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Abuse of a dominant position

This chapter focuses on Article 102 of the Treaty on the Functioning of the European Union (TFEU). Article 102 is a vital piece of EU competition law that prohibits the abuse of a dominant position within the internal market.

Article 102 (ex Article 82 TEC)

Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.

Such abuse may, in particular, consist in:

(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

(b) limiting production, markets or technical development to the prejudice of consumers;

(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

Barriers to entry, in the context of competition law, refer to obstacles that prevent or impede new competitors from entering an industry or market. These barriers may take many forms, including high start-up costs, access to suppliers and distribution channels, regulatory compliance requirements, strong brand loyalty, patents and copyrights, economies of scale, or network effects. They essentially create a protective shield for existing firms, allowing them to maintain higher prices and profit margins without fearing new competitors. These barriers can be natural (e.g., geographical location or capital intensity) or artificial (e.g., unfair trade practices or restrictive agreements).

From a competition law perspective, barriers to entry are crucial because they can limit competition, leading to a less efficient market. Competition authorities are generally concerned with artificial barriers, as they often reflect anti-competitive behavior. For example, a dominant firm might try to prevent new entrants by exclusive dealing, predatory pricing, or abuse of intellectual property rights. On the other hand, authorities recognize some barriers as legitimate and necessary for market function. Nonetheless, they may still need to intervene if these barriers, natural or artificial, lead to monopolistic or oligopolistic market structures that limit consumer choice, inhibit innovation, and result in higher prices.

Further readings:

What is a Barrier to Entry? Economic Forces Blog