Abuse of Economic Dependence - The Centre for European Policy ...

How to Rectify the Gap 81
As Faull and Nikpay (2007) argue, there is no reason to believe that the
concept of dominance in the original ECMR 13 has a different meaning from
the concept of dominance in Article 82. 14 The introduction of the concept
of dominance in merger control pointed in the direction of the ECJ in
Article 82 cases, even though jurisprudence focuses on abusive commercial
conduct by dominant firms rather than on the preservation of competitive
market structures. 15
Since the Commission recognized the gap in the dominance test in the
original ECMR and changed the substantive test, in order to capture the
merger gap cases, why does the Commission not address the same gap in
the dominance test in Article 82 cases?
As the abovementioned analysis indicates, the concept of dominance has
the same meaning under merger control and Article 82. The same market
structure that can lead to a gap merger case (eg differentiated products
market, few strong firms in the post-merger market, limited switching,
capacity constraints etc) can lead to a gap case in Article 82 as was illustrated
above. The Commission seems, under the new merger substantive
test, to prevent the creation of a firm that can lead to non-coordinated
effects in the post merger oligopolistic market (ie gap case) but cannot
prevent this firm from adopting anti-competitive conduct in the postmerger
market.
This is counterintuitive since the dominance test under the original
ECMR was ‘devised’ from the dominance concept under Article 82. In fact,
oligopolistic markets. The gap refers to situations where the remaining firms in the postmerger
market have the incentive and ability to adopt conduct inducing an adverse impact on
competition, and thus profit from exerting their market power in the post-merger market,
without being dependent upon a coordinated response on the part of the other members of the
oligopolistic market structure. The adverse impact on competition is induced by the merger.
Gap cases arise in oligopolistic markets which exhibit factors conducive to collective dominance
(coordinated effects). Such factors include: barriers to entry and exit, a small number of
firms, ability to coordinate towards equilibrium, ability to enforce compliance as well as ability
to monitor and deter any prospective maverick firms. These criteria depend on features
such as product homogeneity, low demand growth, low price sensitivity of demand, symmetric
cost structures and multi market contacts (I Kokkoris, ‘The Development of the Concept
of Collective Dominance in the European Community Merger Regulation from its Inception
to its Current Status’ World Competition, September 2007). In particular in differentiated
product markets where a merger can lead to incentives for conduct having an adverse impact
on competition, without creating a single leading player, and without significantly increasing
the feasibility of tacit collusion. The latter situation, which cannot be dealt either as single-firm
dominance or as collective dominance, is known as the ‘gap’ in the application of the dominance
test.
13 Council Regulation (EEC) 4064/89 of 21 December 1989 on the control of concentrations
between undertakings, [1989] OJ L395/1, corrigendum [1990] OJ L257/14.
14 J Faull and A Nikpay, The EC Law of Competition (Oxford University Press, UK, 2007)
322.
15 See further: C J Cook and C S Kerse, EC Merger Control (3rd edn, Sweet and Maxwell,
London, 2000) 131.