Abuse of Dominance

Article 6 of Law No. 4054 prohibits as unlawful the abuse by one or more undertakings, alone or through agreements or concerted practices with others, of their dominant position in a market for goods or services.

What Is a Dominant Position?

A dominant position is the economic power that enables one or more undertakings in a given market to act independently of their competitors and customers. It is assessed after the relevant market is defined. Market share is an important indicator: under the Competition Authority’s guidelines on abuse of dominance, dominance is unlikely at market shares below forty per cent. The strength of competitors, barriers to entry and buyer power are also assessed.

Examples of Abuse

The examples listed in the Law are: directly or indirectly preventing competitors’ activities; making the sale of goods or services conditional on the purchase of other goods or services; applying different terms to buyers in equal positions; and limiting supply, markets or technical development to the detriment of consumers.

Conduct frequently encountered in practice includes:

• Exclusionary exclusivity and loyalty rebates: Agreements and target rebates that effectively prevent customers from dealing with competitors.
• Predatory pricing: Pricing below cost to drive competitors out of the market.
• Tying and bundling: Making the sale of a product in which the undertaking is strong conditional on buying another product.
• Margin squeeze: Pricing by an undertaking active in both wholesale and retail markets that prevents competitors from operating profitably.
• Discrimination and refusal to supply: Applying different terms to certain customers or refusing to supply without objective justification.

Sanctions

If abuse is established, the undertaking may be fined up to ten per cent of its annual gross revenue (administrative fines), and the Board may impose obligations to end the conduct. The commitments mechanism is frequently used in dominance cases.