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

92 A Gap in the Enforcement of Article 82
product markets where firms produce substitute products is the diversion
ratio, 43 which will indicate the diversion of sales from the products of
one of the firm to the other firms’ products, in case of an anti-competitive
conduct by that firm. This diversion ratio is calculated by looking at
customers’ choices if they switch away from a firm that adopts the anticompetitive
conduct (eg increases its price).
• Alternative sources of supply of the product.
Alternative sources of supplies may prove sufficient in mitigating any
anti-competitive conduct from the non-dominant firm. The adequacy of
these alternatives will depend on the degree of differentiation of the
product as well as on possible capacity constraints that the incumbents
in the market may face. If the competitors of the non-dominant firm are
able to compensate for the anti-competitive conduct (the cessation of
supply), the conduct may not lead to any consumer harm. Even in
markets characterized by homogeneous products and capacity
constraints faced by the incumbents, an anti-competitive conduct of any
the non-dominant undertaking will not be mitigated by reaction from
other incumbents if they are not able to increase capacity in order to
absorb the switching of demand emanating from the anti-competitive
conduct of the non-dominant firm. Thus, in Cournot markets, if there
are no capacity constraints, the incumbent firms will react to the anticompetitive
conduct of any the non-dominant undertaking, mitigating
thus the adverse impact on the market.
In the case of a market with differentiated products though, as is likely
to be the case in gap cases, capacity constraints are not so important, as
in markets with homogeneous products, since the reaction of the rival
firms is unlikely to significantly mitigate the anti-competitive conduct of
the non-dominant undertaking, in contrast to the case of the Cournot
type of competition, where, since the products are homogeneous, the
non-dominant firm’s conduct can be easily mitigated.
• Impact on consumers.
The Guidance paper seems to adopt an approach, advocating that an
anti-competitive conduct is not prohibited unless it entails significant
consumer harm, after an off-setting of the harm to consumers against the
(mainly short-term) benefits for the consumers has been effected. 44
43 The closeness of substitution between products does not only depend on the degree of
differentiation of these products, but also on factors such as capacity constraints and barriers
to entry and expansion.
44 See also EAGCP Report, http://ec.europa.eu/comm/competition/publications/studies/
eagcp july 21 05.pdf. As stated therein: ‘An economics-based approach to the application of
article 82 implies that the assessment of each specific case will not be undertaken on the basis
of the form that a particular business practice takes (for example, exclusive dealing, tying, etc)
but rather will be based on the assessment of the anti-competitive effects generated by business
behaviour. This implies that competition authorities will need to identify a competitive harm,