties
      of supplementary obligations which, by their nature or according to commercial
      usage, have no connection with the subject of such contracts.
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The snus cooler shelf labels case - background

    • Snus (snuff): Tobacco for oral use. Sold from snus coolers
    • Swedish Match
    • British American Tobacco (BAT)
    • Japan Tobacco (JTI)
    • Strict rules on the marketing of tobacco in Sweden

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Conduct

    • Swedish Match launched a template for snus cooler shelf labels in June
      2012
    • Competitors complained
    • SCA started investigating
    • Swedish Match abandoned their labelling system in March 2013
    • In December 2014 the SCA took the case to court and requested a fine of
      approximately 3,5 million euro

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Relevant product market

    • Low demand side substitution between snus and cigarettes
    • High demand side substitution between price segments and between
      different types of snus
    • Conclusion: The market for selling snus to retailers

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Relevant geographic market

    • Tobacco markets are generally regulated by national laws
    • Selling snus is not allowed in most membes states
    • Market conditions relatively consistent throughout Sweden
    • Conclusion: Sweden relevant geographic market

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Dominant position

    • Swedish Match market shares
       – High, approximately 80 %, but falling trend for many years
       – Still over 95 % in profitable premium segment
    • Snus costumers very brand loyal
    • Many Swedish Match products ”must have” – unavoidable trading partner
    • Swedish Match owned most of the snus coolers in stores
    • Strict rules on the marketing of tobacco
    • Only limited countervailing buyer power
    • Did Swedish Match have a dominant position?

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Abuse
    • Non-exhaustive list of examples in article 102
       – Labelling system ”new” exclusionary abuse
    • Shelf labels important for marketing snus
       –   Specific market conditions
       –   Witnesses representing retailers and competitors
       –   Expert witnesses
       –   Swedish Match internal documents
    • Restriction of competition?
       – Not competition on the merits to introduce rules for competitors price and
         brand communication
       – No proof of actual effect
       – Did the labelling system tend to restrict price and brand competition?

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Objective justification

     • Swedish Match interest to keep coolers tidy
        – Less intrusive means available
     • Swedish Tobacco regulation restricts marketing
     • Patent and Market Court ruled that it was not for Swedish Match to ensure
       that requirements in Swedish Tobacco Act was met (T-30/89 Hilti)
        – E.g. possible to contact relevant authorities
        – Labelling system part of anti competitive strategy
        – Fine approximately 3,5 million euro
     • Patent and Market Court of Appeals ruled that Swedish Match was allowed
       to stop labels in its coolers that did not comply with the Swedish Tobacco
       Act. Thus the labelling system was objectively justified

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The waste management case – background
     • Producers of goods are obliged to take back packaging waste that results
       from the use of their products
     • In practice producers pay a license fee to a company that takes care of the
       recycling and collection of the waste
     • FTI was the only company providing such exemption services

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The collection infrastructure

     • FTI owns and runs a nationwide collection infrastructure consistong of
       approximately 5 000 recycling stations such as this

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Conduct

     • TMR asked FTI to give access to the collection infrastructure. FTI refused.
     • TMR complained to the Swedish Competition Authority that started an
       investigation.
     • FTI decided to enter into an agreement with TMR giving TMR access to its
       infrastructure. TMR started competing with FTI.
     • After a few years, FTI terminated the agreement with TMR and refused to
       renegotiate.
     • TMR claimed FTI was abusing its dominant position.

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Relevant markets

     • Downstream relevant market
       – Market for exemption services for packaging waste in Sweden
       – Only FTI and TMR on this market
     • Upstream product market
       – Market for a public and nationwide collection infrastructure in Sweden

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Dominant position

     • FTI has only public and nationwide collection infrastructure in Sweden
     • Monopolist
     • Potential competition?
     • Countervailing buyer power?
     • FTI has a dominant position on the upstream market for public and
       nationwide collection infrastructure in Sweden

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Abuse
     • Refusal to supply
     • Importance of undertakings right to choose trading partners and dispose of
       its property
     • Bronner criteria (Case C-7/97, Bronner)
        – The infrastructure must be indispensable (no actual or potential substitute)
        – Conduct of the dominant undertaking must be likely to eliminate competition
          in the market
        – Refusal cannot be objectively justified
     • Relevance of TMR being an existing customer?
     • Is the nationwide collection infrastructure indispensable?
     • Legal, practical or economic obstacles for duplicating infrastructure?

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Objective justification

     • Objective justification
     • Lower incentives to invest in the infrastructure
     • Environmental standards

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Discussion

     • Questions or comments?
     • Thank you

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Further reading
     • Guidance on the Commission's enforcement priorities in applying Article
       [102] of the EC Treaty to abusive exclusionary conduct by dominant
       undertakings (2009/C 45/02)
     • Case C-7/97, Bronner, EU:C:1998:569
     • Case C-209/10, Post Danmark I, EU:C:2012:172
     • Case C-457/10, AstraZeneca, EU:C:2012:770
     • Case C-413/14 P, Intel, EU:C:2017:632
     • Case C-525/16, Meo, EU:C:2018:270
     • Case T-612/17, Google Shopping (pending, fine 2,42 billion euro)
     • Case T-604/18, Google Android (pending, fine 4,34 billion euro)
     • Case T-334/19, Google AdSense (pending, fine 1,49 billion euro)
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