User:Jacobnolan1/sandbox

Refusal to supply:

Refusal to supply is where a dominant firm decides to not supply goods or services to another firm. The categorisation of refusal to supply cases as a form of ‘abuse’ has been quite controversial. Some would argue that it is the prerogative of a firm who it decides to supply its goods and services to and that punishing the firm for not supplying a different firm, or forcing the dominant firm to sell their products against their will, is wrong. Francis Jacobs, an Advocate General in the Court of Justice, acknowledged this, stating that ‘the right to choose one’s trading partners and freely to dispose of one’s property are generally recognised principles in the laws of the Member States’ and that if these rights were to be infringed it would ‘require careful justification’.[1] It has also been argued that the act of forcing the dominant firm to supply its products to others may not produce pro-competitive effects if ‘free-riders’ are able to take advantage of investments that have been made by other firms on the market. This has also been acknowledged by Advocate General Jacobs and the European Commission.[2]

Irrespective of these controversies, the law does, in certain circumstances, impose a duty on dominant firms to not to refuse to supply their products and can impose an obligation on the firm to supply the products. Case law has developed a substantial test to determine when refusing to supply a downstream customer by an upstream firm amounts to an abuse of the dominant (upstream) firm’s position.

The first issue to consider is whether there is a refusal to supply. An outright refusal to supply the product will satisfy this, as will what the Commission has termed ‘constructive refusal’.[3] One example of this would be offering to supply the product only on ‘unreasonable terms’[4]; another would be unduly delaying the supply of the product.

The second is whether the accused undertaking has a dominant position in the upstream market. Upstream market means the suppliers and producers of the products and raw materials; the downstream market tends to be the consumer/customer-facing businesses. It should be noted that the Court of Justice has said that the dominant firm does not even need to actually operate on the upstream market – it could be sufficient that there is a potential, or even hypothetical, market.[5] This can be a solution to the problem that the market may not actually exist due to the dominant firm refusing to supply the goods or services.

The third issue to consider is whether the access which is sought from the dominant firm is indispensable to the firm that is wishing to compete on the downstream market. An example of this can be seen in Oscar Bronner.[6] The Court held that a home-delivery system for a daily newspaper market was not indispensable as there were other methods for delivering daily newspapers and there were no technical, legal, or economic obstacles that made it impossible for other daily newspapers to create their own system. The Magill[7] case shows when access will be indispensable – without the information that access was requested for in Magill, the magazine they wished to publish could not have been published at all. Further, there were no objective justifications for refusing to supply the product and the refusal would have eliminated all competition in the secondary market. The access will be indispensable if duplication of the product or services to which access is sought is:


 * physically impossible (for example, there is only one point on a coastline where a deep-sea port could be built and access is sought to this port’s facilities)[8];


 * legally impossible (for example, where the product is protected by intellectual property rights)[9]; or


 * not economically viable (for example, if the market is not sufficiently large enough to sustain a second facility that would compete with the dominant firm’s).[10]

The fourth issue is whether the refusal would lead to an elimination of effective competition in the downstream market. The Court of Justice confirmed that it is not necessary to demonstrate that ‘all’ competition was eliminated; instead, it just has to be established that ‘all effective’ competition has to be eliminated.[11]

The final issue is whether the dominant firm has an objective justification for refusing to supply the product or service. If they do, then the refusal will not be unlawful. Such an objective justification must pursue a legitimate interest other than the dominant firm’s own commercial interests. Examples of objective justifications include that the customer would use the product for an illegal purpose or that granting access could negatively impact the incentive of the dominant firm and downstream competitors to innovate.[12]

The Guidance is only concerned with refusals to supply which risk vertical foreclosure. However, refusals to supply can also be a concern with respect to horizontal foreclosure, although this is rare. An example of this would be disciplinary measures against a distributor who handles competitors’ products.[13]

Refusal to supply intellectual property rights:

The general approach towards compulsory licencing from the European Courts has been that, ‘in the absence of EU harmonisation of laws on designs and models’, it is up to national law to determine the nature and extent of compulsory licencing.[14] However, in Magill,[15] the Court took a more unorthodox approach. It held that the abuse consisted of the refusal by the dominant firm to supply even basic information by relying on national copyright standards. This led to a new product, which was not currently offered and for which there was consumer demand, being prevented from being created.

However, in Oscar Bronner,[16] the exceptional circumstances of Magill were stressed. The Court had been influenced in Magill, although not explicitly, by the fact information as prosaic as TV listings were given copyright protection – most member states would not have conferred this.[17] By stressing the exceptionality, the Court of Justice sought to quell fears that the precedent could have been applied to intellectual property rights that required significant risk-taking and investment to obtain. It significantly narrowed the circumstances in which compulsory licencing could be applied in. The situation was clarified further in IMS Health[18]: the protection of competition through punishing a refusal to supply can only come before the economic freedom of the intellectual property right’s owner where the refusal prevents the ‘development of the secondary market to the detriment of consumers’.[19] In Microsoft,[20] the three criteria that had been developed to determine if the circumstances were deemed ‘exceptional’ were laid out:


 * The refusal relates to a product or service indispensable to the exercise of a particular activity on a neighbouring market;


 * The refusal is of such a kind as to exclude any effective competition on the neighbouring market; and
 * The refusal  prevents the appearance of a new product for which there is potential consumer demand.[21]

[1] Oscar Bronner v Mediaprint [1998] Case C-7/97 at para 56.

[2] The Commission noted that an obligation imposed on a firm to supply other firms may reduce the incentive of both the ‘free-riding’ and dominant firm to innovate, to the detriment of the consumers.

[3] Guidance on the Commission’s Enforcement Priorities in Applying Article [102 TFEU] to Abusive Exclusionary Conduct by Dominant Undertakings at para 79.

[4] Telekomunikacia Polska [2015] Case T-486/11.

[5] IMS Health GmbH & Co v NDC Health GmbH & Co [2004] case C-418/01 at para 44.

[6] Oscar Bronner.

[7] [1995] Case C-241/91.

[8] An example of access to a port being instructed can be seen in Port of Rødby [1994] OJ L 55/52.

[9] Oscar Bronner.

[10] IMS Health v NDC Health at paras 28-30.

[11] CEAHR v Commission [2017] Case T-712/14 at para 106, confirming Microsoft v Commission [2007] T-201/04.

[12] Guidance on Enforcement Priorities at para 90.

[13] United Brands v Commission [1978] Case 27/76.

[14] Renault Case [1988] 53/87 and Volvo v Erik Veng Case [1988] 238/87.

[15] Magill case.

[16] Oscar Bronner.

[17] Richard Whish and David Bailey, Competition Law (OUP, 9th edn, 2018) at p.817.

[18] IMS Health v NDC Health

[19] Ibid., at para 48.

[20] Microsoft v Commission [2007] Case T-201/04.