Abuse of dominance - Research paper by Fernando Diez on different approaches to abuse, in particular the Telefonica and Microsoft cases

[University of Antonio de Nebrija] Article 82 of EC Treaty prohibits any abuse by one or more undertakings of a dominant position; the examples contained of “abuse” reflect a variety of public policies that have led European antitrust authorities in several directions simultaneously, indicating also a highly regulatory policy of control of the adverse effects of market power in the EU. The lack of guidance in this field both for undertakings and enforcers led the European Commission to issue in 2005 the well known Discussion Paper on exclusionary abuses; although also announced, a further notice on the so-called exploitative abuses is still waited. Besides, a more economic approach to abusive practices is preached from virtually all the communitarian instances. However, two recent decisions – the fine imposed in July 2007 to Telefonica for practicing excessive prices in the form of margin squeeze in the broad band market in Spain, and the confirmation in September 2007 by the Court of First Instance of the fine imposed to Microsoft in 2004 for two allegedly anticompetitive practices (tying and refusal to supply) - suggest that this new economic understanding is either still forthcoming or not yet understood as such by everybody. In this paper we take all this considerations into account when analyzing two features of the current understanding of abusive practices under EC law. First, the evolution from early decisions finding excessive prices and refusals to deal – which were mostly vertical in nature- to the latest pronouncements show a shift to horizontal effects. In addition to it, the ex ante regulation of certain industries – e.g. telecommunications - has certainly altered the way in which antitrust ex post intervention is conducted. Both phenomena are illustrated respectively by the Telefonica and Microsoft cases, and need to be assessed under the new economic approach to Article 82 practices.

Article 82, Sector-Specific Regulation, Microsoft and Telefonica: Really a New Economic Understanding of Abusive Practices Under EC Law?