Abuse of dominance
What is abuse of a dominant position?
One of the key enforcement activities of the CCPC is investigating undertakings that have abused, or are abusing, a dominant position. Section 5 of the Competition Act 2002 as amended sets out that any abuse by one or more undertakings of a dominant position in trade for any goods or services in the State or in any part of the State is prohibited. The EU equivalent of section 5 of the Competition Act 2002 can be found under Article 102 of the TFEU.
Abuse of a dominant position can take many different forms, and the types of conduct involved are not limited to a fixed list. Examples include refusal to supply, predatory pricing, excessive pricing, exclusive dealing, discriminatory treatment and tying/bundling.
What is dominance?
Section 5 of the Competition Act 2002 only prohibits abusive conduct by a dominant undertaking. In practice this can mean that a dominant and a non-dominant undertaking could implement the same practice (e.g., a refusal to supply or predatory pricing) but only the dominant undertaking would infringe competition law.
A key question then is, “what is dominance?”.
EU Courts have held that dominance means that the undertaking faces limited competitive pressure and enjoys a position of economic strength on a relevant market, which enables it to behave to an appreciable extent independently of its competitors, its customers, and ultimately consumers. From this it can be seen that dominance needs to be held in the context of a specific market for goods and/or services.
Dominance is most often held by a single undertaking in a particular market. In limited and exceptional circumstances, two or more undertakings may be considered to hold a dominant position collectively. However, in many markets, effective competition exists and no undertaking holds a dominant position.
What are the indicators of dominance?
In general, there is no single measure which can point to one or more undertakings holding a dominant position in a given market. In practice, this means that competition authorities such as the CCPC will look at a range of factors when considering whether an undertaking is dominant, these can include:
- Market shares: Generally high market shares (40%+) which are stable over time can be a good indicator of dominance.
- Competitors’ positions: If there is a big market share gap between the largest player in the market and their nearest competitor, this can be an indication of dominance.
- Barriers to entry and expansion: If it is difficult for new players to enter the market or expand their position, this can be an indication of dominance.
- Counterveiling Buyer Power: If purchasers of the goods or services of an undertaking are unable to effectively negotiate on things such as price, this can be an indication of dominance.
Is it illegal for a company to have a dominant position?
No. It is not illegal for an undertaking to have a dominant position. It is only where a dominant undertaking abuses that dominant position that it breaches competition law. This is sometimes referred to as the “special responsibility” of a dominant undertaking under competition law.
What sort of conduct constitutes an abuse of dominance?
Exclusionary abuses
Generally, an exclusionary abuse of dominance involves conduct that goes beyond normal competition and makes it harder for other businesses to compete.
This includes behaviour where a dominant business:
- Does not compete mainly by offering better prices, quality, innovation or efficiency; and
- Uses its market power in a way that can exclude or disadvantage existing or potential competitors.
Such conduct may reduce competition in the market by limiting choice or innovation.
Examples can include practices that block access to customers or key inputs, or that make it uneconomic for competitors to remain in the market.
Exploitative abuses
Generally, an exploitative abuse of dominance involves a dominant business using its market power to take unfair advantage of its customers, suppliers, or consumers.
This may arise where a dominant business:
- Charges unfairly high prices; or
- Imposes unfair or unreasonable trading conditions.
Unlike exclusionary abuses, exploitative abuses focus on direct harm to customers or consumers, rather than on excluding competitors.
For more specific guidance, you can find further information on:
