Abuse of dominant position

Abuses of dominant position are closely monitored by the ADLC and the courts.

Article L. 420-2 of the Commercial Code prohibits any abuse of a dominant position by a company or group of companies when its purpose or effect is to prevent, restrict or distort competition.

The first paragraph of this article contains a non-exhaustive list of examples such as refusal to sell, tied selling, discriminatory sales conditions or the termination of a commercial relationship on the sole ground that the partner victim of the termination refuses to accept unjustified commercial conditions.

Article L. 420-4 of the Commercial Code enshrines the principle of individual exemptions provided that the company concerned demonstrates the productivity gains of the practice and that the practice reserves a fair share of the profit for consumers.

The ADLC uses the analytical framework of the European Commission. See question 6 in the “vertical agreements” section.

Under French law, there is no turnover threshold above which the authorities or the courts presume that a company is in a dominant position. However, the ADLC considers that a market share greater than 50% is an indication of a dominant position.

The ADLC may retain a dominant position beyond 40 % depending on the nature of the market, the market shares of competitors, the constraints exerted by other competitors, the type of customers targeted and the maturity of the market.

Being in a dominant position is not illegal in itself and has no consequences as long as the company does not abuse its dominant position. However, certain practices must be closely monitored when the company concerned has a significant market share. These practices include refusal to sell, tied selling, etc. Not only the actual effects but also the potential effects are checked.

Economic analysis should be used as a useful tool to assess market dominance and in particular to define relevant product markets, geographic markets, to determine the methodology for calculating market shares, to define the degree of effective competition , potential competitors and the exercise of countervailing buyer power for customers.

Market share plays a key role in assessing dominance, as discussed in point 3.4.

Article L. 420-4 of the Commercial Code provides for exceptions to the prohibition of abuse of dominant position such as:
Practices resulting from the application of a legal or regulatory provision;
Practices meeting the following criteria: (i) the practices contribute to economic progress, in particular by creating or maintaining jobs, (ii) they reserve a fair share of the profit for consumers, (iii) they do not eliminate competition for a substantial part of the products in question and (iv) they do not include restrictions which go beyond what is strictly necessary to achieve the economic progress aimed at.

See question 4.

The regulations also apply to cases of collective domination in accordance with Article L. 420-2 of the Commercial Code. The ADLC analyzes three cumulative conditions provided by European case law: (i) market transparency, i.e. each member of the group concerned must have the opportunity to know the behavior of other members in order to determine whether it intends to adopt the same behavior, (ii ) the possibility of tacit and lasting coordination and (iii) the lack of foreseeable stability of consumers and competitors as to the results expected from the common policy.

Companies must be able to adopt a common market policy and act independently of their competitors and customers. Collective domination does not necessarily imply an absence of competition between the parties.

Abuse of dominance regulations apply to both dominant buyers and suppliers.

Potentially abusive conduct that falls within the scope of Article L. 420-2 of the Commercial Code includes in particular: discount systems, discriminatory prices, exclusivity agreements, margin compression, denigration, predatory practices, tied selling and the use of anti-competitive practices resulting from a legal monopoly.

Furthermore, according to Article 102 TFEU, an abusive practice may consist of "(a) directly or indirectly imposing unfair purchase or selling prices or other trading conditions, (b) limiting the production , markets or technical development to the detriment of consumers, (c) applying dissimilar conditions to equivalent services with regard to trading partners, thereby placing them at a competitive disadvantage, (d) making the conclusion of contracts subject to the acceptance, by the partners, of additional services which, by their nature or according to commercial usage, have no connection with the subject of these contracts”.

Intellectual property can play a role in the analysis of abuses of dominant positions. Indeed, the use of intellectual property rights by a company can be abusive when it is in a dominant position. For example, denial of a license may be considered unreasonable, particularly if the intellectual property rights qualify as critical infrastructure. However, ownership of a patent or other intellectual property rights does not necessarily give the company a dominant position.

Refusals to maintain a business relationship are not considered anti-competitive in themselves. Nevertheless, in certain circumstances, they can be considered as anticompetitive when the company concerned is in a dominant position.

With regard to refusals to sell, three cumulative conditions must be established in order to determine whether or not a refusal to sell is anti-competitive in nature: (i) the essential character of the product to which access is refused, (ii) the effect on the competition and (iii) the innovative nature of the product.