February 03 2011
The Trade and Industry Appeals Tribunal has annulled the fine imposed by the Competition Authority on CRV, a company active in the production, sale and distribution of breeding bull sperm, for abuse of its dominant position by granting certain rebates to cattle breeders.(1) In line with the European Commission's guidelines on exclusionary abuse,(2) the tribunal found that the authority should have used a more effects-based approach in its assessment of the foreclosure effects of the rebates.
The Rotterdam District Court had already annulled the fine imposed by the authority on CRV for abuse of its dominant position by granting a quantity discount for lack of a more effects-based approach.(3) The authority had qualified CRV's quantity discount as a loyalty rebate without taking account of the actual exclusionary effects of this discount. Even though CRV's quantity discount could have exclusionary effects due to the roll-back effect (ie, linking the discount rate to all purchases made in the same year instead of to the new purchases only), the court found that the authority should have assessed the actual exclusionary effect of the discount. The authority could not rely on theoretical assumptions, due to:
With regard to the customer loyalty discount scheme, the court agreed with the authority that this discount amounted to abuse of CRV's dominant position. The court considered that this rebate scheme, according to which a discount was granted to a purchaser only if it bought (almost) all of its requirements from CRV, had the object of restricting competition.(4) However, on appeal, the tribunal found that the authority had failed to show that the loyalty scheme had affected the cattle breeders in their choice of supplier or hampered effective access of competitors to the market. In particular, the authority had not disputed that:
On that basis, the tribunal found it unlikely for the loyalty scheme to have an appreciable effect on competition, and therefore it did not constitute an abuse of a dominant position.
In regard to the tester discount, according to which purchasers would be granted a 10% discount on their purchases if they agreed to participate in a trial programme for bull sperm, the court held that the authority had correctly concluded that this discount had potential exclusionary effects for which no economic justification had been provided, and thus constituted abuse. However, on appeal, the tribunal considered that the tester discount was unlikely to have an appreciable effect on competition, particularly since the authority itself had established that the discount did not appear to have had anti-competitive effects which had hampered competitors. The discount was granted to any cattle breeder participating in the trial programme without a minimum purchase obligation. As a result, the tester discount did not force cattle breeders to purchase exclusively from CRV, but merely provided them with a financial incentive.
The tribunal reversed the court's ruling, as well as the underlying Competition Authority decision.
For further information on this topic please contact Jolling De Pree or Erik H Pijnacker Hordijk at De Brauw Blackstone Westbroek by telephone (+31 70 328 53 28), fax (+31 70 328 53 25) or email (firstname.lastname@example.org or email@example.com).
(2) Guidance on the commission's enforcement priorities in applying Article 82 of the EC Treaty (now: Article 102 of the Treaty on the Functioning of the European Union) to abusive exclusionary conduct by dominant undertakings, OJ 2009, C45/7.
(3) Rotterdam District Court, July 4 2007, LJN: BA9164. For further details please see "Loyalty rebates and exclusionary effects".
(4) The rebate scheme provided that a purchaser would be granted a 1% discount over its entire purchases in the relevant years if it bought 90% of its total purchases from CRV. A 2% discount would be granted if the purchaser bought exclusively from CRV.
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Jolling De Pree
Erik H Pijnacker Hordijk