Summary

In January 2019, the Swedish Patent and Market Court found that a dominant company's termination of an access agreement with a downstream competitor constituted an abuse. By finding that the refusal had to be able to eliminate all effective competition on the downstream market in order to be held abusive, the court not only introduces a stricter application than in previous decisions but also suggests an extension of the scope of situations in which the Bronner criteria should be applied.

1. Introduction 

Producers of paper, metal and plastic packaging are under a legal obligation to collect and recycle packaging waste. To fulfil that obligation, producers must provide households with access to a nationwide public infrastructure for the collection of such waste. Svenska Förpacknings- och Tidningsinsamlingen's (FTI) operates the only infrastructure of this kind in Sweden. 

In 2012, FTI entered into an agreement with TMResponsibility (TMR) to allow producers affiliated with TMR to use the infrastructure. FTI terminated the agreement in 2016 and TMR subsequently filed a complaint to the Swedish Competition Authority (SCA), in which it claimed that the termination of the agreement constituted an abuse of FTI's dominant position. The SCA agreed and ordered FTI to revoke the termination of the agreement under the imposition of a EUR 1.8 million penalty fine.

FTI withdrew the termination, but expressly stated that the withdrawal was conditional on the Patent and Market Court rejecting FTI's appeal of the SCA's decision. 

2. Decision

The Patent and Market Court found that FTI held a dominant position in the upstream infrastructure market and a very strong position on the downstream market of supply of producer responsibility services, on which TMR was its only competitor.

The court further held that EU case law did not support that the criteria laid down in the Bronner case (C-7/97, Bronner), for refusals to supply new customers, also had to be applied in cases of termination of previous supply. The court then went on to contest the previously established notion that termination of previous supply is more likely to constitute an abuse than a refusal to supply new customers. A distinction between these two situations is a position clearly expressed in case law and in the European Commission's (EC) guidance on the enforcement priorities regarding the application of Article [102] to exclusionary conduct (para. 84). Instead, the court held that even though a distinction may sometimes be motivated, the difference between the two situations should not be exaggerated, as that may cause dominant companies to completely abstain from providing access to indispensable input to new customers or making new investments. This could, the court went on, subsequently have a negative effect on competition in the long term. The court also noted that the European Court of Justice has held that the distinction is of no relevance in margin squeeze cases (C 52/09, Teliasonera, p. 90 – 93). 

Lastly, the court was skeptical of the argument put forward by the EC in the enforcement priorities, stating that an input is more likely to be considered indispensable if the company subject to the refusal has made relationship-specific investments to use the subsequently refused input (p. 84). Instead, the court argued, potential loss due to such unnecessary investments should be dealt with under private law. 

Against this background, the court found that the bar should be set relatively high for a termination of previous supplies to constitute an abuse of dominance. Ordinarily, a termination would be considered abusive if it had the ability to eliminate all competition from the relevant customer. However, given the circumstances, the court held that in the absence of evidence of a deliberate strategy to limit competition or other improper conduct, it was insufficient that the company or companies that were refused supply would no longer be able to compete with the dominant company. Instead, the refusal had to be able to eliminate all effective competition on the downstream market, i.e. following the amended criteria from Bronner stated in later case law (T-301/04, Clearstream v Commission, p. 148; T-201/04, Microsoft v Commission, p. 563-564). For such an elimination to be at hand, the court found that the other criteria laid down in the Bronner case also had to be fulfilled; the infrastructure had to be indispensable to provide producer responsibility services in that there existed no actual or potential substitute for it, and the dominant company had to be unable to objectively justify the refusal.

The court stated that there was no actual or potential alternative to the infrastructure and that the lack of suitable land was sufficient to conclude that it would be unreasonably hard to establish a parallel infrastructure. The termination of the agreement would subsequently result in FTI being the only remaining player on the downstream market for the supply of producer responsibility services for the foreseeable future. 

Since FTI was unable to show an objective justification for the termination of the agreement, the court concluded that FTI had indeed abused its dominant position and thus rejected the appeal. 

3. Comment

The key take away from this case is the court's finding that the former notion that termination of previous supply is more likely to constitute an abuse than a refusal to supply new customers, should no longer be adhered to. Instead, the court held, the possible anti-competitive risks of such a distinction motivates the use of higher demands in order to conclude the existence of an abuse. Hence, even though the court didn't consider the Bronner criteria as being directly applicable in a case of termination of previous supply, all effective competition on a market could only be concluded as eliminated if the criteria in question were fulfilled. Thus, the court extended the scope of situations in which the Bronner criteria should be applied.

This deviates from the assessments made by e.g. the UK Competition Appeal Tribunal in case no 1044/2/1/04 Burgess v. OFT CAT 25 (p. 322 – 323), where the court deemed that the refusal to supply an indispensable input to a long-standing existing customer could constitute abuse in the absence of an objective justification, i.e. maintaining the former notion that termination of previous supply is more likely to constitute an abuse than a refusal to supply new customers.

In February 2019, FTI decided to file an appeal against the ruling by the Patent and Market Court, requesting that the matter be reviewed by the last instance Patent and Market Court of Appeal. 

 

This article was first published in Concurrences Journal

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