Abuse of Dominant Position

We are all delighted when firms do something special to retain our business - not just being efficient and customer friendly, but also by offering volume discounts ("three for the price of two", "buy one, get one free") and loyalty discounts such as airmiles, reward cards, Nectar cards and Clubcards.

But there comes a point when such behaviour begins to trap us.  A large company may, for instance, temporarily reduce certain prices so as to squeeze a smaller rival out of business. Or it may refuse to supply a customer who threatens to start buying part of their supplies from a smaller competitor.  Such behaviour is, in law, abuse of significant market power and can lead to the imposition of large fines of up to 10% of turnover in all of the relevant years.

The most commonly attacked forms of abuse are listed below. They can be divided into two broad groups. Exploitative abuse enables the firm to increase its profits by exploiting its market power; a step along the road, if you like, towards having monopoly power. Exclusionary abuse is aimed at excluding or removing competitors from the market.

And it is hardly a new phenomenon. Martin Luther took a very hard line:-

Exploitative Abuse

Limiting production - perhaps by failing to expand or invest, so increasing prices and profits but disadvantaging customers who cannot easily move elsewhere.

Restriction of supply to distributors - again with a view to maintaining high prices and profits. But this is in practice often allowed. It is still possible for the manufacturers of certain goods to 'recommend' retail prices, and this can get pretty close to price-fixing. And the prices of luxury goods can be kept artificially high by restricting their availability. Very few shops are, for instance, allowed to sell Hermes scarves or Rolex watches. This is because it is felt that a manufacturer should be allowed a measure of control over its brand value - in which it has often invested very heavily.

Excessive pricing - One obvious (but hard to define) symptom of abuse of dominant position would be surprisingly high prices (and profits). Interestingly, the European Court (the CJEU) found that such pricing could be identified if prices in one country (in which the company was dominant) were much higher than in another (in which it was not). In more detail:

Exclusionary Abuse

Price discrimination - offering price reductions and volume discounts to those customers who may be tempted to leave you for a competitor. [But individual banks, for instance, are not regarded as dominant in their market and so are not prohibited from offering good interest rates to new customers, whilst switching established customers to much lower rates.]

Tying - such as tying one product to the sale of another, being restrictive of consumer choice and depriving competitors of outlets. This led the European Commission to fine Microsoft € 497 million for including its Windows Media Player within the Microsoft Windows platform. And there was big USA 'tying' investigation in the 1990s when Microsoft was found guilty of illegally forcing PC vendors to bundle its Internet Explorer browser, so shutting out Netscape.

I am not sure if it counts as tying, but American Express will not let retailers steer customers towards using Visa or Mastercard, both of which charge the retailer lower transaction fees. This was challenged in the USA and went to the Supreme Court - but the court ruled that such anti-steering provisions were not an abuse of Amex's dominant position.

Refusal to supply a facility which is essential for all businesses attempting to compete - The most obvious essential facilities are in the transport industry: docks, bus stations & airports. The Competition Appeal Tribunal held that privately built and owned crematorium was not an essential facility even though its exclusive use by its funeral director-owner meant that no other funeral director firm could attract business in that particular town.

This argument is at the heart of the legal action by Epic Games (makers of Fortnite) who object to Apple's removal of their game from Apple Store when Epic Games moved to bypass Apple's 30% commission on in-app purchases.

There was a rather nice example in Lithuania when its railway company tore up a few metres of railway line near the Latvian border so as to stop a freight company saving a lot of money by exporting its oil via a Latvian port.  An EU court fined it €20 million.

Full line forcing - the retailer is forced to stock the whole of a manufacturer's range of products, thus leaving little or no room for competitors' products.

Freezer and fridge exclusivity - Birds Eye Walls were prohibited from loaning freezers to small shops in the UK on condition that they did not use them to sell ice creams made by its competitors, Mars. Similarly the EU required Coca-Cola to allow 20% of its fridge space to stock drinks made by competitors such as Pepsi.

Predation (as in preying on a victim). This behaviour includes predatory pricing - the practice of dropping prices of a product so much that smaller competitors cannot cover their costs and fall out of business - and other predatory behaviour - e.g. running new bus services at frequent intervals so as to force a new competitor out of the market. The European Alliance of Rail New Entrants accused France's SNCF and Spain's RENFE of unfairly introducing new 'low cost' subsidiaries so as to limit the effect of competition from new domestic and cross-border rail services.

It can be difficult to tackle predation because the initial behaviour (lower prices etc.) benefits consumers.  Authorities therefore need to ensure that they do not fall into the trap of protecting competitors rather than protecting competition.


Abuse of dominance investigations are usually carried out in the UK by the Consumers and Markets Authority (CMA) under Chapter II of the 1998 Competition Act 1998, which closely mirrors what is now Article 102 of the Treaty on the Functioning of the European Union (TFEU).  Appeals from CMA decisions are to the Competition Appeal Tribunal.  EU-wide cases are taken by the European Commission and some regulators such as Ofgem and the Financial Conduct Authority have concurrent powers shared with the CMA and occasionally take enforcement action themselves.

The problem is that dominance is hard to prove, and abuse of dominance even harder, given that much "abuse" is regarded as feisty competition when carried out by smaller firms. Indeed, executives of larger companies under such investigation often complain that they are being penalised for being successful. Abuse investigations are also always very hard fought, partly because the fines can be so high and also because of the word abuse and the associated accusation of wrongdoing. The European Commission has had some luck under Article 102 (and its predecessor legislation) with victories over Microsoft, for instance - see "tying" above. But successful UK Chapter II investigations are few and far between. Market Studies and Market Investigations,which do not require the CMA to prove wrongdoing, have been much more successful.

The OFT did however successfully show that Cardiff Buses had abused their dominant position in the Cardiff bus market by setting up new services when threatened by '2 Travel' - a new entrant into the market. 2 Travel subsequently took a private action* in the courts against Cardiff Bus, suing successfully for both ordinary damages and exemplary damages. The Competition Appeal Tribunal, in awarding both sets of damages, commented that "Cardiff Bus's conduct has been outrageous" and "There is something inherently repugnant in a service being commenced by a dominant undertaking for the sole reason of excluding another."

Another OFT success led to Reckitt Benckiser being fined £10m after it withdrew Gaviscon Original Liquid from the National Health Service prescription list after its patent had expired and before a generic name could be assigned to the medicine. They did this because, if UK doctors search for a branded drug, their software gives the generic name if there is one, so allowing pharmacists to dispense the cheaper drug to save the NHS money. This choice provides for strong price competition between pharmaceutical suppliers and can result in considerable savings to the NHS. By withdrawing NHS packs of Gaviscon Original from the prescription list after the patent had expired but before it was given a generic name, doctors were instead forced to prescribe its alternative product, Gaviscon Advance Liquid, which cost much more.

It is also worth noting that:

*Private actions may be brought to claim compensation for losses caused both by abuse of dominant position and by cartels. Further information about private actions may be found here.

The CMA has also has some success in other pharmaceutical 'price gouging' cases against companies such as Pfizer.  The most dramatic was against Actavis UK (formerly Auden Mckenzie) which paid other companies millions of pounds not to enter the market and compete with its recently debranded version of hydrocortisone tablets.   As a result, the company raised the price of one pack of its previously branded and price controlled drug from £1.07 to £103.  (Debranding takes drugs into unregulated pricing regimes where competition is supposed to act as a brake on prices. But if competition does not emerge then the sole supplier becomes a monopolist.)  The CMA fined the company £206m.

Competition regulators are interested in IAG's possible dominance of transatlantic routes. IAG own BA and Iberia, and code share with American Airlines and Finnair, subject to European Commission constraints which expire in 2020. The CMA are therefore thinking about the position after 2020, and after Brexit, bearing in mind that BA have also expressed an interest in acquiring Norwegian Air Shuttle, in which they have a small shareholding.

Some regulators have "Chapter II" powers alongside the CMA, though they are seldom used. But Ofcom fined Royal Mail £50m in 2018 for predatory price reductions aimed at damaging its rival Whistl. Royal Mail said it would appeal but, subject to that, Ofcom's ruling may allow Whistl to claim compensation by launching a private action.

Significant European Cases


The European Commission announced in November 2010 that they were investigating possible abuse of dominant position by Google's search engine. The investigation aimed to determine whether the firm's method of generating unpaid results adversely affects the ranking of other firms, specifically those providing so-called vertical search services such as sites that offer price comparison. A UK company called Foundem filed the complaint, amongst many others, in February 2010,. Foundem claimed that its award-winning site was effectively forced from the market after Google's search algorithms began to "remove legitimate sites from [its] natural search results, irrespective of relevance". It also said that Google promotes its own services over those offered by competitors:- "Google is exploiting its dominance of search in ways that stifle innovation, suppress competition, and erode consumer choice". Google, however, argued that there are good reasons why Foundem's site is ranked poorly. For example, it said, Foundem "duplicates 79% of its website content from other sites." The case was still unresolved in 2013 when Fairsearch Europe increased the pressure on Google by complaining that it was abusing its dominant position by providing its Android operating system for free on mobile phones:- an echo of earlier complaints in both Europe and the US that Microsoft had abused its dominant position by bundling Media Player and Internet Explorer with its Windows PC operating systems.

The Commission announced in June 2017 that it was fining Google 2.4bn euros ($2.7bn; £2.1bn) as "the company had abused its power by promoting its own shopping comparison service at the top of search results". [I doubt that Google cared very much. The abuse had, after all, been going on for at least 7 years, and Google's parent company Alphabet currently had more than $172bn of assets. I doubt, too, that Google were too concerned that Commissioner Margrethe Vestager then encouraged companies that had been hurt by Google's behaviour to use the Commission's report as a basis for claiming damages via private actions.]

The case for Google was nicely summarised on the Chillin'Competition blog as follows:

Google provides a free search service to consumers and it monetizes this service via advertisements. Today’s decision states that Google cannot favor its own product ads – the very same ones that make its services possible - over those of competitors. This is remarkable and wholly unprecedented. To illustrate what this means, a useful analogy may be to think about a newspaper (a business models that is also funded via ads). What the Commission is doing is the equivalent of asking this newspaper to carry/publish the advertising service of competing newspapers and in equal conditions whatever that means (same placement, length or size, possibly even almost for free) and without getting the revenue. Another valid analogy is that of a supermarket obliged not to favor its own products, even if it is not the only supermarket around. The implications for vertically integrated companies in virtually every industry are potentially enormous.

But this seems to me to be over-egging the argument. Lots of perfectly proper competitive behaviour becomes improper and unacceptable when a company becomes dominant. So a newspaper could be accused of misbehaving if (a) it favours its owners' products when displaying advertisements, and (b) we all read that newspaper and read hardly any others. It is no doubt very annoying to be told that you cannot exploit your dominance in one area in order to gain advantage in another, but the alternatives are worse - for consumers at least.

Google's response was interesting. It decided against going back to the old system and including merchants without charge and listing them by lowest price. Nor will it fulfil its equal treatment obligation by listing all comparison shopping sites in its general results in order of quality or relevance, as it does for non-commercial queries. Instead, Google has told the commission that it will create a standalone unit for its shopping service and force rivals to bid against that unit (and each other) for ads shown at the top of Google’s search results page. This could raise costs and prices, but might have been worthwhile if it deterred future abuse.

Foundem and many others complained again to the Commission in 2018, arguing that Google's bidding system was terrible for consumers, as companies' position in Google's ranking were now determined by bidders' ability to pay rather than their popularity or low prices. It was also suggested that many of the comparison advertising sites were in truth merely advertising systems that look like price comparison sites. and that Google encouraged this. The Commission has yet to opine ...

Here is an interesting footnote to this case:- Google had previously won a legal battle in the UK with a small company called Streetmap - a pioneer in online mapping whose service was crushed when Google put its own Google Maps above Streetmap in its search engine results. The Competition Appeal Tribunal ruled that, although Google held a dominant position, it had not committed an abuse.

In a separate case, the European Commission fined Google €4.3 billion (£3.8bn) in 2018 for abusing its dominant position in search by requiring Android smartphone manufacturers to pre-install Google's apps - or else they would not be allowed access to Google Play services. (Alphabet-owned) Google's appeal failed other than by achieving a small reduction in the fine.  I don't suppose, though, that the size of the fine meant very much to a group then valued at $1.4 trillion.

And in a third case, the Commission fined Google a further €1.5bn (£1.3bn) for restricting publishers (until 2016) from displaying rival search ads on their websites, thus using its dominant position to shield itself from the full force of competition.

And the Commission began a second assault on Google in 2016 when it accused it of abusing the dominant position of its Android operating system, for instance by placing requirements on mobile (cellphone) manufacturers to pre-install some Google products. This is a similar accusation to that which led to Microsoft being fined many hundreds of millions of Euros for tying the installation of Microsoft operating systems to the installation of Internet Explorer and Windows Media Player.

The Commission announced in December 2019 that was opening a fresh investigation into how Google and its partner companies gather, process, use and monetise data.

Other concerns about the behaviour of Google and the other Technology Giants are discussed here.


The European Commission opened two antitrust cases against Apple in 2020.  One followed a complaint from Spotify and Kobo about Apple's 30% subscription fee charged in respect of customers who signed up to those services via Apple's App Store.  The CMA opened a similar case in 2021, following the UK's Brexit from the EU.

The second EU case focused on whether Apple unfairly denies its 'tap and go' iPhone functionality to rival payment companies.

Other European Investigations

The European Commission announced in April 2015 that it was investigating Gazprom for abusing its dominant position in Eastern Europe by building artificial barriers which reduced its customers' ability to resell their gas to others.

It was reported in early 2016 that professional speed skater Claudia Pechstein had successfully persuaded the German courts that, since the German skating organisation controlled the market for speed skating events, its use of arbitration clauses binding athletes to use the International Court of Arbitration for Sport constituted an abuse of a dominant position under German antitrust law. (The case arose because the anti-doping authorities had found what they believed were abnormal levels of reticulocytes, or immature red blood cells, in Claudia's blood, often an indicator of doping. She says that the irregularity was the result of a congenital blood disorder.) The German court said it found a structural imbalance within the sports court that favored sports governing bodies over athletes.  The imbalance, according to the court, arose from the composition of the Council whose 20 members are nominated primarily by international sporting organisations, and not by athletes. The decision is being appealed.

The European Court of Justice in 2014 confirmed a 2007 European Commission decision that MasterCard's interchange fees were anti-competitive. This led to a collective claim against MasterCard to be launched in the UK on behalf of all consumers.

Martin Stanley

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