User:Elinahh/Refusal to supply

Refusal to supply ( also Refusal to deal) means actions where a dominant company denies a buyer access to an input in order to exclude that buyer from participating in an economic activity. The term 'Refusal to supply' in this context refers to a from of an exclusionary abuse of dominant market position. Refusal to Supply covers several types of practises in addition to just refusing to supply productsor services. For example refusal license Intellectual property rights (IPR) or to deny access to essentiel facilities are classical practices that have been seen as anticompetitive refusals to supply. Also practises making it impossible for other companies to conduct business with dominant company can be refusal to supply. These kinds of indirect ways of refusing to supply may for example be unfair trading conditions and delaying supplyies. Also several companies together can be abusing their collective dominant position for example refusing to access to facilities. By forcing the dominant companies to supply the government try to improve competition, especially in they downstream market. Other types of abuses of dominance are for example exclusive dealing, product bundling and tying.

Legal aspects
In European Union (EU) Article 102 of the Treaty on the Functioning of the European Union (TFEU) regulates abuse of dominance. In general, every company has a right to decide to whom they want to supply or not to supply. That basic right is based on the Freedom of contract. That freedom can only be limited in situations where the company refusing to supply would be abusing their dominance.In other words, there needs to be a justification for not letting companies choose their's trading partners freely. In competition law this justification is that refusing to supply is likely to have anticompetitive effect on the market and consumers. Even if there is company would be required to supply, there can be reasonable defence why they will not supply. For example if the customer has bad credit or if the dominant company is not able to produce enough products. It is also important to make sure that the competitors of dominant companies do not take advantage of this measure.

Based on European Commission Guidance on their enforcement priorities there are three questions which can be used to  determine wether practise is considered anticompetitive refusal to supply. If all if these criteria are fulfilled the refusal to supply is likely infringing Article 102 if there is no objective justification for the refusal. Objective justification is a defence, objectively reasonable reason for not supplying. There are several possible objective justifications depending on the case. For example access to facilities may be refused if giving access would increase the costs considerably and therefore compromise the lucrativeness of dominant company's business.
 * 1) Does the refusal relate to a product or service that is necessary to be able to effectively compete on a downstream market?
 * 2) Is the refusal likely to lead to the elimination of effective competition on the downstream market?
 * 3) Is the refusal likely to cause consumers?

Types
Some of the most general refusal types are listed here. There are no limited list of action that are classified as refusal to supply, because the term covers wide variety of practises and situations.
 * Termination of an existing supply relationship. If dominant company terminates existing supply relationship and the termination is likely to have a anticompetitive effect and there are not justifications for there termination these actions can be abusive.
 * Refusal to start suppling an input is an abuse of dominant position if a dominant company refuses to supply an indispensable input, the refusal is not objectively justified and is expected to influence competition negatively.
 * Refusal to licence Intellectual property rights can only be abuse if in addition to criteria above there are exceptional circumstances why the refusal is to be considered as abuse. This is because the main idea of IPR is to have an exclusive right to the property.
 * Refusal to supply information needed for interoperability. If dominant company uses refusal to supply information as a method to expand its dominant position to another market there might be an abuse of dominant position. 

Downstream market and upstream market
Markets can be vertically divide into two steps. The earlier step is where products are sold to an intermediary and not sold to a final customer. This intermediary is often another company, which will then exploit the product in their own product. This earlier step is called the upstream market. The later step, which is called downstream market, is where products are sold to the customers. In EU the refusal from a dominant company in upstream market to supply for a competing company in the downstream market has been seen as most harmful type of refusals to supply. Reason for this is that a dominant company operating in both, downstream and upstream markets, are in position to use refusal to supple as a way to exclude or even eliminate competition from the downstream market and protect their position at the upstream market in an anticompetitive way.

Essential facility
Essential facility has been defined by the European Commission in case of Sealink/B&I - Holyhead in 1992 as follows: "a facility or infrastructure access to which competitors cannot provide services to their customer". Basically essential facilities are so called bottlenecks that limit the competition in certain territories. If a dominant company possesses an essential facility, it can not refuse the access to the facility from competitor without objective justification. It also has to apply the same terms that to does with it own services to not to cause a competitive disadvantages to others.