University of Amsterdam Faculty of Law
An Analysis of Tying Practices Under
Articles 101 and 102 TFEU
Clearing up the overlaps in their application
Master Thesis
European Competition Law and Regulation (LLM track)
Student: Tjaša Geč (11202599) Supervisor: Prof. dr. Rein Wesseling
Abstract
The primary purpose of this thesis is to examine the substantive analysis required to tackle tying practices, both as restrictive agreements under Article 101(1)(e) TFEU and as abuse of a dominant position under Article 102(d) TFEU. While tying is prohibited in the same manner under both articles, the Commission and the CJEU have relied predominantly on dominance and hence most of the cases were a straightforward application of Article 102. Given the lack of the case law tackling tying practices pursuant to Article 101, this thesis sheds light on how – and to what extent – the substantive analyses should differ. In particular and in light of the increasing importance of economic analysis, it focuses on answering the question of how the conditions necessary to establish an illegal tying should be interpreted according to whether Article 101 or Article 102 is applied.
Furthermore, the modernisation of the articles concerned which, in order to prevent legal discrepancies sought to align their application, appears to have lost sight of the specific features underpinned by different concepts and economic and legal logic underlying the two provisions. As a consequence of this evolutionary path, the borderline between Articles 101 and 102 has become elusive. Moreover, such great deal of convergence renders the application of Article 101(1)(e) to tying agreements redundant. Therefore, this thesis tries to clear up the overlap in their application and delineate the critical factors triggering the invocation of either Article 101 or Article 102. Where appropriate, normative proposals are given with a view to demonstrate how the substantive analysis and its application can be improved.
List of Abbreviations AG CJEU/Court : : Advocate General
Court of Justice of the European Union
Commission : European Commission
EU : European Union
GC : General Court
NCA : National Competition Authority
TFEU TTBER
: :
Treaty on the Functioning of the European Union Technology Transfer Block Exemption Regulation
Treaties VABER
:
:
Treaty on the Functioning of the European Union and Treaty of the European Union
Table of Content
Abstract...2
List of Abbreviations...3
Table of Cases...6
The European Union Courts...6
AG Opinions...7
Commission Decisions...7
Community law stricto sensu ...8
Community soft law...8
1. Introduction...9
2. The Blurred Borderline between Tying under Articles 101 and 102 TFEU. 11 2.1. Definition and application of tying...11
2.2. Tying as vertical agreement versus tying as unilateral conduct – drawing a distinction between their application...12
2.3. Tying arrangements under Article 102 TFEU...13
2.3.1. Shift from ‘per se’ to ‘rule of reason’ analysis...13
2.3.2. The five-pronged test...14
2.3.3. Modified approach to tying under 102 TFEU...14
2.3.3.1. Per se legality...15
2.3.3.2. Expanded consumer demand test...15
2.3.3.3. Market share cap...15
2.3.3.4. As-efficient-as competitor test and consumer harm test to assess anticompetitive effects...15
2.3.3.5. Objective justification modelled under Article 102(d) TFEU...16
2.4. Tying agreements under Article 101 TFEU...16
2.4.1. Agreement...17
2.4.2. An effects-based approach to the assessment of actual or likely anticompetitive effects...18
2.4.3. Applicability of Block Exemption Regulations...19
2.5. Interim conclusion...20
3. Conditions for a Tying Claim and their Application under Articles 101 and 102 TFEU...20
3.1. The relationship between market power under article 101 TFEU and dominance under Article 102 TFEU...20
3.1.1. Dominance under Article 102 TFEU...20
3.1.2. Significant degree of market power under Article 101 TFEU...21
3.1.3. Overlap of the concept of dominance between Articles 101 and 102 TFEU 21 3.2. Separate products / separate customer demand...22
3.2.1. The concept of separate products...22
3.2.1.1. Does the tied product belong to a separate product market?...24
3.2.2. The commercial usage criterion under Article 102 TFEU...25
3.3. Coercion...27 3.4. Anticompetitive effects...28 3.4.1. Foreclosure analysis...28 3.4.2. Article 101...30 3.4.3. Article 102...31 4. Objective Justification...32
4.1. Allocation of the burden of proof under Articles 101 and 102 TFEU...33
4.2. The CJEU’s approach to justification claims in tying cases...34
4.3. Introduction of the ‘safe haven’ rule...34
4.4. The role of the intent...35
5. Proposal of establishing critical factors for delineating tying practices under Articles 101 and 102 TFEU...36
5.1. Establishing the sole ambit of Article 101 and Article 102 TFEU...37
5.1.1. Requirement of a prior commitment...37
5.1.1.1. Contractual tying...37
5.1.1.2. Technical tying...38
5.1.2. The role of dominance...38
5.1.3. Other factors supporting the proposed distinction...39
5.1.3.1. Risk sharing...39
5.1.3.2. Position of (final) consumers...40
5.1.3.3. Remedies...40
5.2. Plurality of actions and the ‘centre of gravity’ test...41
5.2.1. Is the proposed criterion of distinction always applicable?...41
5.2.2. ‘Centre of gravity’ test...41
6. Conclusion...42
Bibliographies...44
Books...44
Articles...44
Table of Cases
The European Union Courts
- AEG Telefunken v Commission (Case 107/82 ) [1983] ECR 3151 - Akzo Chemie BV v Commission (Case C-62/86) [1991] ECR I-03359
- Bayer AG v Commission (Case T-41/96) [2000] ECR II- 3383, upheld on appeal Bundesverband der Arzneimittel-Importeure and Commission v Bayer (Joined Cases C-2/01P and C-3/01 P) [2004] ECR I-00023
- BPB Industries Plc and British Gypsum Lts v Commission (Case T-65/89) [1993] ECR II-00389
- Compagnie Maritime Belge Transports SA v Commission (Joined Cases C-395/96 P and C-396/96 P) [2000] ECR I-1365
- Confédération européenne des Associations d'Horlogers-Réparateurs (CEAHR) v Commission (Case T-427/08 ) [2010] ECR II-0000
- Delimitis v Henninger Bräu AG (Case C-234/89) [1991] ECR I-935 - Ford v Commission (Joined Cases 25 and 26/84) [1985] ECR 2725
- General Motors Netherland BV, Opel Netherland v Commission (Case T-368/00) [2003] ECR II-4491
- Hoffmann-La Roche v Commission (Case C-85/76) [1979] ECR 461 - Hüls v Commission (Case T-9/89) [1992] ECR II-499
- Klaus Höfner and Fritz Elser v Macroton GmbH (Case C-41/90 ) [1991] ECR I-1979
- Langnese-Iglo v Commission (Case T-7/93) [1995] ECR II-1533
- LR AF 1998 A/S, formerly Løgstør Rør A/S v Commission (Case T-23/99) [2002] ECR II-01705
- Microsoft v Commission (Case T-201/04) [2007] ECR II-3601
- Pavel Pavlov v Stichting Pensioenfonds Medische Specialisten (Joined Cases C-180/98 to C-184/98) [2000] ECR I-6451
- Post Danmark AS v Konkurrencerådet (Case C-209/10 ) [2012] ECLI:EU:C:2012:172
- Tetra Pak International SA v Commission (Case T-83/91) [1994] ECR II-755, upheld on appeal, Case C-333/94 P Tetra Pak International SA v Commission (Tetra Pak II) [1996] ECR I-5951
- Tipp-Ex v Commission (Case C-279/87) [1999] ECR I-261
- United Brands Company and United Brands Continental BV v Commission (Case C-27/76) [1978] ECR 207
- Van den Bergh Foods v Commission (Case T-65/98) [2003] ECR II-4653 - Volkswagen AG v Commission (Case T-62/98) [2000] ECR II-2707, on appeal
Case C-338/00 P Volkswagen AG v Commission [2003] ECR I-9189 - Windsurfing International v Commission (Case 193/83) [1986] ECR 611
AG Opinions
- Opinion of Advocate General Jacobs in Case C-53/03 Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) and Others v Glaxo SmithKline pic and Glaxo SmithKline AEVE [2005] ECR 1-4609
- Opinion of Advocate General Fennelly in Joined Cases 395/96 P and C-396/96 P Compagnie Maritime Belge Transports SA v Commission [2000] ECR I-1365
Commission Decisions
- Vaesseni Moris (Case IV/C-29.290) Commission Decision 79/86/EEC [1979] OJ L 19/32
- Velcrol Aplix (Case IV4./204) Commission Decision 85/410/EEC [1985] OJ L 233/22
- Eurofix-Bauco/Hilti (Case IV/30.787) Commission Decision 88/138/EEC [1988] OJ L 65/19
- Microsoft (Case COMP/C-3/37.792) Commission Decision of 24 March 2004 relating to a proceeding under Article 82 of the EC Treaty
- Rio Tinto Alcan (Case COMP/39230) Commission Decision AT.39239 (unpublished) 20 December 2012
- Eastman Kodak Company v Image Technical Services, Inc. et al., 504 US 451 (1992)
Table of Legislation
Community law stricto sensu
- Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty [2003] OJ L l/1
- Commission Regulation (EU) No 330/2010 of 23 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices [2010] OJ L 102/1
- Consolidated version of the Treaty on the Functioning of the European Union (TFEU) [2012] OJ C 326/1
- Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements [2014] OJ L 93/17
Community soft law
- Communication from the Commission, Guidelines on the application of Article 81(3) of the Treaty [2004] OJ C 101/08
- Communication from the Commission, Guidance on the Commission's enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings [2009] OJ C 45/7
- Information from European Union Institutions, Bodies, Offices and Agencies, European Commission, Guidelines on Vertical Restraints [2010] OJ C 130/01 - Communication from the Commission, Guidelines on the application of
Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements [2014] C 89/03
1. Introduction
Tying is a well-established and common business practice, engaged in by large and small undertakings, in competitive markets as well as in oligopolies, and monopolies.1
The pervasiveness of tying on the market shows that it is generally beneficial – it may result in cost reduction, quality improvement, and may provide consumers with increased convenience and variety.2 However, as tying might also give rise to
anticompetitive effects, its prohibition was written into the 1957 Treaty of Rome and has been preserved in each subsequent amendments.3
Tying is listed as a specific example of restriction of competition under both Articles 101(1)(e) and 102(d) TFEU. The respective provisions entail the prohibition of making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
Despite the fact that tying practices are prohibited in the same manner under Article 101 and Article 102, the policy instruments used to deal with the tying issue differ.4
While under Article 101 tying falls within the scope of the control of restrictive agreements, it is addressed in the context of the control of unilateral behaviour of dominant firms under Article 102.5 Most of the antitrust cases on tying under EU law6
have been brought under the latter provision7 and the jurisprudence of the CJEU
played a key role in interpreting elements that have to be met in order for Article 102(d) to apply. Given the lack of the case law tackling tying practices pursuant to Article 101, this thesis will examine how – and to what extent –the substantive analysis of tying differs according to whether Article 101 or 102 is applied.
Since tying practices are susceptible to review under both articles, which can be applied simultaneously, coherence and consistency in their application are important.8
They contribute to legal certainty, ensure that the antitrust policy is enforced in a predictable and defensible manner, and prevent legal contradictions. The shift of EU antitrust policy from a formalist approach to an effects-based approach under Article 1 Hedvig Schmidt, Competition Law, Innovation and Antitrust: An Analysis of Tying and
Technological Integration (Edward Elgar Publishing 2009) 3
2 Christian Ahlborn, David S. Evans and A. Jorge Padilla, ‘The antitrust economics of tying: a farewell to per se illegality’ (2004) The Antitrust Bulletin/Spring-Summer, 287, 288
3 Matthew Jonathan Cole, ‘Tying Law in the European Union: Theory and Application’ (Doctoral thesis, September 2014) <https://orca.cf.ac.uk/73237/1/2015ColeMJPHD.pdf> (accessed 1 June 2017) page 11
4 Ahlborn et al. (n 2) 20
5 ibid.
6 Contrary to U.S. law, where the issue of tying has been predominantly tackled in the context of the control of restrictive agreements under section 1 of the Sherman Act. ibid.
7 Richard Whish and David Bailey, Competition Law (Oxford University Press, 8th edn, 2015), 731
8 The simultaneous application of Articles 101 and 102 was confirmed by the CJEU, inter alia, in Van
102, the foundation of which was laid down in the preliminary ruling of the CJEU in Post Danmark9, has brought within reach not only the coherence and consistency in the application of Articles 101 and 102 respectively, but also between the two articles.10
However, it seems that the jurisprudence, as well as the academic literature, have overlooked the great deal of convergence between the two provisions in the area of tying (and other vertical) agreements stemming from the modernisation of Article 102.11 As a result of the shift from form-based to effects-based approach, and due to
the need for consistency between Articles 101 and 102, the reform somehow lost sight of the specific features of the Articles concerned.12 The Commission’s practice
indicates that in case of a doubt the Commission would normally try to invoke both provisions in order to ensure that the contentious conduct is caught by at least one of them.13 Applying two provisions to the same practices is economically inefficient and
useless. It increases administrative and litigation costs without bringing any incremental benefit.14 Therefore, the main purpose of this thesis is to define the
vanishing boundaries between Articles 101 and 102 and to draw a distinction between their applications to tying practices.
Undoubtedly, the modernisation of Article 102 sought to align its application with that of Article 101 in order to prevent discrepancies and legal contradictions. I believe that this switch to a more flexible approach is especially welcomed in the area of tying practices. The CJEU’s attitude towards tying is rather unfavourable, since it seems that the CJEU has failed to appreciate economic efficiencies that tying may generate, which in turn could result in false-positive rulings. However, such reform appears to be a two-edged sword: while it pursues legitimate aims (i.e. consistency in the application of the two articles concerned) on one hand, it undermines different concepts and legal and economic logic underlying the two provisions on the other hand, and therefore further deepens the convergence between them. In this vein, this thesis will try to redefine the scope of the two Articles so that Article 101 is expanded to catch tying agreements that are currently considered abusive under Article 102. Consequently, this makes the latter provision applicable solely to unilateral tying practices.
Since the enactment of the reform of Article 102, the CJEU has not yet had the opportunity to adjudicate on tying case. However, given the statement of objections 9 Case C-209/10 Post Danmark AS v Konkurrencerådet [2012] ECLI:EU:C:2012:172. This judgement appears to be a milestone in the evolution of the CJEU's tackling of price-based exclusionary practices towards a more economic approach.
10 Luc Peeperkorn, 'Coherence in the Application of Articles 101 and 102: A Realistic Prospect or an Elusive Goal?’ (2016) 39(3) World Competition Law and Economics Review, 389, 391, 396
11 Ekaterina Rousseva, Rethinking exclusionary abuses in EU competition law (Hart Publishing 2010) 431
12 ibid.
13 See e.g., Rio Tinto Alcan (Case COMP/39230) Commission Decision AT.39239 (unpublished) 20 December 2012
the Commission has sent to Google for tying apps to its operating system15, there is a
decent chance the Court will soon be able to express its view. Recognising that the Microsoft case16 is one of the most controversial cases in the history of EU
competition policy17, it will be intriguing to see if the Commission and the CJEU will
nevertheless rely on the Microsoft legal precedent, or actually take account of the conceptual evolution of the analysis under Article 102 and adjust to fast-moving and dynamic markets, such as the information and communication technology sector.
2. The Blurred Borderline between Tying under Articles 101 and 102 TFEU 2.1. Definition and application of tying
Tying is a practice where a seller or a licensor requires that a buyer or a licensee, as a condition of purchasing or licensing one product or service – the ‘tying’ product – also purchases or licenses another, distinct product – the ‘tied’ product. It is analytically the same as exclusive dealing; however, while exclusive dealing ties distribution to manufacturing, equivalently, tying is exclusive dealing in the tied product.18 As these types of agreements share salient business purposes, economic
characteristics and legal treatment, many Commission and Court decisions address the cumulative effects of a combination of parallel tying and/or exclusive purchasing agreements.19
The wording of Articles 101(1)(e) and 102(d) is identical and tying is one of the numerous practices20 that might fall within the scope of both concerned provisions.
The simultaneous application was confirmed also by the case law which prohibits vertical agreements under both concerned articles.21 However, the Commission and
the CJEU have taken a much more lenient approach to tying practices under Article 101.22 The surprisingly few Article 101 decisions indicate that tying agreements are
unlikely to attract Commission interest, much less fines, unless they are employed, in conjunction with other restrictive practices, to foreclose competition, or if significant anticompetitive effects result from network effects.23 The GC’s reasoning for the
differentiated approach is, as it follows from its judgement in British Gypsum, that 15 European Commission – Press release, Antitrust: Commission sends Statement of Objections to Google on Android operating system and applications (April 2016) http://europa.eu/rapid/press-release_IP-16-1492_en.htm (accessed 4 June 2017)
16 Case T-201/04 Microsoft v Commission [2007] ECR II-3601
17 See Bo Vesterdorf, Article 82 EC: Where do we stand after the Microsoft judgement <http://www.icc.qmul.ac.uk/docs/gar2008/144723.pdf> (accessed 4 June 2017)
18 Richard A. Posner, ‘Vertical Restraints and Antitrust Policy’ (2005) University of Chicago Law Review 72(1), 229, 233. This is all the more true in contractual tying cases, as distinct from technological tying cases, where the tied product is physically integrated with the tying product.
19 James D. Veltrop, ‘Tying and Exclusive Purchasing agreements under EC Competition Law’ (1994) 31 Common Market Law Review, 549
20 Such as for example exclusive dealing agreements, bundling, exclusionary rebates etc.
21 Rousseva (n 11) 357
22 ibid.
“considerations, which apply in a normal competitive market situation, cannot be unreservedly accepted in the case of a market where, precisely because of the dominant position of one of the economic operators, competition is already restricted.”24
2.2. Tying as vertical agreement versus tying as unilateral conduct – drawing a distinction between their application
Given the overlap in the scope of Articles 101 and 102 in the area of vertical agreements in general, and tying in particular, it is difficult to find a dividing line between the two provisions and to explain why Article 101 is to be applied instead of Article 102 or vice versa. Therefore, it is hard to distinguish between the two types of tying practices.
First of all, there is no elaborated criterion which would make it possible to judge with confidence whether a certain tying practice is a vertical restraint (agreement) or unilateral conduct. And second of all, as dominance is no longer a concept reserved only for the application of Article 102, also Article 101 is sufficiently qualified to deal with tying practices that are currently considered abusive agreements under Article 102.25
The notion of an agreement has been gradually expanded through case law.26 It is now
clear that where a requirement imposed by the supplier is observed by the dealer (even seemingly involuntary), such situation does not prevent the finding of an agreement. The jurisprudence further demonstrates that an agreement exists even where it is not in the economic interest of one of the parties and even where the party is induced or enters the agreement because of the economic pressure exercised upon him/her.27 The CJEU, however, somewhat limited the approach of widening the
concept of agreement in Bayer, where it held that “an agreement cannot be based on what is only an expression of a unilateral policy of one of the contracting parties, which can be put into effect without the assistance of others.”28
It is interesting that in spite of the broadening of the concept of agreement and a clear tendency to interpret the notion of agreement so widely as to restrict the category of practices that can be caught under the provision designed to cover unilateral acts, tying remains a practice scrutinised predominantly under Article 102. This may indicate that whenever there is sufficient evidence that one of the parties holds a dominant position, the allegation of tying will automatically be brought under Article 24 Case T-65/89 BPB Industries Plc and British Gypsum Lts v Commission [1993] ECR II-00389, paragraph 67
25 Rousseva (n 11) 432
26 See Case 107/82 AEG Telefunken v Commission [1983] ECR 3151; Joined Cases 25 and 26/84
Ford v Commission [1985] ECR 2725; Case C-279/87 Tipp-Ex v Commission [1999] ECR I-261; Case
T-62/98 Volkswagen AG v Commission [2000] ECR II-2707, on appeal Case C-338/00 P Volkswagen
AG v Commission [2003] ECR I-9189 27 ibid.434, 436
28 Joined Cases C-2/01 P and C-3/01 P Bundesverband der Arzneimittel-Importeure eV and
102. Since the qualification of the conduct under Article 102 does not exclude a priori its application (unlike in the case of Article 101), the respective article will apply regardless of how the conduct is qualified. Therefore, in case of a doubt, the invocation of Article 102 appears a more convenient and an easier option.
Bearing in mind the above considerations, one can conclude that the current case law does not clearly delineate between critical factors qualifying a conduct as an agreement or unilateral practice. The CJEU has rather relied on dominance as the reason for applying Article 102. However, as the market power has emerged as a crucial factor in the assessment of vertical agreements under Article 101, and whereas no upper market share threshold for the application of that article has been determined, dominance does no longer seem appropriate demarcation line between Articles 101 and 102.
2.3. Tying arrangements under Article 102 TFEU
2.3.1. Shift from ‘per se’ to ‘rule of reason’ analysis
Prior to the Commission issuing its Guidance Paper29 and according to the established
case law, tying has been perceived as inherently abusive. The GC judgements in Hilti30 and Tetra Pak II31 made clear that absent an objective justification, a dominant firm is not entitled to condition the acquisition of one product to the acquisition of a different one irrespectively of the effects such practice produces on the market.32 As
such reduction in consumer choice in itself seemed to be abusive no evidence of exclusionary effects was needed.33
Such rigid approach to tying practices was changed (to a limited extent) by the Commission’s decision in Microsoft34, where the Commission justified the application of an effects-based approach by the special circumstances of the case.35 However, the
Guidance Paper took a step further and now provides that the assessment of the anticompetitive impact to which tying may give rise will have to be established not only in special circumstances, but in all tying cases.36 The Commission’s new
29 Communication from the Commission, Guidance on the Commission's enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings [2009] OJ C 45/7
30 Case T-30/89 Hilti AG v Commission [1991] ECR II-1439
31 Case T-83/91 Tetra Pak International SA v Commission (Tetra Pak II) [1994] ECR II-755, upheld on appeal, Case C-333/94 P Tetra Pak International SA v Commission (Tetra Pak II) [1996] ECR I-5951
32 Pablo I. Colomo, ‘Intel and Article 102 TFEU Case Law: Makin Sense of a Perpetual Controversy’ (2014) LSE Law, Society and Economy Working Papers 29/2014, 13
33 Ahlborn et al. (n 2) 316
34 Microsoft (Case COMP/C-3/37.792) Commission Decision of 24 March 2004 relating to a proceeding under Article 82 of the EC Treaty, upheald on appeal, Case T-201/04 Microsoft (n 16)
35 Unlike in typical tying cases, in Microsoft customers were not fully precluded from obtaining the tied product from other vendors.
approach puts an end to a presumption that tying normally causes competitive harm.37
Instead, the Guidance Paper notes that “tying and bundling are common practices intended to provide customers with better products or offering in more cost effective ways.’38
The substantive reform of the application of Article 102 is difficult to reconcile with the framework set by the preceding judgements addressing the issue of tying as it “avoids explicit confrontation between past experience and the new line of development, and seeks pragmatic solutions.”39 Therefore, the CJEU will have to deal
with the compromise between effects-based approach and legal certainty on case-by-case basis.
2.3.2. The five-pronged test
The role of the economic analysis has changed the treatment of practices under Article 102. With a view to attain more refined and economically reasonable decisions, the Commission established in Microsoft the five-pronged test applicable to the assessment of tying.40 This test, which has been affirmed by the GC, is a response
to the criticism of the per se rule applied in ‘classic tying cases’, and consists of five cumulative elements: (i) the tying and the tied product are two separate products, (ii) the undertaking concerned is dominant on the tying product, (iii) the undertaking concerned does not give customers a choice to obtain the tying product without the tied product, (iv) the practice in question forecloses competition, and (v) the absence of objective justification.41
Numerous criticism of the five-pronged test emerged after its establishment, emphasizing the need for its greater flexibility which would ensure that all anticompetitive tying cases are caught, but avoid false positive rulings. The operability of the current test raises concerns especially when it comes to dealing with high technology industries, rapid innovation and product development. It is argued that the approach must be more flexible towards the company, the nature of the products and the market conditions in which the company operates.42
2.3.3. Modified approach to tying under 102 TFEU
The five-pronged test is the cornerstone of the effects-based approach which can be said to be in line with the current economic thinking. However, it appears to be too costly, undermining legal certainty and ill-equipped to properly operate in dynamic 37 Jonathan Faull and Ali Nikpay, The EU Law of Competition (3rd edn Oxford University Press 2014) 456
38 Commission Guidance (n 29) paragraph 49
39 ibid. 431
40 Maurits Dolmans and Thomas Graf, 'Analysis of Tying Under Article 82 EC: The European Commission's Microsoft Decision in Perspective' (2004) 27(2) Kluwer Law International 27(2), 225
41 Case COMP/C-3/37.792 Microsoft (n 34) paragraphs 794–795, upheld on appeal, Case T-201/04
Microsoft (n 16) paragraphs 842–842 42 Schmidt (n 1) 179
markets.43 A new regulatory model expressed in the legal literature aims to be broad
enough to catch all anticompetitive tying, yet sophisticated enough to leave out pro-competitive behaviour. It is based on the following five points: (i) per se legality, (ii) an expanded consumer demand test, (iii) a market share cap to access dominance, (iv) as-efficient-as competitor test and consumer harm test to assess anticompetitive effects, and (v) objective justification modelled under Article 102.44
2.3.3.1. Per se legality
The modified approach first sets out that tying should be per se legal. This means that companies are allowed to tie until they reach a particular market power threshold. Hereafter the tie will be subject to analysis in order to ascertain whether it generates anticompetitive effects.45
2.3.3.2. Expanded consumer demand test
The current consumer demand test is seen to be insufficient and underdeveloped to deal with the more complex and technologically advanced products since it is not able to distinguish between products and their components.46 The expanded consumer
demand test maintains the consumer demand for the tied product without the tied product as a yardstick, while it encompasses further considerations: ‘new functionalities’ resulting from the technological integration, market development indicating that there will be no separate demand for a particular element of the product in the future, and the question of whether the component is necessary for the main function of the product are the factors that must be taken into account.47
2.3.3.3. Market share cap
A market share cap for the assessment of dominance consists of three screening levels depending on the market power and competitiveness of the market. According to the proposed test, tying is perceived as harmless whenever an undertaking’s market share does not exceed 40%.48 When market share is above 40% but below 60% tying can be
permitted if the tied product market is sufficiently competitive and has low barriers to entry. And lastly, ties by undertakings with market shares above 60% or above 40% in uncompetitive markets with high barriers to entry would be subject to a full assessment of weighing anticompetitive against procompetitive effects.49
43 ibid. 186
44 This is not the only regulatory model that has been proposed as a best way towards new and more flexible approach to 'modern’ tying theory. Cf. Kai-Uwe Kühn, Robert Stillman and Christina Caffarra, 'Economic theories of bundling and their policy implications in abuse cases: an assessment in light of the Microsoft case' (2005) 1(1) European Competition Journal, 85, 112–120
45 ibid.
46 ibid. 215
47 ibid. 213
48 See also chapter 3.1.3.
2.3.3.4. As-efficient-as competitor test and consumer harm test to assess anticompetitive effects
In order for the efficiencies, benefits to consumers and competitive process to be given appropriate consideration, an assessment of anticompetitive effects has to be embarked upon two factors: as-efficient-as competitor test and consumer harm test. The first complements the market share cap test and assesses whether the competitors may be equally efficient, but are nevertheless unable to compete sufficiently with the dominant company due to the advantage it has created with tying. If exclusion of equally efficient competitor is found, a full assessment of pro- and anticompetitive effects should be made in line with consumer harm test, whereas part of this assessment is included in the assessment of objective justification.50 The conduct will
be illegal if there is a net harm to consumer welfare taking into account all information available.51
2.3.3.5. Objective justification modelled under Article 102(d) TFEU
The new approach to objective justification suggests that Article 102(d) provides for an exemption when two conditions are met. First, there must be potential efficiencies that prevail against anticompetitive effects (part of consumer harm test described above). And second, the nature of the product or market conditions dictate that tying is part of commercial usage.
2.4. Tying agreements under Article 101 TFEU
Article 101(1)(e) has the same wording and pursues the same objective of anticompetitive tying as Article 102(d).52 Although the same concept underpins both
provisions and it should be irrelevant for the assessment outcome under which provision tying practice might be reviewed, the approach a competent authority has to undertake under Article 101 TFEU is slightly different from the one under Article 102 TFEU.
A landmark judgement that significantly altered the legal landscape of tying was Delimitis.53 Since Delimitis a competitive analysis, taking into account the economic and legal context of the tying agreement, is required under Article 101 TFEU.54
Market power as well as cumulative effects of various restrictive clauses in individual contracts became of paramount importance in the assessment of tying practices.55
50 ibid. 239–240
51 ibid. 233
52 There is a strong consensus amongst academics that a prohibition of tying practices under Article 101 does not apply to individual vertical ties but only to horizontal agreements to tie. However, the Courts have not yet ruled on this question. Thomas Eilmansberger, ‘Competition law issues concerning related markets and their treatment under EU competition law’ in More Common Ground for
International Competition Law edited by Josef Drexl and Others (Edward Elgar Publishing 2011) 114 53 Case C-234/89 Delimitis v Henninger Bräu AG [1991] ECR I-935
54 Veltrop (n 19) 562
Antitrust analysis of tying agreement pursuant to Article 101 TFEU focuses heavily on the foreclosure in the tied market by way of raising barriers to entry or expansion for rivals,56 and less on the leveraging of market power. Although foreclosure
typically aims at ousting opportunities of competing suppliers in the tied product market, the Commission maintains in its Guidelines on Vertical Restraints that tying may lead to anticompetitive foreclosure on the tying market as well, or both at the same time.57 The foreclosure effect depends on the tied percentage of total sales of the
tied product on the market.58 The Commission considers that tying agreement falls
foul of Article 101 TFEU where: (i) there is an agreement or concerted practice (conditioning the provision of one product to the acquisition of another product); (ii) actual or likely anti-competitive effects can be expected with a reasonable degree of probability; (iii) the likely anticompetitive effects on competition would be appreciable.59
2.4.1. Agreement
The existence of a tying agreement is a condition sine qua non for application of Article 101 TFEU. Contractual relationship required under Article 101 TFEU, however, merely refers to agreements between undertakings. Consequently, not all contractual tying practices fall within the scope of its wording. There is one hypothetical situation in which Article 101 TFEU is certainly not able to reach the condition of an agreement.60 This is the situation where an undertaking supplies final
consumers – individuals and not undertakings, and where it imposes certain restrictions on the transaction.61 Despite the broad interpretation of the concept of
undertaking62, the CJEU held in Pavel Pavlov that a final consumer cannot be
regarded as an undertaking because his/her behaviour is not of an economic nature (i.e. does not offer goods and/or services on the market).63 Therefore, tying
agreements concluded between an undertaking and a natural person purchasing goods and/or services as a final consumer do not fall within the scope of Article 101, rendering the application of Article 102 non-redundant.
56 Communication from the Commission, Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements [2014] C 89/03, paragraph 223
57 Information from European Union Institutions, Bodies, Offices and Agencies, European Commission, Guidelines on Vertical Restraints [2010] OJ C 130/01, paragraph 216
58 ibid.
59 Rio Tinto Alcan (n 13) paragraph 97
60 Rousseva (n 11) 465
61 ibid.
62 The CJEU held in Höfner and Elser that the concept of an undertaking includes »every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is finances.« Case C-41/90 Klaus Höfner and Fritz Elser v Macroton GmbH [1991] ECR I-1979, paragraph 21
63 Joined cases C-180/98 to C-184/98 Pavel Pavlov v Stichting Pensioenfonds Medische Specialisten [2000] ECR I-6451, paragraphs 71–78
As coercion was accepted as one of the elements that need to be met in order to establish an illegal tying practice64, the question whether the concept of an agreement
and the concept of coercion are not, by themselves, mutually exclusive arises. The concept of an agreement has been explained in Bayer, where the GC held that an agreement “centres around the existence of a concurrence of wills between at least two parties, the form in which it is manifested being unimportant so long as it constitutes the faithful expression of the parties’ intention.”65 Bearing in mind that
tying practice only exists where an undertaking does not give customers a realistic choice to obtain the tying product without the tied product, the existence of a concurrence of wills appears elusive.
However, the concurrence of wills refers to the behaviour that each of the parties adopts on the market.66 No concurrence of wills is required with regard to the
objectives and motives for concluding the agreement or effects of the agreement on the market.67 Furthermore, according to the settled case law, the fact that party’s
consent is not given without a certain amount of pressure from the other party participating in anticompetitive activities cannot call into question the existence of an agreement.68 As such, the concepts of coercion and agreement are not in contradiction
and therefore, coercion imposed by the undertaking with market power does not preclude a finding of an agreement.
2.4.2. An effects-based approach to the assessment of actual or likely anticompetitive effects
After the finding of an agreement, tying has to be subjected to an effects-based analysis which is discernable in Regulation 330/2010 regarding vertical restraints69, as
well as in Commission Guidelines on Vertical Restraints, which set out the principles for the assessment of vertical agreements under 101 TFEU. It is important to note that tying obligations are only capable to result in anticompetitive foreclosure if they concern two distinct products, whereas the distinct product test under Article 101 is identical to the one under Article 102. The anticompetitive foreclosure is in particular likely where, “without the tying obligations, an important competitive constraint would be exercised by competitors that either are not yet present on the market at the time the obligations are concluded, or that are not in a position to compete for the full 64 Case T-201/04 Microsoft (n 16) paragraph 864
65 Case T-41/96 Bayer AG v Commission [2000] ECR II- 3383, paragraph 69, upheld on appeal, joined Cases C-2/01P and C-3/01 P BAI v Bayer (n 28) paragraph 97
66 Rousseva (n 11) 438
67ibid. 438–439
68 Case T-368/00 General Motors Netherland BV, Opel Netherland v Commission [2003] ECR II-4491, paragraph 147. See also Case T-23/99 LR AF 1998 A/S, formerly Løgstør Rør A/S v Commission [2002] ECR II-01705, paragraph 142, 165; Case T-9/89 Hüls v Commission [1992] ECR II-499, paragraph 128
69 Commission Regulation (EU) No 330/2010 of 23 April 2010 on the the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices [2010] OJ L 102/1
supply of customers because the supplier in question is an unavoidable trading partner at least for part of the demand on the market.”70
Moreover, it has to be noted that, “appreciable anticompetitive effects are likely to occur when at least one of the parties has or obtains some degree of market power and the agreement contributes to the creation, maintenance or strengthening of that market power or allows the parties to exploit that market power.”71 The Commission further
asserts in Guidelines on Vertical Restraints that the degree of market power required for a finding of an infringement under Article 101(1) TFEU is less than the degree of market power required for a finding of dominance under Article 102 TFEU.72
2.4.3. Applicability of Block Exemption Regulations
As it has already been mentioned above, principles for the assessment of vertical agreements are set out also in Vertical Agreements Block Exemption Regulation (VABER).73 Before carrying out the effects-based analysis, it is necessary to ascertain
whether VABER applies. The Guidelines on Vertical Restraint note that tying is exempted under Block Exemption Regulation when the market share of the supplier, on both the market of the tied product and the market of the tying product, and the market share of the buyer, on the relevant upstream markets, do not exceed 30%.74
The market share thresholds indicate that there are market share levels below which no anticompetitive effects can arise on the market.
Similarly, in case of technology license agreements (i.e. when an undertaking contractually ties the licensing of its technology to the purchase of another product), Technology Transfer Block Exemption Regulation (TTBER) provides for the market share ‘safe harbour’, when market share of each of the parties to the agreement does not exceed 30% on the relevant market(s).75 Moreover, the Commission’s
accompanying Technology Transfer Guidelines highlight that outside the area of hardcore restrictions Article 101 is unlikely to be infringed where four or more independently controlled technologies are available in addition to the technology controlled by the parties to the agreement which may be substitutable for the licensed technology at a comparable cost to the user.76
70 Rio Tinto Alcan (n 13) paragraph 100. Pursuant to Guidelines on Vertical Restraints tying constitutes a vertical restraint falling under Article 101 where it results in a single branding type of obligation for the tied product. Therefore, on the question of what constitutes an appreciable foreclosure under Article 101(1), the analysis for single branding can be applied. See in Commission Guidelines (n 57) paragraphs 132, 214, 216
71 Commission Guidelines (n 57) paragraph 97
72 ibid.
73 Commission Regulation (n 69)
74 Commission Guidelines (n 57) paragraph 218
75 Commissoin Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements [2014] OJ L 93/17, Article 3(2)
2.5. Interim conclusion
Considering the Commission practice and the settled case law, Articles 101 and 102 can be applied in parallel.77 In the absence of a particular conceptual distinction
between tying practices falling under Article 101 and those falling under Article 102, a distinction in the legal consequences of illegal tying practices under the respective provisions is also wiped away.78 The redundancy of Article 102 in the area of vertical
agreements (which include tying agreements) resulting from the application of Article 101 was illustratively demonstrated in Van den Bergh Foods, where the Commission refrained from imposing fines under Article 102 as it perceived the infringement under Article 102 TFEU as being exactly the same as the one under Article 101.79
Such parallel application, hence, seems superfluous.
3. Conditions for a Tying Claim and their Application under Articles 101 and 102 TFEU
Since the same overall analytical framework of tying can be addressed under different policy instruments, it is important to identify how each of the elements is (or should be) interpreted and assessed in practice depending on whether Article 101 or Article 102 is applied. The ambition of this and the following chapter is to examine whether the operation of the five-pronged is equally applicable under both articles and to propose, where possible, the interpretation of the specific element in a way tailored to the specific features of the provision concerned.
3.1. The relationship between market power under article 101 TFEU and dominance under Article 102 TFEU
3.1.1. Dominance under Article 102 TFEU
Dominance is a general pre-condition that has to be established in order for finding an abusive tying practice under Article 102. In this respect, an undertaking should be dominant on the tying market, though not necessarily on the tied market.80 If tying is
carried out by a non-dominant undertaking, effective competition on the tying product market should ensure realistic alternatives to the tied offer for customers will remain.81 In this vein, the Commission decision in Hilti made clear that the
77 Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461, paragraph 116; Joined Cases C-395/96 P and C-396/96 P Compagnie Maritime Belge Transports SA v Commission [2000] ECR I-1365, paragraph 309; Case T-51/89 Tetra Pak II (n 31) paragraphs 21, 22; Commission Decision 98/531/EC of 11 March 1998, Cases IV/34.073, IV/34.395 and IV /35.436-Van den Bergh Foods
Limited (n 8)
78 This applies to the fining policy as well as to the right to damages. See Rousseva (n 11) 443–445
79ibid. 455
80 Commission Guidance (n 29) footnote 34
undertaking’s ability to carry out its illegal tying policies stems from its power on the market for the tying product.82
Through its strong position on the market, a dominant undertaking can use tying of a (complementary) product to preserve or even enhance83 its dominant position by
deterring future entry into the market for the tying product.84 Moreover, tying can also
be used as the means for leveraging the market power from the tying product market to a tied product market, thereby foreclosing competition on the latter.85
3.1.2. Significant degree of market power under Article 101 TFEU
Market power acquired an increased importance also under Article 101. Since the modernisation of its application, it is generally accepted that tying can give rise to competition law concerns only if a certain degree of market power at the level of supplier or buyer or both exists.86 In this vein, the Commission limits the application
of Article 101 with respect to tying to undertakings holding a certain degree of market power.87
This view is reflected in the Technology Transfer Agreements (TTA) Guidelines where the Commission highlighted that in order “for tying to produce likely anti-competitive effects the licensor must have a significant degree of market power in the tying product so as to restrict competition in the tied product.”88 In line with this
statement is, furthermore, the Block Exemption Regulation (TTBER), the legal effect of which is that tying is fully exempted below a market share threshold of 20% in case of horizontal agreements and 30% in the case of vertical agreements in respect of technology transfer agreements.89
3.1.3. Overlap of the concept of dominance between Articles 101 and 102 TFEU Indisputably, both abusive and restricting tying practices require sufficient degree of market power on the part of the concerned undertakings. In this respect, the Commission maintains that the degree of market power normally required for the finding that tying amounts to an infringement under Article 101 is less than the degree of market power required for finding of dominance under Article 102.90 This indicates
82 Case IV/30.787 Eurofix-Bauco/Hilti, OJ 1988 L 65/19, paragraph 74
83 In any case, Article 102 TFEU does not condemn tying carried out by undertakings pursuing to gain dominant position. Schmidt (n 1) 74
84 Dennis W. Carlton and Michael Waldman, ‘The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries’ (2002) 33(2) The RAND Journal of Economics, 194, 195
85 ibid.
86 Rousseva (n 11) 450
87 ibid.
88 Commission Guidelines (n 57) paragraph 223
89 Commissoin Regulation (n 75) Article 4. See also Commission Guidelines (n 57) paragraph 218
90 Communication from the Commission, Guidelines on the application of Article 81(3) of the Treaty [2004] OJ C 101/08, paragraph 26. See also Rousseva (n 11) 450
that the only difference between dominance under Article 102 and Article 101 is in the degree of market power.
In the AKZO ruling the CJEU established a rebuttable presumption of dominance applicable in circumstances where an undertaking has consistently held a market share of 50% or above.91 Yet, the case law establishes no firm market share threshold
below which dominance could not be found. In its Guidance Paper the Commission notes that “dominance is not likely if the undertaking's market share is below 40% in the relevant market (emphasis added).”92 However, this does not exclude the finding
of a dominant position at market share levels below 40%93, when other factors
indicate that an undertaking can nevertheless behave “to an appreciable extent independently of its competitors, customers and ultimately of its consumers.”94
It seems paradoxical that, while the Court has not totally excluded the finding of dominance at market shares lower than 30%, TTBER assumes that market shares below 30% exempt tying agreement from the application of Article 101(1).95 At the
same time, note should be made of the fact that dominance precludes neither the application of Article 101(1) nor of Article 101(3). Therefore, it cannot be firmly concluded that ‘degree’ represents a sharp demarcation line between dominance under Article 102 and sufficient degree of market power under Article 101.96
The current legal framework can lead to situations in which a tying practice would be exempted under one of the Block Exemption Regulations if scrutinized under Article 101, but found abusive if brought under Article 102. In order to avoid such contradictions, I am of an opinion, that a clear distinction should be drawn between the market power necessary for triggering the application of Article 101 to tying and dominance. In this respect, the threshold associated with finding of dominance should be strictly set and should coexist with a benchmark below which dominance could not be established.
3.2. Separate products / separate customer demand
3.2.1. The concept of separate products
Prior to the Microsoft judgement, the concept of ‘separate products’ as a prerequisite for a finding that tying constitutes an infringement of competition rules was reflected 91 Case C-62/86 Akzo Chemie BV v Commission [1991] ECR I-03359, paragraph 60
92 Commission Guidance (n 29) paragraph 14
93 For example, in British Airways the company was held dominant with 39.7% market share. See Case C-95/04 P British Airways v Commission [2007] ECR I-2331
94 Case C-27/76 United Brands Company and United Brands Continental BV v Commission [1978] ECR 207, paragraph 38. “The existence of a dominant position derives in general from a combination of several factors which, taken separately, are not necessarily determinative.” Rio Tinto Alcan (n 13) paragraph 35
95 Rousseva (n 11) 450. In practice, however, an undertaking engaging in tying practice will normally have a market share higher than 30%. Hence, Block Exemption Regulations do not seem to apply in any event. See in Faull, Nikpay (n 37) 440
in neither the case law nor scholarly writings. Bearing in mind that the wording of Articles 101(1)(e) and 102(d) does not entail the term ‘separate products’, this requirement might seem axiomatic.97 It is also deemed “one of the most controversial
issues in the tying field.”98 However, the links deriving from technological
developments in general, and digitalization in particular, blurred the distinction between main and secondary supplementary product. Therefore, identifying two separate products appears more adequate than focusing on the distinction suggested by the term ‘supplementary obligations’.99
The assessment of whether there are two separate products must be carried out in light of consumer demand for the tied product on a stand-alone basis; if there is demand to purchase the tied and tying product separately (from different sources of supply), the products at issue are distinct.100 Despite the fact that distinction between the term
‘separate products’ and ‘separate customer demand’ is almost entirely semantic, it is noteworthy that it is the customer (through customer demand for the tied product) who defines separate products.101 Certainly, consumer’s perception of products
changes over time due to the continuous product development and integration in technology markets; demand for two separate products can disappear if an integrated version offers a better customer experience.102 In this vein, the GC held that due to the
rapid and constant evolution of the IT and communication industry the products that “initially appear to be separate products may subsequently be regarded as forming a single product, both from the technological aspect and from the aspect of the competition rules.”103 In any event, the direction in which demand moves should be
left to the consumers, and not be dictated by the Commission/NCA or Court, nor by the conduct of a dominant undertaking.104 Despite recognizing that the separate
product test must be applied in a dynamic way, the GC put forward that the separate product test must be applied at the time when the abuse is alleged to have been committed.105
At this point I find it interesting to mention that in Windsurfing, a case concerning licensing agreements which arbitrarily laid down supplementary obligations on the licensees, the CJEU held that even a possibility of future separate demand has to be taken into account. It rejected justification that the prohibition on separate sales of rigs 97 Cole (n 3) 162
98 F. Enrique Gonzales Diaz and Antòn Leis Garcia, 'Tying and bundling under EU competition law: future prospects' (2007) Competition Law International 3, 13, 13
99 Jurian Langer, Tying and Bundling as a Leveraging Concern under EC Competition Law (Kluwer Law International 2007) 117–118
100 Commission Guidance (n 29) paragraph 51
101 Cole (n 3) 169
102 Schmidt (n 1) 66
103 Case T-201/04 Microsoft (n 16) paragraph 913
104 ibid.
105 Case T-201/04 Microsoft (n 16) paragraphs 914–915. The application of such principle might be problematic as in fast-moving markets two separate products might have become one only recently. Thus, mere reliance on historical evidence would be misleading and result in false convictions. See in Faull, Nikpay (n 37) 443–444
could not have any effect on competition as the refusal of such sales was in the licensees’ interest. The judgement was based on the argument that there were already vendors offering sailboard rigs and sailboard as separate components. However, the Court held that even if at one time there was no general interest in separate sales, the situation might alter subsequently.106
As regards the separate product requirement, the economic literature underlines the importance of the concept of complementarity. It takes the view that complementarity between two different components of a tie is an essential ingredient in order for tying to result in anticompetitive harm.107 The implication is that when such
complementarity does not exist, tying should be excluded from antitrust scrutiny.108
Moreover, the importance of complementarity is acknowledged also in the Guidance Paper. It states that “if the tied product is an important complementary product for customers of the tying product, a reduction of alternative suppliers of the tied product and hence a reduced availability of that product can make entry to the tying market alone more difficult.”109 Tying two complementary goods together raises barriers to
entry (in the absence of independent suppliers) as an entrant into the tied market has to enter both markets simultaneously, which makes the initial investment higher (especially if the tying product is expensive to replicate).110
3.2.1.1. Does the tied product belong to a separate product market?
A further requirement, despite not being yet applied or confirmed as a condition in the cases decided by the Commission or the European Courts, is that the tied product, in addition to being separate, belongs to a separate, and thus separately exploitable, product market.111 Its relevance, however, stems from the concept of market power
leveraging underlying the prohibition in Article 102(d); the non-merit based projection of market power into another market which has to be distinct from the market of the tying product.112 Otherwise, if the two markets are interrelated to an
extent that excludes the possibility of consumer exploitation with regard to the tied product regulatory intervention to protect the process of competition on the tied market would neither be necessary nor justified.113
The separate market requirement serves as an important limitation of the scope of the tying prohibition. It applies if the tying and the tied product, in spite of constituting separate products, are perceived by the consumer as forming two constitutive and formative elements of a system.114 Pursuant to this ‘system defence’ the consumer can
106 Case 193/83 Windsurfing International v Commission [1986] ECR 611, paragraphs 56–58
107 Kühn et al. (n 44) 113
108 ibid. See also chapter 4.2.
109 Commission Guidance (n 29) paragraph 58
110 Cole (n 3) 63
111 Eilmansberger (n 52) 104
112 ibid.
113 ibid. 105
be assumed to take the total system cost (the cost of both the tying and the tied product) into account when making the purchasing decision.115 In such cases, it is
submitted that undertakings should not be precluded from competing on the market for the whole system. Hence, it should not be qualified as an abuse if the dominant undertaking were to ‘close’ the system by tying its constitutive elements or excluding rivals from the tied product market by means of loss-involving strategies (i.e. low-price or even below-cost sales of products necessary to consume or utilise the supplier’s other product).116
Although there is no case in which a dominant firm had to rely on ‘system defence’, there are some cases in which the central aspect of this defence has been elaborated and criteria to assess the question of whether the tied product forms or belongs to a separate relevant market have been established.117 The authorities tackled this issue in
these cases because the undertakings concerned lacked market power on the market for the tying product. This raised the issue whether an undertaking could be considered as dominant on the tied (downstream) market, whereas central to this issue was the existence of a close link between the tying and the tied market.118 To assess
whether there was sufficient interrelation between the two markets the Commission used the following four criteria: i) can the consumer make an informed choice including lifecycle pricing; ii) is the consumer likely to make an informed choice; iii) would a sufficient number of consumers adapt their purchasing behaviour at the level of the tying market in case of an apparent policy of exploitation being pursued in one specific aftermarket; and iv) would consumers adapt within a reasonable period of time?119
While the exclusion or hindering of rivals on the tied product market through tying in the absence of a separate relevant market should not be considered infringing antitrust laws, the way in which an undertaking competes on the ‘systems market’ could be. The test would be whether, after the addition of the tied product, the price for the tying product (i.e. the whole ‘system’) is still cost covering under the criteria developed in the case law.120
115 ibid. In this sense, the US Supreme Court held in Eastman Kodak that “when a manufacturer uses its control over single-branded parts to acquire influence in single-branded service, the monopoly “leverage” is almost invariably of no practical consequence, because of perfect identity between the consumers in each of the subject aftermarkets […]. When that condition exists, the tie does not permit the manufacturer to project power over a class of consumers distinct from that which it is already able to exploit (and fully) without the inconvenience of the tie.” See the US Supreme Court in Eastman
Kodak Company v Image Technical Services, Inc. et al., 504 US 451 (1992) page 498 116 Eilmansberger (n 52) 105, 107
117 Info-Labl Ricoh (1999), Competition Policy Newsletter No. 1, page 35; Pelikan/Kyocera (1995), Competition Policy Newsletter No. 6, page 13; Case T-427/08 Confédération européenne des
Associations d'Horlogers-Réparateurs (CEAHR) v Commission [2010] ECR II-0000, paragraphs 67–
70, 78–80, 105. See in Eilmansberger (n 52) 105–106
118 Info-Labl Ricoh (n 117) 36
119 ibid. 36–37
120 Case C-62/86 Akzo (n 91) paragraph 72, Case T-83/91 Tetra Pak II (n 31) paragraphs 148–149. See Eilmansberger (n 52) 118–119
3.2.2. The commercial usage criterion under Article 102 TFEU
In Tetra Pak II the Court held that the competent authority is not precluded from finding that there is an unlawful tie even though the products in question are connected by commercial usage, a situation not covered by the express wording of Article 102(d).121 It concluded that “a [commercial] usage which is acceptable in a
normal situation, on a competitive market, cannot be accepted in the case of a market where competition is already restricted.”122 In particular, this line of reasoning results
from the ‘special responsibility’ a dominant undertaking has on the market.123
Special responsibility of a dominant undertaking facilitates the finding of an abuse. It makes it easier to reach the conclusion that a conduct which produces efficiencies, if undertaken by a firm with market power, is nevertheless harmful to competition if carried out by a dominant firm, without the competition authorities examining in detail whether such behaviour might be efficiency enhancing.124
From the above considerations it is clear that the GC did not consider the commercial usage criterion as a proxy for either efficiencies or consumer harm.125 As such, the
absence of commercial usage is not regarded as a prerequisite for (illegal) tying, but rather seems to be treated similarly to objective justifications.
3.2.3. The commercial usage criterion under 101 TFEU
The commercial usage criterion can be understood as suggesting a lenient approach towards the combination of products and services that may be tied together because they are not separate products, due to efficiencies (e.g. technical complementarity) or because of industry practice.126
As it is explained in the section 3.1., at least one of the undertakings entering into a tying agreement has to hold a certain degree of market power. Despite the fact that dominance is not an obstacle to the application of Article 101 TFEU, this section will concentrate, for the purposes of describing the difference in the application of the commercial usage criterion, merely on a situation in which none of the undertakings to the agreement is dominant, but in which, however, one of them has sufficient degree of market power.
The conclusion on commercial usage criterion following from Tetra Pak II, which is inherent to the concept of special responsibility is applicable to unilateral conducts by dominant undertakings. Such line of reasoning should not be simply transposed into the interpretation of Article 101, as the critical features and the legal logic underlying 121 Case C-333/94 P Tetra Pak II (n 31) paragraph 37. See Whish, Bailey (n 7) 731
122 Case T-83/91 Tetra Pak II (n 31) paragraph 137
123 See Case C-322/81 Michelin v Commission [1983] ECR 3461, paragraph 57
124 Ahlborn et al. (n 2) 317
125 ibid. 315
the two provisions differ.127 Subject to a special responsibility are dominant
undertakings and not undertakings with sufficient degree of market power. Therefore, under Article 101 the commercial usage test could be seen as a proxy for the net welfare effect of tying agreement (in parallel with U.S. law on tying).128 In line with
this thinking, the above proposal for more firm market share thresholds appears to be even more appropriate.
3.3. Coercion
Pursuant to the Microsoft judgement, coercion is the third condition necessary for a finding of unlawful tying, and is considered to be met in the situation when a supplier does not give customers an option of obtaining the tying product without the tied product.129 It can manifest itself in different forms. The CJEU distinguishes between
contractual and technical coercion.130 While the former exists if the requirement to
buy the tied product is imposed as a condition for the sale of the tying product, the latter consists in preventing the customer from using the tying product without the tied product.131
Coercion seems, prima facie, indeed a key element for a finding of an illegal tying, as no competitive concerns result from a voluntary transaction that would have occurred even in the absence of a tie.132 However, whether the concept of coercion genuinely
contributes to the improvement of the assessment of the tying practices (by increasing the standard of proof) is arguable.
Despite the fact that the Court expressly affirmed coercion as a condition for the abuse, the Guidance Paper does not include this element as a condition for tying practice to fall foul of Article 102. The same holds true for other Commission’s documents which are tackling the tying practices under Article 101.133 This may
suggest that coercion must be understood as an element of the behaviour that triggers the application of the substantive analysis of tying and not as a form of anticompetitive effect.134 As such coercion is only relevant to the assessment of
whether as-efficient competitors are foreclosed from the tied market.135
127 cf. Bundeskartellamt, 'Digitale Ökonomie – Internetplattformen, zwischen Wettbewerbsrecht,
Privatsphäre und Verbraucherschutz (October 2015)
<https://www.bundeskartellamt.de/SharedDocs/Publikation/DE/Diskussions_Hintergrundpapier/AK_K artellrecht_2015_Digitale_Oekonomie.pdf?__blob=publicationFile&v=2> (accessed 2 June 2017) page 29
128 Ahlborn et al. (n 2) 299
129 Case T-201/04 Microsoft (n 16) paragraph 945
130 ibid. paragraphs 963, 965
131 Technical coercion occurs when the tying product is designed in such a way that it only works properly with the tied product (and not with the alternative offered by competitor) or when two products are physically integrated so that they can only be sold together. See Alison Jones and Brenda Sufrin, Competition Law: Text, Cases and Materials (5th edn, Oxfor University Press 2014) 474
132 Veltrop (n 19) 556
133 See chapter 2.4.
134 Faull, Nikpay (n 37) 445
