Refusal to supply

What is refusal to supply?

A refusal by a dominant undertaking to supply an input to a competitor in a downstream market can, in certain circumstances, amount to an abuse of a dominant position contrary to section 5 of the Competition Act 2002 (as amended) and Article 102 of the Treaty on the Functioning of the European Union.  

Refusal to supply concerns typically arise where a dominant undertaking is vertically integrated, meaning it both controls an essential input and competes with the requesting undertaking in a downstream market. It also generally refers to cases where the input has been developed or established for the dominant undertaking’s own use, and has not been previously shared with third parties.

Not every refusal by a dominant undertaking to supply its competitors (or potential competitors) will breach competition law.

For a refusal to supply to amount to an infringement of competition law, the case-law of the European Court of Justice requires that all of the following conditions are met:

• Indispensability: The input or facility must be indispensable to compete on the downstream market. This means there is no realistic or economically viable alternative, and the input cannot reasonably be duplicated or developed by competitors.
• Elimination of effective competition: The refusal must be likely to eliminate all effective competition on the downstream market. It is not sufficient that competitors are merely disadvantaged.
• Lack of objective justification: The refusal must not be objectively justified. Legitimate justifications may include capacity constraints, quality or safety considerations, or other objective commercial or technical reasons.

In addition, if the refusal concerns access to an input protected by intellectual property rights, the refusal must also limit technical development in the market in order to be considered an abuse. This is notably the case when the refusal prevents the emergence of a new product or service for which there is potential consumer demand (even if such goods or services are in competition with those of the dominant undertaking), thereby harming innovation or consumer choice.

A refusal to supply may also arise where access is offered only on terms that are unreasonable, discriminatory, or commercially unviable for competitors. In such cases, the conduct may amount to a constructive refusal to supply, even if access is not expressly denied. An abusive refusal to supply by dominant undertaking is typically aimed at controlling a downstream market by denying competitors access to or supply of inputs necessary to compete.

Why are the criteria so strict?

The strict conditions that characterise the abuse reflect a policy which seeks to balance the need to protect an undertaking’s property rights, right to contract, and its incentives to innovate and develop assets and services, against the need to ensure healthy competitive dynamics on downstream markets relying on those assets and services.

Does the dominant undertaking need to fully own the input requested?

To amount to an abusive refusal to supply, the dominant undertaking must own or have exclusive control over the input. Ownership has a particular meaning in this context. It means that the dominant undertaking has exclusive, or essentially exclusive, control over the input. This may be because it fully owns the input, or because it has legal rights or other interests which grant it control of that input (for example, an exclusive lease or a licence).

If, however, the undertaking’s control over the input is subject to legal, regulatory or contractual obligations which reduce or dilute the level of control the undertaking has over the input, (for example, regulatory obligations which require it to grant access to competitors) its conduct will not generally be assessed through the refusal to supply framework described above.  Instead, the undertaking’s conduct will be assessed using a more general framework that examines whether the conduct, actually or potentially, gives rise to exclusionary effects.

Why must the input be indispensable?

The input must be indispensable to compete on the downstream market. This means that access to it, or supply of it, is necessary for a competitor to enter or remain competitive on the downstream market. If the input can be realistically duplicated or developed by the downstream competitor, or an equivalent sourced from another undertaking, the refusal to supply will generally not amount to an abuse. Competition law does not require a dominant undertaking to share an input merely because it would make entry or expansion easier for competitors, or because duplication would be costly or less efficient.

Can a refusal to supply be justified?

A refusal to supply may be objectively justified if the dominant undertaking establishes that it is capacity constrained or where some other legitimate reason justifies the refusal. Any justification must be objective, proportionate, and supported by evidence.

What if the undertaking has previously provided this input or has not developed it exclusively for its own use?

If the undertaking has previously supplied the input to competitors, or has developed the input with a view to third‑party use rather than for its own exclusive use, a subsequent refusal to supply or grant access may raise particular competition concerns.

Where an undertaking has a history of supply, downstream competitors may have structured their business in reliance on continued access to the input. In such circumstances, a sudden withdrawal of supply, or a refusal to continue supplying on reasonable terms, may have immediate and serious effects on competition in the downstream market.

Similarly, competition concerns may arise where a dominant undertaking has developed an input, platform, or infrastructure that is designed to interoperate with third‑party products or services, or where access has already been granted to certain third parties. In such cases, refusing access to other competitors, or delaying access without objective justification, may distort competition in related markets.

In these circumstances, the strict conditions developed in the case‑law on refusals to supply infrastructure developed exclusively for the dominant undertaking’s own use may not apply in their strict form. In particular, the refused input may not need to satisfy the full indispensability requirement. Instead, the conduct will be assessed on a case-by-case basis under the general framework of Article 102 TFEU, focusing on whether the conduct departs from competition on the merits, whether it is capable of producing exclusionary effects, and whether it is objectively justified.

Nevertheless, interrupting prior supply or prior openness of an input does not always constitute an abuse. This type of conduct will constitute an abuse only where, having regard to all the circumstances, it is capable of excluding effective competition and cannot be objectively justified.

If you believe you have evidence of an undertaking engaging in an abusive refusal to supply, you can contact the CCPC.