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Sangyun Lee, 'Some Introductory Notes to Economic Dependence and Abuse Thereof' (Convegno: L’abuso di dipendenza economica, Milan, 24 January 2023)


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Sangyun Lee, 'Some Introductory Notes to Economic Dependence and Abuse Thereof' (Convegno: L’abuso di dipendenza economica, Milan, 24 January 2023)

  1. 1. Some Introductory Notes to Economic DependenceandAbuse Thereof 1 1 1. This presentation draws on my previous presentations at the 17th ASCOLA Annual Conference (, Rikkyo University ASBP Workshop (, and Seoul Workshop ( I sincerely thank Professor Masako Wakui (Kyoto University), Professor Thomas Weck (Frankfurt School), and Professor Claudio Lombardi (University of Aberdeen) for their valuable comments on my early draft. 2. Sangyun Lee2 Research Fellow, Korea University ICR Law Center Milan, January 24, 2023 DOMINANCE DEPENDENCE
  2. 2. 2 BACKGROUND
  3. 3. EUROPEAN UNION 3 • Digital Markets Act (DMA) (2) … characteristics of core platform services are very strong network effects, an ability to connect many business users with many end users through the multisidedness of these services, a significant degree of dependence of both business users and end users, lock-in effects, a lack of multi-homing for the same purpose by end users, vertical integration, and data driven-advantages. All these characteristics, combined with unfair practices by undertakings providing the core platform services, can have the effect of substantially undermining the contestability of the core platform services, as well as impacting the fairness of the commercial relationship … this leads to rapid and potentially far-reaching decreases in business users’ and end users’ choice, and therefore can confer on the provider of those services the position of a so-called gatekeeper. (3) … Some of those undertakings exercise control over whole platform ecosystems in the digital economy and are structurally extremely difficult to challenge or contest by existing or new market operators, irrespective of how innovative and efficient those market operators may be. … ? ? Business users End users Substitute Substitute profits profits Competitive bottleneck unfair practices Core Platform Services unfair practices • UTPs Directive 2019/633 (food supply chains); P2B Regulation (platform transparency) • Dependency consideration in the CJEU’s precedents: e.g. British Leyland plc v Commission, para 9; Deutsche Bahn v. Commission, para 57; Aéroports de Paris v. Commission, para 165
  4. 4. UNITED STATES 4 1. 2. 3. Albert A. Foer, ‘Abuse of Superior Bargaining Position (ASBP) What Can We Learn from Our Trading Partners?’ Competition and Consumer Protection in the 21st Century Hearings, Project Number P181201 (Aug 20, 2018), p.13. • “Unfair Methods of Competition” (UMC) under the FTC Act Section 5 • Policy Statement Regarding the Scope of Unfair Methods of Competition (Nov 10, 2022)1 • Proposed Rule to Ban Non-compete Clauses (Jan 5, 2023) “The Commission preliminarily finds non-compete clauses for workers other than senior executives are exploitative and coercive because they take advantage of unequal bargaining power between employers and workers at the time the employer and worker enter into the non- compete clause. … courts have held conduct that is exploitative and coercive can violate Section 5 where it burdens a not insignificant volume of commerce. Courts have long recognized bargaining power between employers and workers is unequal and, as a result, workers are vulnerable to exploitation and coercion through the use of noncompete clauses at the time of contracting” – Notice p. 81 (IV. A. 1. a) et seq.2 • Foer (2018) “… competitive process rather than narrowly interpreted consumer welfare is the principal objective of the antitrust laws. In this light, one can make several points in favor of applying “unfair methods of competition” to ASBP. …” 3
  5. 5. Legislative Status Quo1 (Abuse of Economic Dependence / Superior Bargaining Position) 5 • Two Modalities of Implementing the AED via the Comp Law (i) AED law stipulated separately but operated in close proximity to the dominance rule e.g., Austria – Sec. 4a, Cartel Act Belgium – Art. IV.2/1, WER France – Art L.420-2, Code de commerce Germany – Sec. 20, GWB Portugal – Art. 12, Law no. 19/2012 Switzerland – Art. 7, Cartel Act (ii) AED law stipulated separately as unfair practices & operated independently of the dominance rule e.g., Romania – Art. 2(3), LEGE nr. 11/1991 Spain – Art. 16(2), Ley 3/1991 US – Sec. 5, FTC Act Japan – Art. 2(9)(v), AMA Korea – Art. 45(1)(6), MRFTA Abuse of Dependence Abuse of Dominance Abuse of Dominance Abuse of Dependence Abuse Abuse Unfair Conduct 1. See ANNEX 1. Overview of the Legislative Status Quo.
  6. 6. Key Questions • Why does competition law (CL) need the Abuse of Economic Dependence (AED)? • How to implement AED prohibition within the CL’s enforcement framework?1 6 1. For a question about what to be considered when introducing AED rules within the competition law’s framework, see ANNEX 2. Recommendations for Jurisdictions to Introduce Dependency-Based Law.
  8. 8. What is Competition Law for? • Modern Competition Law (since the 2000s) • A public policy measure to maintain the pro-competitive market economy sensu lato by means of a form of public intervention (alongside the possibility of private litigation) against anti-competitive practices based on ex-post effect-based analysis. • Competition Law’s Concerns • External constraint on the freedom of contract • Primary role of CL (in abuse control) – to prevent market foreclosure (leading to exploitation) • Competition Law’s Intervention (against unilateral conduct) • Two requirements: (1) Power/Position & (2) Abuse • (1) Substantial Market Power – An objective power formed when there’s a lack of substitutes • (2) Abuse – (Mainly) horizontal, exclusionary abuse 8
  9. 9. * Note. A linear understanding of competitive harm 9 Competitive Market ☺ Anti-competitive Conduct 🤜🤜 Market Foreclosed 🤒🤒🤕🤕 Customer Exploitation ☠ US’s incipiency doctrine post-Chicago School EU’s ordo-liberalism... US’s Chicago School CW standard (stricto sensu) Competition Law’s Intervention Timings
  11. 11. 11 • SMP (Power-to) • H. COMP between Substitutes • H. ABUSE (Exclusion) ? ? ? What lies on the other side?
  12. 12. 1st Can “SMP” Fully Embrace Anti-competitive Power? POWER-TO and POWER-OVER POWER-TO (do something) • Morris (2002) ‘power is a dispositional concept and refers to the capacity to effect (i.e., accomplish) outcomes, rather than ability to affect other people (i.e., alter their conduct).’ POWER-OVER (someone) • Dahl (1957) - ‘A has power over B to the extent that he can get B to do something that B would not otherwise do.’ • Lukes (1974; 2005) - ‘A exercises power over B when A affects B in a manner contrary to B’s interests.’ • Foucault (1983) - ‘power as such does not exist … if we speak of the structures or the mechanisms of power, it is only insofar as we suppose that certain persons exercise power over others’ • Emerson (1962) - to say that X has power is vacant, unless we specify “over whom”; “the power of A over B is equal to, and based upon, the dependence of B upon A.” • SMP only captures one aspect of power, the capacity to bring about outcomes as intended So, Relative Market Power (‘RMP’) concept is needed to get a more holistic view 12
  13. 13. 13 • SMP (Power-to) • H. COMP between Substitutes • H. ABUSE (Exclusion) RMP (Power-over) ? ?
  14. 14. 2nd Is Competition Only Horizontal? (a question on substitutability) HORIZONTAL COMP and VERTICAL COMP • Traditional view – Timothy Muris “Market power, of course, exists only at the horizontal level” / BUT… • Steiner (1991; 2008) – ‘Firms are deemed as competitors when they capture a share of surplus value at each other's expense or take sales or margins from each other.’ • Muthoo (2000) – In bargaining theory, a bargaining situation is defined as a situation in which “two or more players have a common interest to co-operate, but have conflicting interests over exactly how to co-operate”. • Porter (2008)’s Five Competitive Forces Not only (horizontal) competition from established rivals within the same industry, substitutes in other industries, and the threat of new entrants, but also (vertical) competition from the bargaining power of suppliers and buyers can constitute competitive forces that determine industry profitability 14 Incumbent(s) BargainingPower of Suppliers BargainingPower of Buyers Threat of New Entrants Rivalry Among Existing Competitors Threat of Substitute Products or Services ⚔ ⚔ ⚔ ⚔ ⚔
  15. 15. 15 • SMP (Power-to) • H. COMP between Substitutes • H. ABUSE (Exclusion) RMP (Power-over) V. Pressure from Complements ?
  16. 16. 3rd Can Power Only Be Abused in Horizontal? 16 HORIZONTAL ABUSE and VERTICAL ABUSE • Kantzenbach (2014) - In German competition law - Horizontal abuse is construed as a kind of practice against competitors e.g., predatory pricing, rival’s cost- raising practices (leading to market foreclosure) - Vertical abuse means a practice “against customers, especially by raising prices above the competitive level” (which is not covered by the US antitrust rules) • Dr. Jacques Steenbergen, the former President of the Belgian Competition Authority stated that several investigations in other states against abusive practices by internet convinced him of the need to prohibit these types of ‘vertical’ abuses in Belgian Comp law1 Source: Concurrence 1. Laurent Garzaniti, Thomas Janssens, and Tone Oeyen, ‘Abuse of economic dependence: Belgian Competition Authority adds another tool to its enforcement toolkit’ (Freshfields Bruckhaus Deringer Briefing, Mar 26, 2019)
  17. 17. 17 • LINEAR and CIRCULAR understanding of competitive harm Substitutes decreased A’s capacity to make changes being formed/fortified A’s exclusive conduct & Competitors excluded Profits concentrated to A A’s control over B (B’ dependence on A) increased A’s unfair exercise of its control/influence to capture more surplus A’s profit increased at the cost of B’s interest A’s customer lock-in strategies getting more effective How Does Vertical Abuse Impact Competition?
  18. 18. Application: Google’s Play Store 18 • Through the lens of substitutability Google = Dominance? SMP? Very demanding e.g., Epic Games v. Apple • Google has power-over users and can fortify its position First, by increasing users’ reliance on the Google Play Store, Google gains influence over the users, including app providers and end-users. • Individuals' consumption path dependence → • They are locked in on their repeated consumption patterns -→ • App developers also become dependent on major distribution channels (‘competitive bottleneck’) → Second, Google’s position becomes more entrenched over time in a reinforcing feedback loop • Google maximizes its profits at the expense of dependent parties (mainly app suppliers) → • Dependent parties accept asymmetric terms and conditions → • Google takes a larger portion of the benefits (money, data, contractual obligations...) → • Google's business model gets more powerful, elaborated, advanced. ? ? Business users End users Substitute profits profits unfair practices Google’s Play Store unfair practices Competitive bottleneck
  19. 19. What harm exactly? 19 Competitive harms of exploitative and economic dependent abuse (Bougette, et al. (2019))* (i) harm to consumer welfare due to price increases, limited choices, and limited innovation incentives; (ii) harm to companies’ market accessibility; (iii) harm to distributional wealth transfer, impairing allocative efficiency; (iv) regulatory harm caused by the accumulation of private economic power; (v) macroeconomic imbalances due to the concentration of economic power; and (vi) erosion of moral of the market system and loss of faith in it, attributable to the non-sanctioned but repetitive occurrence of abusive practices, in the long run • The horizontally focused SMP approach cannot readily suppress these problems as a foul of competition law * Patrice Bougette, Oliver Budzinski, and Frédéric Marty, ‘Exploitative Abuse and Abuse of Economic Dependence: What Can We Learn From an Industrial Organization Approach?’ (2019) 129(2) Revue d'économie politique 261
  20. 20. 20 • SMP (Power-to) • H. COMP between Substitutes • H. ABUSE (Exclusion) RMP (Power-over) V. Pressure from Complements V. ABUSE (Exploitation)
  22. 22. 22 Sec 2 Sherman I thank Giorgio Monti for the fruitful discussion on the relationship between dominance and dependence. HOLISTIC APPROACH Art. 102 TFEU (incl. 102(a)) Dominance & Dependence (e.g., AT BE FR DE IT JP KR PT RO ES CH) POWER-TO HORIZONTAL COMPETITION HORIZONTAL ABUSE POWER-OVER VERTICAL COMPETITION VERTICAL ABUSE
  23. 23. Key Takeaways • Why is ‘Abuse of Economic Dependence’ needed? • For a more holistic approach to anti-competitive power and abuse, 1) ‘Substantial Market Power’ based on the power-to concept should be complemented by ‘Relative Market Power’ based on the power-over concept; 2) The fact that not only is competition horizontal (i.e., competition between substitutes) but also vertical (i.e., competitive pressure from complementary relations) needs to be considered; and 3) In addition to horizontal abuse (with exclusionary effects), the existence of vertical abuse (raising adverse ramifications by exploitation) should be recognized. 23
  24. 24. 24 HOW TO IMPLEMENT IT?
  25. 25. 1st Power/Position in AED • Key considerations: 1. Considerations focused on external context: the objective absence of feasible alternatives 2. Considerations focused on internal context: the importance of the transaction for the weaker(s) 25 ? B ? INCUMBENT A 2nd How important is A for B’s business? 1st Are there any feasible alternatives? (a) the relative market power of the other enterprise; (b) an important share of the other company in its turnover, while also taking into account that the more important this share, the greater the risk of dependence; (c) the technology or know-how owned by the other enterprise; (d) the high profile of a brand, scarcity of the product, the perishable nature of the product or still loyal purchasing behavior of consumers; (e) the company's access to resources or to essential infrastructure; (f) the fear of serious economic disadvantage, of reprisals or of the termination of a contractual relationship; (g) the regular grant to a company of special conditions, such as discounts (rebates), that are not granted to other companies in similar cases; (h) its deliberate choice or, on the contrary, its mandatory choice to place itself in a position of economic dependence. - WETSVOORSTEL/PROPOSITION (12 février 2019) LEXICAL PRIORITY
  26. 26. 1st Power/Position in AED • Relationship with the AEC principle? • “Article 82 EC prohibits a dominant undertaking from, …, adopting pricing practices that have an exclusionary effect on competitors considered to be as efficient as it is itself …” – Post Danmark I (2012), para 25. See also, Intel (2017), para 136. • Economic dependence (i.e., relative market power) is less relevant to the AEC principle, given the relational and bilateral features of the power and the coercive nature of abuse. • The efficiency of competitors (i.e., substitute providers) can be taken into account as a (negative) factor of structural dependency when assessing the feasibility of alternatives • The more efficient the competitors,  the more feasible the alternatives will be in the market and  the less likely the incumbent will be found to be relatively dominant. 26 Feasibility test less efficient … less feasible … more likely …
  27. 27. ABUSE OF DOMINANCE ABUSE OF DEPENDENCE “Any practice the implementation of which holds no economic interest for a dominant undertaking, except that of eliminating competitors so as to enable it subsequently to raise its prices by taking advantage of its monopolistic position, must be regarded as a means other than those which come within the scope of competition on the merits” - Servizio (2022), para 77 (suggestion) … no economic interest … except that of negating the merits of competition so as to … 2nd Abuse in AED • AED is Coercive by its nature: higher prices, shifting costs, restricting one’s choice... “The transfer of costs incurred and the shift of entrepreneurial risk to the weaker party in the relationship represent a common denominator for most of the above UTPs.” (Green Paper (2013)) • Abnormality of problematic practices in AED? • To be found illegal as abuse of dominance, the accused conduct must fall outside the scope of normal competition (competition on the merits) • Likewise, not every exploitative use of dependency amounts to abuse in CL. Illegal use of the state of dependency should be “abnormal” in light of the merits of competition. 27
  28. 28. 2nd Abuse in AED 28 Contract law or sector-specific regulations issues Competition law issues • Abnormality 1. ‘abnormalities’ that can be equated with contractual failure 2. ‘abnormalities’ having structural impacts a. Impacts on commerce or (structural) fairness (e.g., Qualcomm v. Samsung) b. Impacts on competition (e.g., German Facebook case) • Considerations Considerable factors: e.g., the undertaking’s market position, the problematic conduct’s market coverage (or the capability of being widespread), the legitimacy of the conditions and arrangements in question (e.g., whether the conditions are in violation of other rules), the problematic conduct’s duration and gravity (seriousness), and the undertaking’s intention, and the predictability (ex-ante calculability) of damages. A Question Worth Asking and Answering: Should the exclusionary effect or the capability of restricting competition be required in AED?
  29. 29. 2nd Abuse in AED 29 • Various types of the prohibition of AED in CL (work in progress) (ii) Prohibiting AED by Expanding the Scope of Abuse of Dominance (iii) Prohibiting AED as a Type of Unfair Practices Harm Undermining Contractual Fairness - E.g., Korea’s Pasteur case Impacts on Structural Fairness E.g., France’s Apple case, France’s Google (Neighboring rights) case E.g., Korea’s Apple case Impacts on Competition E.g., Italy’s legislation E.g., Spain’s legislation, Romania’s legislation, JFTC’s Guidelines
  30. 30. 30 Grazie per l'attenzione! Sangyun Lee (李相潤)
  32. 32. A Cursory Overview (still a work in progress) 32 (Exclusionary) Abuse of Dominance * Direct exploitation is not prohibited + Exploitative Abuse of Dominance * Direct exploitation (i.e., exploitation without exclusion) is also prohibited but within the existing dominance framework + Abuse of Economic Dependence (a.k.a., abuse of superior bargaining position) * Abusive exploitation of economic dependency is prohibited regardless of the existence of dominance This table draws on Sangyun Lee, 'A Theoretical Understanding of Abuse of Economic Dependence in Competition Law' (SSRN June 24, 2022) p.61 ENACTED
  33. 33. AUSTRIA 33 • Chapter 2, Cartel Act 2005 (as amended effective 10 September 2021)1 • Section 4 – Dominance • Section 4a – Relative Market Power “An undertaking shall also be deemed to be dominant if it has a predominant market position in relation to its purchasers or suppliers; such position is, in particular, deemed to exist if such purchasers or suppliers depend on maintaining business relations in order to avoid serious economic disadvantages. An undertaking which acts as an intermediary on a multisided digital market shall also be deemed to be dominant if the purchasers of its intermediary services depend on establishing business relations with it in order to avoid serious economic disadvantages.” • Section 5 – Abuse (no differences between Sec 4 and Sec 4a) Imposing unfair (i.e., supra-competitive) prices or terms; limitations on production, markets, or technical developments; discrimination; imposing irrelevant contractual conditions; predation. 1.
  34. 34. BELGIUM 34 2. Non-official translations. I thank Maurits Van de Sande for his help in the translation of the Dutch text to English. 1. The English translation of the law is available at • Article IV. 2 and 2/1, Code of economic law (WER)1 Art. IV.2. – Abuse of dominance Art. IV.2/1 – Abuse of economic dependence “It is prohibited for one or more undertakings to abuse* a position of economic dependence in which one or more undertakings are engaged, where competition may be affected on the Belgian market concerned or a substantial part thereof.” ‘Economic dependence … it must be possible to punish behaviors related to a balance of power. … that power relationship does not arise from the objective dominance of a market, such as in the dominant position, but from the fact that the relative power of an enterprise makes its economic partners vulnerable.’2 (WETSVOORSTEL/PROPOSITION (12 février 2019)) (emphasis added) * The list of abusive practices contained in the law: • Refusal to deal; imposing unfair prices or terms; limitations on production, markets, or technical developments; discrimination; imposing irrelevant contractual conditions.
  35. 35. FRANCE 35 1. 2. As for the English translation of the provision, see paragraph 956 at Autorité de la concurrence, Decision 20-D-04 of 16 March 2020 (Apple). • Article L420-2, Code de commerce1 Para 1 – Abuse of dominance Para 2 – Abuse of economic dependence “… the abuse of the state of economic dependence of a client or supplier by an undertaking or group of undertakings is also prohibited if it is likely to affect the functioning or structure of competition. This abuse may include a refusal to sell, tie-in sales, or discriminatory practices mentioned in Articles L. 442-1 to L.442-3* or in product range agreements.”2 * Arts. L442-1, L.442-2, and L442-3 • « petit droit de la concurrence » • UTPs (targeting significant imbalances between rights and obligations in asymmetric B2B relations) • Presided over by the DGCCRF (as opposed to the Autorité de la concurrence) • E.g., Tribunal de commerce de Paris, 28 mars 2022, n° 2018017655 (Google’s App Store fee)1 ‘not justifiable as not bearing any risks and costs’
  36. 36. GERMANY 36 • Sec. 20 (as well as Sections 19 and 19a) GWB (1) [Sec. 19(1) + (2) no 1] --> undertakings ... to the extent that other ... suppliers or purchasers ... are dependent on them [without] sufficient and reasonable possibilities for switching to third parties ... and [if] there is a significant imbalance between the power of such undertakings ... and the countervailing power of other undertakings (relative market power). [Sec. 19(1) + (2) no 1] --> undertakings acting as intermediaries on multi-sided markets to the extent that other undertakings are dependent on their intermediary services for accessing supply and sales markets [without] sufficient and reasonable alternatives.... A supplier ... is presumed to depend on a purchaser ... if this supplier regularly grants to this purchaser, in addition to discounts customary in the trade or other compensation, special benefits which are not granted to similar purchasers. (1a) Dependence ... may also arise from the fact that an undertaking is dependent on accessing data controlled by another undertaking in order to carry out its own activities. Refusing to grant access to such data in return for adequate compensation may constitute an unfair impediment pursuant to [subsection (1) + Section 19(1), Section 19(2) no 1] (regardless of whether the data have been commercially traded or not). (2) [Sec. 19(1) + (2) no 5] --> undertakings ... in relation to the undertakings which depend on them. (3) Undertakings with superior market power in relation to [SME competitors] may not abuse their market power to impede such competitors directly or indirectly in an unfair manner. An unfair impediment ... exists in particular if an undertaking 1.offers food ... below cost price, or; 2.offers other goods or commercial services not just occasionally below cost price, or 3.demands from SMEs (in downstream distribution market competitors) a price for the delivery ... which is higher than the price it itself offers on such market, [without] objective justification. .... (3a) An unfair impediment ... exist[s] where an undertaking with superior market power on a market ... impedes the independent attainment of network effects by competitors and in this way creates a serious risk of significantly restricting competition on the merits.
  37. 37. ITALY 37 . 1. Available at • Art. 9, LEGGE 18 giugno 1998, n. 192 (amended by LEGGE 5 agosto 2022, n. 118)1 Art. 9(1) - Presumption of the situation of “dipendenza economica” in B2P relations. Where a digital platform offers intermediation services and plays a decisive role in this regard, the state of dependency is presumed unless proven otherwise (“gatekeeper” offering “core platform services.”) Art. 9(2) - Strengthening the prohibition by adding more examples of abuse applicable to platforms 1st not providing sufficient information about the service provided; 2nd imposing unilateral obligations, which is not justifiable in terms of the nature and content of the activity performed; and 3rd hampering the use of different providers for the same service (through the imposition of conditions or additional costs) * Note. No restrictions on interoperability and data portability. Art.9(3-bis) - If such practices have relevance to the protection of competition, the AGCM enforces Source: DW
  38. 38. JAPAN KOREA 38 Anti-Monopoly Act (AMA) MonopolyRegulationandFairTradeAct (MRFTA) Art. 19 with Art. 2(9) Prohibition on Unfair Trade Practices Art. 2(9)(v) (Source: Japan FTC engaging in any act specified in one of the following by making use of one's superior bargaining position over the counterparty unjustly, in light of normal business practices (a) causing the counterparty in continuous transactions (including a party with whom one newly intends to engage in continuous transactions; the same applies in (b) below) to purchase goods or services other than those to which the relevant transactions pertain (b) causing the counterparty in continuous transactions to provide money, services or other economic benefits (c) refusing to receive goods in transactions with the counterparty, causing the counterparty to take back such goods after receiving them from the counterparty, delaying payment to the counterparty or reducing the amount of payment, or otherwise establishing or changing trade terms or executing transactions in a way disadvantageous to the counterparty GD1 13 (Source: Japan FTC (Unjust Interference with appointment of officer in one's transacting party) (13) Causing a corporation which is one's transacting party to follow one's instruction in advance, or to get one's approval, regarding the appointment of officers of the said corporation (meaning those as defined by Article 2, paragraph (3) of the Act (The same shall apply hereinafter)) , unjustly in light of the normal business practices by making use of one's dominant bargaining position over the party. Art. 45 Prohibition on Unfair Trade Practices Art. 45(1)(6) (Source: Korea Legislation Research Institute Trading with a certain transacting partner by unfairly taking advantage of his/her position in trade ED2 6 (Source: Korea FTC Abuse of the Position A. Forced Purchase: conduct in which an undertaking forces its trading counterparty to purchase goods or services against the will of the counterparty B. Forced Provision of Benefit: conducts in which an undertaking forces its trading counterparty to provide money, goods, and services or other financial benefits for the welfare of the undertaking in question C. Imposing Sales Target: conducts in which an undertaking sets a sales target on the goods or services it supplies and forces its trading counterparty to meet the target D. Imposed Disadvantages: conducts in which an undertaking imposes disadvantage to its trading counterparty by setting or a changing terms of trade or in the execution of the trade, through means other than forced purchase, forced provision of benefits or imposed sales target E. Interference with Business Management and Operations: conducts in which an undertaking interferes with management and operations of its trading counterparty by imposing restriction on items manufactured, scale of facilities and equipment, quantity of manufacture, and terms of trade, or by giving order or approval for appointment or dismissal of staff and executives 1. GD: Unfair trading practices designated by the Japan FTC (pursuant to Art. 2(9)(vi) AMA), which are generally applicable across sectors. 2. ED: Enforcement Decree of the MRFTA, which sets out specific types and standards of unfair trading practices pursuant to Art. 45(3) (See Table 2, Art. 52, Decree).
  39. 39. 39 AMA MRFTA Guidelines Concerning ASBP under the AMA (2010) Unfair Trading Practices Guidelines (2021) Position Basic principle - When the weaker cannot help but accept the superior’s request, which is substantially unfavorable to the weaker because the suspension of the transaction with the superior would substantially impede the weak’s business (第2-1) Considerations (第2-2) - Dependency: the portion of the weaker’s sales to the superior’s sales in the total sales of the weaker party. - Market position of the superior: market shares, ranks, etc. - Possibility for the weaker to switch trade partners: any feasible alternatives, transaction-specific investments, etc. - Necessity of the transaction with the superior: the volume of existing transactions with the superior, the superior’s growth, the importance of the products/services in question (brand power), the possibility of increased credit/trust through transactions with the superior, differences in size, etc. Differentiating ASBP from civil law issues - Much stricter standards will be applied than those applicable to bargaining power imbalances under the Korean Civil Act (Ⅴ. 6. (1)) - If parties were well informed and had a choice at the time of engaging in the contract, the ASBP is not applicable (Ⅴ. 6. (2) (가)) Considerations (Ⅴ. 6. (3)) - Continued relationship: transaction-specific investments; lock-in; already invested capitals - Significant dependency: the proportion of sales to the stronger party in the total sales of the weaker party - Market status, characteristics of products/services, etc. Causality Presumed (第2-3) Abuse (Harm) Restrictions on economic freedom - Illegality: Impeding transactions based on the parties’ free and autonomous decisions AND placing victims at a competitive disadvantage while giving perpetrators a competitive advantage (第1-1) - Considerations: the severity of the disadvantage at issue, the extensiveness of the act, the largeness of the number of victims, systemic violations, ramifications of conduct (第1-1), and being against the prevailing (legitimate)* custom or practice (第3). * In light of the “fair competition order” (第3) Restrictions on economic freedom - Illegality: “substantive unfairness (거래내용의 불공정성)” which means an impairment of the other trading party’s freedom of decision-making or imposing disadvantages (Ⅲ. 1. 가. (2). (라) and Ⅴ. 6. (4)) - Considerations: intent, predictability, prevailing custom or practice, legal context, etc. (Ⅴ. 6. (4) (다)) - Balancing (limited): outweighing efficiency gains or consumer benefits (Ⅴ. 6. (4) (라)) JAPAN KOREA
  40. 40. PORTUGAL 40 • Art. 12, Law No. 19/20121 Art. 11 – Abuse of a dominant position Art. 12 – Abuse of economic dependence 1 – It is prohibited for one undertaking or more undertakings to abuse the economic dependence under which any of its supplier or customer may find itself as a result of the fact that any equivalent alternative is not available, to the extent that such a practice affects the way the market or competition operate. 2 – The following cases, among others, may be considered abusive: a) The adoption of any behaviour such as described in subparagraphs a) to d) in paragraph 2 of the previous article; b) Any unjustified break, total or partial, in established commercial relations, bearing in mind previous commercial relations, recognised practices in that particular economic activity and the contractual conditions that have been set down. 3 – For the purposes of paragraph 1, an undertaking is deemed not to have an equivalent alternative when: a) The supply of the goods or service at issue, specifically at the point of distribution, is controlled by a restricted number of undertakings; and b) The undertaking cannot find identical conditions from other commercial partners within a reasonable time scale. 1.
  41. 41. ROMANIA 41 • Competition Law (LEGE nr. 21 din 10 aprilie 1996 legea concurenței)1 • Art. 6 – Abuse of dominance • Unfair Competition Law (LEGE nr. 11 din 29 ianuarie 1991 privind combaterea concurenței neloiale)2 • Art. 1^1 d) – Superior negotiating position (poziție superioară de negociere) • Art. 2(3) – when a business practice that contravenes the principle of good faith is conducted by using the superior negotiating position and the practice is likely to cause negative effects on market competition, the behavior can be found as an ‘unfair competition practice’ e.g., unjustified refusal, breach of contractual obligations, imposition of onerous or discriminatory conditions, unjustified modification or termination of contractual relations • Art. 3^1 – Consiliul Concurenţe, the Romanian competition authority, can sanction the ‘unfair competition practice’ when the practice affects the public interest, including the impairment of the proper functioning of the market. Public interest: a) high degree of social danger; b) the importance or size of the economic sector concerned, the number of enterprises involved; or c) the duration of the practice 1. 2.
  42. 42. SPAIN 42 • Competition Law (Ley 15/2007, de 3 de julio, de Defensa de la Competencia)1 • Art. 2 – Abuse of a dominant position • Art. 3 – Distortion of free competition by unfair acts (when affecting “interés público”) • Art. 62(3)(c) – Art. 3 = Serious infringements • Unfair Competition Law (Ley 3/1991, de 10 de enero, de Competencia Desleal)2 • Art. 16(2) – Economic dependence ‘Abuse by a company of the situation of “la situación de dependencia económica” in which cutomers or suppliers cannot find an “alternativa equivalente” shall be considered unfair.’ ‘Such a situation shall be presumed when a supplier must grant additional advantages (other than usual discounts) to the customer on a regular basis.’ • Art. 16(3) – Unfair practices: (a) ‘The termination of an established commercial relationship without at least six months’ prior written and precise notice, except in the case of serious breaches of the agreements or force majeure.’ (b) Obtaining, under the threat of breaking off commercial relations, prices, payment conditions, sales modalities, payment of additional charges, and other commercial cooperation without an agreement. 2. 1. (English translation:
  43. 43. SWITZERLAND 43 • Art. 7, Cartel Act 1 1 Dominant undertakings and undertakings with relative market power behave unlawfully if, by abusing their position in the market, they hinder other undertakings from starting or continuing to compete, or disadvantage trading partners. 2 The following behaviour is in particular considered unlawful: a. any refusal to deal (e.g. refusal to supply or to purchase goods); b. any discrimination between trading partners in relation to prices or other conditions of trade; c. any imposition of unfair prices or other unfair conditions of trade; d. any under-cutting of prices or other conditions directed against a specific competitor; e. any limitation of production, supply or technical development; f. any conclusion of contracts on the condition that the other contracting party agrees to accept or deliver additional goods or services; g. the restriction of the opportunity for buyers to purchase goods or services offered both in Switzerland and abroad at the market prices and conditions customary in the industry in the foreign country concerned. 1.
  45. 45. Considerations when making a policy choice • Abuse of Economic Dependence Jurisdictions to adopt the AED/ASBP (as a CL tool) should take the following into account i. the level of economic development, ii. the degree to which the economy is liberalized, iii. the NCA’s expertise and resources, and iv. the NCA’s institutional design (e.g., whether judicially/administratively bifurcated or independent) 45 Pure/Direct Exploitation Exclusion Foreclosure Mixed Pros-Cons Cost-Benefit Analysis Exclusion- centered Exploitation- centered Which approach is optimal depends on the case and context