Cartels & Abuse of Dominance

European and national competition rules aim to promote competition and to protect consumers against for example excessive prices or restricted choice. The underlying principle is that companies are supposed to determine their market behaviour independently. The Authority for Consumers and Markets (ACM) and the European Commission supervise compliance with the competition rules. Violation of these rules can be costly for any business. Significant fines can be imposed, while agreements can turn out to be null and void. Companies that have violated competition law are in practice increasingly  confronted with claims from third parties who themselves have suffered losses as a result of the original violation. The mainstays of competition law are the prohibition on cartels and restrictive agreements and the prohibition on the abuse of a dominant position.

Prohibition on cartels and restrictive agreements

In short, the prohibition on cartels bans agreements between companies and decisions by sector associations that could represent a limitation of competition. Classic examples include pricing agreements, market sharing agreements and agreements aimed at limiting production capacity. Such agreements between competitors are forbidden in almost all cases. There is also a growing focus on the exchange of competitively sensitive information, which is increasingly seen as restricting competition. Perhaps less well-known is the fact that agreements within distribution, agency and franchising agreements are also covered by the prohibition on cartels. This may for example relate to agreements on (area) exclusivity, selectivity, non-competition, zoning plans for a location or shop space, and restrictions relating to internet sales. In particular, the possibilities for online advertising campaigns or price offers, using price comparison sites or social media, are recurring subjects of discussion.

Abuse of a dominant position

Any company with a dominant position has a ‘special’ responsibility to avoid abusing that position. In itself, having a dominant position is not forbidden: it is forbidden to abuse that position. Examples of abuse are: refusal to deliver, imposing excessively high or excessively low prices, employing unreasonable or discriminatory contract conditions and tied sales arrangements. In determining whether a company has a dominant position, the essence lies in assessing whether in respect of its competitors, customers and consumers, the company enjoys a considerable degree of independence. A high market share may be an indication for a dominant position, but is not the sole criterion.