Interpreting Dominance: A Teleological Analysis of a Dominant Position in Article 102 TFEU and the Interplay with Economic Theory

Abstract: EU competition law, and Article 102 TFEU, strives to prevent the distortion of competition. According to economic theory, a free market economy where resources are allocated through competition can generally be expected to increase the total utility of society. The theoretical models of perfect competition and its opposite monopoly, a total lack of competition, motivates this conclusion. An important caveat is that at times monopolies are more efficient ways of organizing the market, and in such cases potential competition may constrain the monopoly from harming utility. Measuring the market power of individual undertakings enables the determination of whether competition law should intervene. Such intervention is considered motivated when individual undertakings have substantial market power. The CJEU has long held that for an undertaking to be considered in a dominant position in EU law, it must be able to prevent effective competition from being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers. While this in principle equals substantial market power, two divergent approaches have arisen: (i) the CJEU’s which at times appears more expansive than the concept of substantial market power and (ii) the Commission’s, which was developed after a review of the Commission’s policy in the 2000s and more accurately reflects contemporary economic theory. The differences between the institutions further differ when it comes to the goals of competition law and Article 102 TFEU itself. While the Commission has espoused consumer welfare as the end goal of Article 102 TFEU, the Court has rejected this and withheld a broader normative horizon for competition law and a special focus on preserving competition as such. An error cost analysis, where the accuracy and functionality of the two approaches are measured in terms of whether they serve to protect consumer welfare, shows that if such a goal is embraced, the Commission’s approach is more appropriate. However, a broader, normative evaluation of the approaches against the CJEU’s preferred goal of protecting competition as such, shows that the CJEU’s approach may be more advantageous. Thus, the institutions’ embrace of different views is both understandable and internally coherent. As the CJEU is the final arbiter of the law, legal certainty should not be in doubt as the case law is superior in the EU hierarchy of norms. However, undertakings may be motivated to believe that the Commission will adhere to its approach. As the CJEU cannot be expected to enforce this adherence, the dissonance between the institutions generates a lack of foreseeability and, ultimately, a lack of legal certainty.