Abuse Without Dominance in Competition Law: Abuse of Economic Dependence and its Interface with Abuse of Dominance

F. Di Porto, R. Podszun (eds.), Abusive Practices in Competition Law, Cheltenham, Elgar, 2018, pp. 157-184

Max Planck Institute for Innovation & Competition Research Paper No. 15-15

31 Pages Posted: 15 Dec 2015 Last revised: 21 Aug 2019

See all articles by Mor Bakhoum

Mor Bakhoum

Max Planck Institute for Innovation and Competition

Date Written: December 14, 2015

Abstract

This paper investigates the interface between abuse of dominance and abuse of economic dependence, also known in some jurisdictions as abuse of superior bargaining position. When dealing with abuse-of-dominance cases, although the anticompetitive behavior is directed to competitors (exclusion) or consumers (exploitation), there is a fundamental requirement that competition in the relevant market be affected. This approach does not address relative dominance in cases when abuse occurs without dominance and may affect competition. This happens in situations where a relatively dominant market participant enjoys a superior bargaining position with respect to its business partners and uses this position to its own advantage. Taking the example of the distribution sector, the paper showcases how competition may be affected by an undertaking without a dominant position using a network of contracts. This situation can be illustrated in cases where a network of contracts is created by a relatively dominant firm whose sole objective is to lock in smaller or economically weaker business partners in a network and thereby limit their possibility to shift. Such networks of contractual relationships may hinder not only the economic freedom of the weaker party (vertical dimension), but may also strengthen the market power of the relatively dominant firm (horizontal dimension). As a consequence, the relevant market may be affected although the undertaking does not have a dominant position. Hence, there is a close link between economic dependence, freedom of contract and competition law. Situations of abuses by non-dominant firms are not captured by the requirements that the undertaking enjoy a dominant position and the relevant market be affected in abuse-of-dominance cases. This shows the limits of the concept of abuse of dominance as a legal tool used to protect competition in the relevant market. This paper argues that, in addition to abuse of dominance, there is a potential of using the concept of relative dominance (by sanctioning abuses of economic dependence) to protect not only the freedom of competition of the market participants, but also competition itself.

From a theoretical point of view, the paper wrestles with the concept of abuse of economic dependence from the perspective of the goals of competition law: What does it tell us about these goals. Does it stretch the goals of competition law by taking into account fairness and the protection of the weaker party against the stronger? Does abuse of dominance focus the goals of competition law on efficiency? This discussion on abuse of economic dependence and goals is relevant from an enforcement perspective when assessing the appropriate level of enforcement of competition law. The question of whether competition law is over enforced in cases of abuse of economic dependence is another aspect dealt with in this paper.

Keywords: competition law, abuse of dominance, abuse of economic dependence, freedom of contract

Suggested Citation

Bakhoum, Mor, Abuse Without Dominance in Competition Law: Abuse of Economic Dependence and its Interface with Abuse of Dominance (December 14, 2015). F. Di Porto, R. Podszun (eds.), Abusive Practices in Competition Law, Cheltenham, Elgar, 2018, pp. 157-184, Max Planck Institute for Innovation & Competition Research Paper No. 15-15, Available at SSRN: https://ssrn.com/abstract=2703809

Mor Bakhoum (Contact Author)

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

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