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United Kingdom Response Predatory Pricing

This questionnaire seeks information on ICN members’ analysis and treatment of predatory pricing claims. Predatory pricing typically involves a practice by which a firm temporarily charges low prices in order to limit or eliminate competition, and thereby allows the firm to raise prices subsequently. This questionnaire concerns only treatment of single product discounts; rather than pricing practices involving multiple products (including bundling, tying, and related prices). Unless otherwise stated, the questions concern conduct by a dominant firm or firm with significant market power.

Respondents should feel free not to answer questions concerning aspects of your law or policy that are not well developed. Answers should be based on agency practice, legal guidelines, relevant case law, etc., rather than speculation.

Analysis (elements and evidence) 1. Please provide the main relevant texts (in English if available) of your

jurisdiction’s laws and guidelines on predatory pricing.

The principal relevant statutory provision under UK law is the so-called “Chapter II prohibition” under section 18 of the Competition Act 1998 (“CA98”)1

18 Abuse of dominant position

which provides as follows:

(1) Subject to section 19, any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market is prohibited if it may affect trade within the United Kingdom.

(2) Conduct may, in particular, constitute such an abuse if it consists 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 the contracts.

(3) In this section—

“dominant position” means a dominant position within the United Kingdom; and

1 See http://www.opsi.gov.uk/ACTS/acts1998/ukpga_19980041_en_2#pt1-ch2-pb2-l1g18

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“the United Kingdom” means the United Kingdom or any part of it.

(4) The prohibition imposed by subsection (1) is referred to in this Act as “the Chapter II prohibition”.

In addition, section 60 CA982

In the UK, the Office of Fair Trading (OFT) has power to apply and enforce the Chapter II prohibition and also Article 82 EC (on which the Chapter II prohibition is modelled). In relation to the regulated sectors, the same provisions are applied and enforced, concurrently with the OFT, by the Regulators for communications matters, gas, electricity, water and sewerage, railway and air traffic services (“the Regulators”).

ensures that questions arising in relation to the Chapter II prohibition are, so far as is possible and having regard to any relevant differences between the provisions concerned, dealt with in a manner consistent with the treatment of corresponding questions arising in relation to EC law (i.e. Article 82 EC Treaty).

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There are also regulatory provisions, applicable to particular sectors of the UK economy (including those for which the Regulators have responsibility), which relate to the control of market power but which do not predominantly pursue the same objective as Article 82 and the Chapter II prohibition. This response does not deal with these provisions, or enforcement practice in relation to them.

In addition, the OFT has published general guidelines as to the application and enforcement of the prohibitions contained in the Competition Act 1998. It first published such guidance on predatory pricing in the document “Assessment of Individual Agreements and Conduct” (OFT414, September 1999). It has since published a revised draft version of this guidance for consultation entitled “Assessment of Conduct” (OFT414a, April 2004)4

2. Please list your jurisdiction’s criteria for an abuse of dominance/monopolization based on predatory pricing.

. However such guidelines are not a substitute for the applicable law under s.18 CA98 and Article 82 EC.

As with Article 82 EC, the criteria are not set out in detail in the legislation, but can be found in relevant caselaw. See paragraph 16 below.

Under s.60 CA98, as described above, questions arising relating to predatory pricing under the Chapter II prohibition are dealt with, so far as possible, in a manner which

2 See http://www.opsi.gov.uk/ACTS/acts1998/ukpga_19980041_en_5#pt1-ch5-pb6-l1g60 3 I.e. the Office of Communications (OFCOM), the Gas and Electricity Markets Authority (OFGEM), the Northern Ireland Authority for Energy Regulation (OFREG NI), the Director General of Water Services (OFWAT), the Office of Rail Regulation (ORR) and the Civil Aviation Authority (CAA). In the postal sector, the regulator Postcomm has no power to apply or enforce either the Chapter II prohibition or Article 82, and regulates the conduct of Royal Mail via the conditions in its licence. 4 http://www.oft.gov.uk/shared_oft/business_leaflets/competition_law/oft414a.pdf. The guidelines discusses the deliberate incurring of losses to eliminate a competitor so as to be able to charge excessive prices in the future, and where prices are so low that they could force one or more undertakings out of the market, threatening the competitive process. It addresses questions such as when pricing below cost, intention to eliminate and the feasibility of recouping losses are relevant to assessing the existence of predation.

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is consistent with the treatment of corresponding questions as they arise under Article 82 EC. Accordingly under sections 60(1) and 60(2) CA98, courts and competition authorities would apply the criteria set out in EC case law regarding predatory pricing5

This paper discusses briefly the EC principles, but in order to avoid repetition, it chiefly seeks to discuss how these questions have been dealt with by the UK courts and regulators.

.

3. Please explain the circumstances under which a firm’s pricing is, or may be, considered “predatory” in your jurisdiction, by responding to the following questions:

a. As part of your analysis, does the price have to be below one or more measures of cost? Yes/No

i. If yes, please identify which of the following measures is/are used, as applicable:

Cost benchmark/measure Used? Comment Yes No Below marginal cost (the cost of producing one more unit of output)

(see below)

Below average variable cost (cost that varies with output)

Below average avoidable cost (all costs that can be avoided by not producing some or all output)

Below average long run incremental cost (average variable costs and product-specific fixed costs)

Below average total cost (cost including variable, fixed and sunk – non-recoverable – costs)

Other measure of cost (Please identify)

b. For each cost measure employed, please provide the definition of the measure used in your jurisdiction.

Costs measures in general

5 Courts are also required under s.60(3) to have regard to relevant decisions or statements of the European Commission.

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The categories are not closed. In Aberdeen Journals, the Competition Appeal Tribunal (“the CAT”) commented:

“380. In our view, the cost-based rules set out in AKZO and Tetra Pak II, while providing guidance, are not an end in themselves and should not be applied mechanistically. The ultimate aim of the 1998 Act is to secure conditions of undistorted and effective competition. With that primary aim in view, a principal role of the Chapter II prohibition is to prevent dominant firms from defending or strengthening their dominant position in ways that are unreasonable and disproportionate, particularly by using methods different from those found under normal competitive conditions. In our view, the decision of the Court of Justice in Compagnie Maritime Belge itself shows that the guidance available in AKZO and Tetra Pak II is open to further development.”

Marginal cost

Marginal cost per se is rarely referred to under UK jurisprudence, although of course it forms the conceptual basis of many of the other cost measures. The CAT briefly considered the issue of marginal cost in Aberdeen Journals6

Average variable cost

, but did not feel that it needed to conclusively address the issue.

The definition used in AKZO has been used by the OFT. Variable costs are those which vary directly with output. The variability of a cost, and hence the level of variable costs, will depend on the time frame under consideration. The longer the time frame under consideration, the greater the opportunities for undertakings to respond to changes in output by changing their production processes and capacity. Given sufficient time, all costs are variable to a certain degree.

In the case of AKZO7, the European Court held that where prices are below the average variable cost (AVC) of production, predation should be presumed. However, as noted by the Competition Appeal Tribunal in Aberdeen Journals8

Average avoidable cost

, the presumption is rebuttable.

Avoidable costs have also been used in practice, and are referred to in the OFT’s guidelines9. In Aberdeen Journals the CAT noted10

6Aberdeen Journals Ltd v The Office of Fair Trading [2003] CAT 11, paragraphs 378-380, which refer to Cases C-395 and 396/96P Compagnie Maritime Belge v Commission [2000] ECR I-1365. The Court also noted that in its view “the cost-based rules set out in AKZO and Tetra Pak II, while providing guidance, are not an end in themselves” and the guidance therein was “open to further development”.

that measuring avoidable costs over the period of the alleged predation, or an intermediate period of one year, would,

7 Case C-62/86 AKZO Chemie BV v Commission [1991] ECR I-3359 8 Paragraph 357. 9 See for example, paragraph 4.10 of OFT 414 and paragraph 4.8 of OFT 414a. In a speech given by the Chairman by the OFT, it was stated that “Cost allocation is also often dependent on the time frame in question. The concept of average avoidable costs for example, which is proposed in the Discussion Paper as a benchmark for predation, is preferable to average variable costs but still depends critically on selecting an appropriate period of time.” See http://www.oft.gov.uk/shared_oft/speeches/spe0206.pdf 10 Paragraph 385.

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in practice, have given very similar results to measuring what costs were variable over the same period. In cases where avoidable costs and variable costs are not very similar, it may be useful to consider whether an undertaking is covering its avoidable costs. In Alleged predation on the London City to Edinburgh route, the OFT assessed BA’s conduct by examining whether its revenues covered avoidable costs during the two relevant time periods, taking into account relevant internal documents and information provided on BA’s decisions at various points in time11

Evidence that an undertaking prices below its average avoidable costs (AAC) might be relevant evidence when assessing an undertaking's intention.

.

Avoidable costs as described in the guidelines12

Long run incremental cost

are those costs which could be avoided if the undertaking were to cease the production in question. Avoidable costs include both fixed and variable costs of the activity, but do not include, for example, sunk costs (except where the costs where incurred as part of the alleged predatory strategy).

In certain sectors (for example telecommunications) long run incremental cost may be a preferable cost benchmark to variable cost. Relevant provisions include the European Commission’s Notice on the Application of Competition Rules to Access Agreements OJ [1998] C 265/2 (which is a statement to which regard must be had under s.60(3)), the competition law guideline OFT417 The application of competition law in the telecommunications sector, and the decision of the European Commission in Deutsche Post AG OJ [2001] L125/27.

Average total cost

Following the jurisprudence of the European Court under s.60, predatory conduct is to be regarded as predatory where prices are (above AVC but) below average total cost (ATC), where it can be established that the purpose of the conduct was to eliminate a competitor13

c. Is the same cost measure applied in all cases? Yes/No

. The same measure is used as in EC jurisprudence.

i. If different cost measures can be applied, for example on the basis of industry, please explain and provide examples, as available.

11 See http://www.oft.gov.uk/advice_and_resources/resource_base/ca98/closure/British-Airways. The OFT applied three formulations of the predation test to BA’s costs and revenues: (a) whether revenue covered avoidable cost at the route level of LCY-EDI, (b) whether additional revenue from changes to the number of rotations on the route covered additional avoidable costs associated with the changes (that is, whether a change in strategy was incrementally profitable for the route), and (c) whether there were wider effects on BA’s profitability such that a change in strategy was incrementally profitable for BA as a whole. 12 See OFT414 paragraph 4.10 and OFT414a paragraph 4.8 13 AKZO, cited above, and Case C-333/94P Tetra Pak v Commission [1996] ECR I-5951 (“Tetra Pak II”).

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In general the standard AVC/ATC measures are employed (using the nearest proxies in the data available). As described above, the AAC measure may also be used where it differs significantly from AVC.

As described above, in certain sectors particularly where fixed costs are high and marginal costs are low, other measures may be more appropriate.

ii. If more than one cost measure can be applied in any individual case, please explain why and whether, in practice, this has raised issues.

[Intentionally blank.]

d. If price must be shown to be below cost, for which of the dominant firm’s sales must this be shown?

See section i(1) below.

i. Is the only relevant comparison between the cost measure and the dominant firm’s average price for all of its sales in the relevant market? Yes/No

1. If no, over which of the dominant firm’s sales can cost be compared?

The assessment of costs depends upon the facts of the case but will usually relate to the output which forms the alleged predatory conduct. This is not necessarily all of the output in the relevant market. For example in Aberdeen Journals the relevant product market was for local newspaper advertising space in both paid-for and free newspapers. However the abusive conduct concerned the pricing of advertising in the newspaper distributed to homes for free (the Herald and Post) in response to entry by a rival free newspaper (The Independent). Therefore the assessment of predation examined the costs, prices and revenues of the Herald and Post but not those of Aberdeen Journals’ paid-for newspaper in the relevant market (the Evening Express).

e. Could a firm’s price above average total cost ever be found to be predatory? Yes/No

i. If so, please explain the instances in which this might occur, and identify whether this has been the basis for actual enforcement.

In principle, this is not excluded by the relevant caselaw, and is possible in an exceptional case where other factors are present. However, there has never been such a case under CA98.

f. If prices do not have to be below a cost benchmark to be considered predatory, please explain the circumstances under which the firm’s prices are considered predatory.

[Not applicable.]

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4. To be unlawful, must the alleged predatory pricing occur in the market in which the firm holds a dominant position/substantial market power? Yes/No

Predation may occur in one market in order to protect profits in another related market (see eg. discussion of Tetra Pak II and Napp below). However the ability to sustain temporary losses for reasons unrelated to dominance in that market (due to “deep pockets” in general) is not in itself sufficient for a finding of abuse.

a. If no, please explain.

[Not applicable.]

5. Apart from the cost criteria referenced in question 3 above, must other objective criteria, such as the duration or continuity of the pricing behavior, be demonstrated for a finding of liability under a predatory pricing theory? Yes/No

a. If so, please explain. For example, if the behavior must be sustained over a certain time period, why, and for what period?

This is a factual question relating to the market context on which the alleged abuse occurs. The duration of the conduct may be relevant (see 3(d)(i)1 above.)

6. On what type of evidence do you rely to prove predatory pricing? Please explain, including examples as appropriate.

a. Are cost data used? Yes/No

i. If so, are cost data from the firm used? Yes/No

b. Are there circumstances when cost data of other firms can be used? Yes/No.

i. If so, please specify the circumstances.

In general, the cost analysis provides evidence both on whether a reasonably efficient competitor may be excluded by the conduct and whether the conduct makes commercial sense, absent exclusionary effects, for the dominant company. Thus the cost structure of the dominant company is generally most appropriate. (However - in an exceptional case - it cannot be ruled out that it may be appropriate to look at the costs of other competitors.)

c. What other data or information is used, if any? Please provide examples as relevant.

Evidence of intent (see 10(a) below) and in certain types of cases, recoupment (9(e)(i) below).

7. Does pricing below a particular cost benchmark create a presumption of predatory pricing? Yes

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In Case C-62/86 AKZO, the European Court held that where prices are below AVC (the average variable cost of production), predation should be presumed. This authority has been followed in UK cases (see below).

a. If yes, is this presumption rebuttable or irrebuttable? Please explain.

The presumption is rebuttable. At paragraph 357 of Aberdeen Journals [2003] CAT 11, the Competition Appeal Tribunal stated that it did not “exclude the possibility that exceptionally, a dominant firm may be able to rebut the presumption of abuse” even where prices are below AVC.

b. If the presumption is rebuttable, what must be shown to rebut the presumption?

(Also see paragraph 12 below.) It must be shown that the pricing is “objectively justified”. The categories of objective justification are not closed but must be demonstrated by the company itself Pricing would be objectively justified if it did not have an exclusionary object or effect; for example a single short-run promotional price decrease for a new product would be unlikely to amount to a predatory strategy14

8. Is there a “safe harbor” from a finding of predatory pricing for pricing above a particular cost benchmark? Yes/No

.

a. If yes, please explain, including the terms of the safe harbor.

No statutory “safe harbour” exists as such. Generally speaking, prices above AVC but below ATC (average total cost) would be considered predatory where it can be established that the purpose of the conduct was to eliminate a competitor, following the EU case C-333/94P Tetra Pak v Commission [1996] ECR I-5951 (“Tetra Pak II”). Pricing above ATC would be unlikely to be considered predatory.

9. Is recoupment (obtaining additional profits that more than offset profit sacrifices stemming from predatory pricing) required for a finding of liability under predatory pricing rules in your jurisdiction? No

The European Court in Tetra Pak II held that whenever there is a risk that competitors will be eliminated, there is no need to prove the possibility of recoupment. This ruling was endorsed and applied by the Competition Appeal Tribunal in Aberdeen Journals15

However, recoupment has sometimes been addressed in the decision if the evidence showing it is available

. This follows because the weakened state of competition on the market on which the undertaking holds the dominant position leads, in principle, to ensuring that losses are recouped. In effect, a finding of predation implies the possibility of recoupment.

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14 OFT414, paragraph 4.8, OFT414a, paragraph 4.12

. Conversely, if on exceptional facts, the test for dominance was met but an undertaking was still able to prove the impossibility of recoupment in a particular case, this would lead to the case not being brought.

15 Paragraphs 441-446. 16 See e.g. Napp.

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If so:

a. Is this assessment conducted separately from the analysis of the firm’s market power and the predation? Yes/No

[Not applicable.]

b. What factors are employed in assessing recoupment in your jurisdiction?

[Not applicable.]

c. Is there a specific recoupment calculation or amount to be shown? Yes/No

[Not applicable.]

i. If so, what is this?

d. Is there a relevant time period for recoupment? Yes/No

[Not applicable.]

i. If so, what is it?

e. Is it possible for recoupment to occur in a market different than the one in which the predatory pricing took place? Yes/No

i. If so, please explain and provide relevant examples.

A company may “predate” in order to protect profits in a related market (Tetra Pak II). In the UK case of Napp the profits were made simultaneously in a different market segment to where the low pricing occurred and were to part of an exclusionary strategy designed to protect Napp’s ability to charge high prices in the community segment. In such a “related market” case, the OFT might depending on circumstances specifically consider the feasibility of recoupment.

f. What degree of likelihood of recoupment is required (e.g., possibility or probability)?

As described above, the ability of the dominant firm to recoup in principle is included within the finding of predatory pricing.

i. Please provide examples of the recoupment standard of likelihood employed as part of your recoupment assessment.

[Not applicable]

10. Is the firm’s intent relevant in predatory pricing cases? Yes/No

As described above, the “AKZO” test states that conduct is to be regarded as predatory where it can be established that the purpose of the conduct was to eliminate a competitor. Also see the answer to (a) below.

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a. If so, please describe the relevant type(s) of intent, and the evidence used to show the required intent, providing available examples.

This is set in paragraphs 4.15 et seq of OFT414a:

• Direct evidence: Documentary evidence may be used to determine whether an undertaking intended to predate. Evidence from a credible witness may also prove intention to eliminate. If a dominant undertaking adopts a predatory pricing policy and such intent is established, it will be presumed to have that intention for as long as the pricing policy continues.

• “No commercial sense”: It may be relevant to consider whether the undertaking's strategy makes commercial sense only because it eliminates a competitor17

• Other behavioural evidence: eg. targeting of price cuts against a competitor; frequency of cuts (eg. a pattern of aggressive pricing) may provide some evidence of predatory intent; the likelihood of elimination – eg. the scale of the strategy, the “deep pockets” of the alleged predator, and whether the dominant company has the capacity to absorb the increased output

.

b. If objective conditions for predatory pricing -- for example, pricing exceeding a certain cost benchmark or recoupment – are not demonstrated, does intent matter? Yes/No

Predation is not a criminal offence and so an “impossible attempt” is not punishable as such. However as noted above, intention is relevant where pricing is above some measure of costs but below others.

i. If so, please explain.

[Not applicable]

11. In addition to proving below-cost pricing, must effects, such as market foreclosure or consumer harm, be demonstrated to establish liability? Yes/No

a. If yes, please explain the elements assessed (e.g., exit or delayed entry of competitors, price increases, prevention or delay of price decreases) and the types of evidence required to do so.

17 A dominant undertaking would not be able to justify deliberately incurring losses on one product by higher profits earned on another product where the latter profits resulted from eliminating a competitor. For example, in Napp, the fact that losses made from below cost prices in the hospital segment of the market were outweighed by profits earned on excessive prices in the community segment was not a legitimate reason for the low prices in the hospital segment. This was because the low prices in the hospital segment were part of an exclusionary strategy designed to protect Napp's ability to charge high prices in the community segment.

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As noted in paragraph 9 above, the definition of dominance and predation imply the possibility of recoupment. The relevant test is whether the conduct carries a “risk” of the elimination of competition.

Justifications and Defenses

12. What type of justifications or defenses, if any, are permitted for predatory pricing, e.g., an efficiency, meeting competition or objective necessity defense? Please explain and provide examples, as relevant.

In general, a finding of an abuse of a dominant position can be avoided by showing an “objective justification” for the allegedly abusive conduct. Such objective justification is unlikely to be found where predatory intent has been proved. Accordingly the most relevant defences are where intent has been presumed rather than demonstrated, ie. the “objective justifications” for pricing below AVC. These might include in certain circumstances:

• Loss leading of a single product to increase sales of other products, without intent to eliminate a competitor;

• Short run promotions in order to introduce a new product to market, without evidence of an anticompetitive pattern of conduct;

• The existence of network effects;

• In order to gain sufficiently large economies of scale to allow the price to become profitable.

a. What is the standard of proof applicable to these defenses? Who bears the burden of proof? What evidence is required to demonstrate that these defenses or justifications are met?

The burden of providing evidence for all “objective justification” defences falls on the dominant company. Where it has successfully discharged this burden, then the burden falls once more on the claimant or the investigating agency to prove the absence of objective justification.

Enforcement

13. Please provide the following information for the past ten years (as information is available):

a. The number of predatory pricing cases your agency reviewed (investigated beyond a preliminary phase).

[Not available.]

b. The number of these cases that resulted in (i) an agency decision that the conduct violates antitrust rules; (ii) a settlement with relief.

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c. The number of agency decisions issued, if any, that held that the practice did not violate your jurisdiction’s predatory pricing rules (i.e., “clearance decisions”).

d. Each of the number of agency decisions or settlements that were (i) challenged in court and, of those, either (ii) overturned by court decision or (iii) confirmed by court decision.

Cases include:

• BT's pricing of digital cordless phones18

• English Welsh and Scottish Railway

: non-infringement

19

• BT's wholesale DSL products: alleged anti-competitive pricing

: non-infringement

20

• British Telecommunications plc: BTOpenworld's consumer broadband products

: non-infringement

21

• Companies House

: non-infringement (no margin squeeze)

22

• BT Group: potential anti-competitive exclusionary behaviour

: non-infringement

23

• Complaint against the London Metal Exchange (LME) by Spectron plc

: non-infringement

24

• Aberdeen Journal Ltd

: closed on administrative priority grounds

25

• First Edinburgh

: infringement decision, upheld on appeal

26

• Alleged predation on the London City to Edinburgh route: partly non-infringement, partly case closure

: non-infringement

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• Napp Pharmaceutical Holdings Limited

28: infringement decision; substantially upheld on appeal, including finding of “excessively low prices”29

• Cardiff Bus (Statement of Objections)

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18 http://www.oft.gov.uk/advice_and_resources/resource_base/ca98/decisions/bt-cordless

; decision not yet issued

19 http://www.oft.gov.uk/advice_and_resources/resource_base/ca98/decisions/railway-pricing 20 http://www.oft.gov.uk/advice_and_resources/resource_base/ca98/decisions/bt-pricing 21 http://www.oft.gov.uk/advice_and_resources/resource_base/ca98/decisions/freeserve 22 http://www.oft.gov.uk/advice_and_resources/resource_base/ca98/decisions/companies-house 23 http://www.oft.gov.uk/advice_and_resources/resource_base/ca98/decisions/bt-group-plc 24 http://www.oft.gov.uk/advice_and_resources/resource_base/ca98/closure/LME 25 http://www.oft.gov.uk/advice_and_resources/resource_base/ca98/decisions/aberdeen-journals2 26 http://www.oft.gov.uk/advice_and_resources/resource_base/ca98/decisions/lothian 27 http://www.oft.gov.uk/advice_and_resources/resource_base/ca98/closure/British-Airways 28 http://www.oft.gov.uk/advice_and_resources/resource_base/ca98/decisions/napp 29 http://www.catribunal.org.uk/archive/casedet.asp?id=2

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14. Does your jurisdiction allow private cases challenging predatory pricing? Yes/No.

a. Please provide a short description of representative examples, as available.

Private cases to enforce the Chapter II prohibition are specifically permitted under UK law31

15. Is predatory pricing a civil and/or a criminal violation of your jurisdiction’s antitrust laws? No

. An example is Chester City Council et al v Arriva, cited below.

Predatory pricing (and indeed abuses of dominance more generally, as opposed to agreements to fix prices) are not criminal offences under UK laws.

a. If both, what are the differences in the criteria applied to these categories?

[Not applicable]

b. On what basis does the agency choose to bring a criminal or civil case?

[Not applicable]

16. As relevant, please provide a short English summary of the leading predatory pricing decisions/cases in your jurisdiction, including information on the method used to calculate costs, to the extent applicable, and, if possible, a link to the English translation, an executive summary or press release of the case.

Apart from the decisions listed above, the following decisions of courts and tribunals are notable:

• Aberdeen Journals Ltd v The Office of Fair Trading [2003] CAT 1132

• NAPP Pharmaceutical Holdings Ltd v Director General Of Fair Trading [2002] EWCA Civ 796

33; Napp Pharmaceutical Holdings Ltd & Ors v Office of Communications [2002] CAT 134

• Chester City Council & Anor v Arriva Plc & Ors [2007] EWHC 1373

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30 http://www.oft.gov.uk/news/press/2007/74-07

31 See eg. the Practice Direction on such actions: http://www.justice.gov.uk/civil/procrules_fin/contents/practice_directions/competitionlaw_pd.htm 32 http://www.catribunal.org.uk/archive/casedet.asp?id=6; http://www.catribunal.org.uk/archive/casedet.asp?id=10 33 http://www.bailii.org/ew/cases/EWCA/Civ/2002/796.html 34 http://www.catribunal.org.uk/archive/casedet.asp?id=2 35 http://www.bailii.org/ew/cases/EWHC/Ch/2007/1373.html

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17. Please provide any additional comments that you would like to make on your experience with predatory pricing rules and their enforcement in your jurisdiction, including, as appropriate but not limited to:

a. Whether there have there been or you expect there to be major developments or significant changes in the criteria by which you assess predatory pricing, explaining these developments as relevant.

[Intentionally blank.]

b. Whether there are significant policy and/or practical considerations that may lead to greater or lesser agency enforcement against predatory pricing pursuant to unilateral conduct rules in your jurisdiction, e.g., concern with the risks of false positives/false negatives, the existence of related laws such as a general ban on below-cost pricing, limited evidence of consumer harm, and/or difficulties in obtaining reliable cost data (please provide explanation as relevant).

[Intentionally blank.]

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Exclusive Dealing/Single Branding

This questionnaire seeks information on the analysis and treatment of exclusive dealing (referred to as single branding in some jurisdictions) by ICN member competition authorities. For purposes of this questionnaire, we refer to “exclusive dealing” and “single branding” as conduct that requires or induces customers or suppliers to deal solely or predominantly with that firm. Nevertheless, this questionnaire does not cover tying, bundling, loyalty discounts, rebates or related practices, which your responses should therefore not address. Unless otherwise stated, the questions concern conduct by a dominant firm or firm with significant market power.

Respondents should feel free not to answer questions concerning aspects of your law or policy that are not well developed. Answers should be based on agency practice, legal guidelines, relevant case law, etc., rather than speculation.

Legal Basis and Specific Elements

1. Please provide the main relevant texts (in English if available) of your jurisdiction’s laws and guidelines on exclusive dealing/single branding.

The principal relevant statutory provisions under UK law are the so-called “Chapter I prohibition” under section 2 the Competition Act 1998 (“CA98”)36 and the “Chapter II prohibition” under section 18 CA9837

which are modelled on Articles 81 and 82 respectively and which provide as follows:

2 Agreements etc. preventing, restricting or distorting competition

(1) Subject to section 3, agreements between undertakings, decisions by associations of undertakings or concerted practices which—

(a) may affect trade within the United Kingdom, and

(b) have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom,

are prohibited unless they are exempt in accordance with the provisions of this Part.

(2) Subsection (1) applies, in particular, to agreements, decisions or practices which—

(a) directly or indirectly fix purchase or selling prices or any other trading conditions;

(b) limit or control production, markets, technical development or investment;

(c) share markets or sources of supply;

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

36 See http://www.opsi.gov.uk/ACTS/acts1998/ukpga_19980041_en_2#pt1-ch1-pb2 37 See http://www.opsi.gov.uk/ACTS/acts1998/ukpga_19980041_en_2#pt1-ch2-pb2-l1g18

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(e) make 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.

(3) Subsection (1) applies only if the agreement, decision or practice is, or is intended to be, implemented in the United Kingdom.

(4) Any agreement or decision which is prohibited by subsection (1) is void.

(5) A provision of this Part which is expressed to apply to, or in relation to, an agreement is to be read as applying equally to, or in relation to, a decision by an association of undertakings or a concerted practice (but with any necessary modifications).

(6) Subsection (5) does not apply where the context otherwise requires.

(7) In this section “the United Kingdom” means, in relation to an agreement which operates or is intended to operate only in a part of the United Kingdom, that part.

(8) The prohibition imposed by subsection (1) is referred to in this Act as “the Chapter I prohibition”.

[…]

18 Abuse of dominant position

(1) Subject to section 19, any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market is prohibited if it may affect trade within the United Kingdom.

(2) Conduct may, in particular, constitute such an abuse if it consists 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 the contracts.

(3) In this section—

“dominant position” means a dominant position within the United Kingdom; and

“the United Kingdom” means the United Kingdom or any part of it.

(4) The prohibition imposed by subsection (1) is referred to in this Act as “the Chapter II prohibition”.

Formerly an exclusion from the Chapter I prohibition of the Competition Act was

17

available for vertical agreements (providing certain conditions were met). This exclusion has since been repealed. Vertical agreements which benefit from EC “block exemptions” benefit from a parallel exemption from the Chapter I prohibition under section 10 CA98, unless that parallel exemption is cancelled by the OFT. Individual agreements may be exempt under section 9 CA98, which is modelled on Article 81(3) EC:

9 Exempt agreements

This section applies to any agreement which—

(a) contributes to—

(i) improving production or distribution, or

(ii) promoting technical or economic progress,

while allowing consumers a fair share of the resulting benefit; but

(b) does not—

(i) impose on the undertakings concerned restrictions which are not indispensable to the attainment of those objectives; or

(ii) afford the undertakings concerned the possibility of eliminating competition in respect of a substantial part of the products in question.

(2) In any proceedings in which it is alleged that the Chapter I prohibition is being or has been infringed by an agreement, any undertaking or association of undertakings claiming the benefit of subsection (1) shall bear the burden of proving that the conditions of that subsection are satisfied.

As the question deals with such conduct by firms which are dominant or who have significant market power, the rest of this response does not primarily deal with the Chapter I prohibition or the application of Article 81 EC.

Under Chapter 1 of Part 4 of the Enterprise Act 2002 (the “Enterprise Act”)38

38 http://www.opsi.gov.uk/acts/acts2002/ukpga_20020040_en_12#pt4

, the OFT may also make a market investigation reference to the Competition Commission, following which the Competition Commission publishes a report and takes such action as is reasonable and practicable to remedy, mitigate or prevent any identified adverse effect on competition. The focus of the market investigation regime is upon investigating whether markets are not functioning properly, as opposed to identifying breaches of prohibitions established in statute by a single firm. On receipt of a market investigation reference from the OFT or a sectoral regulator, the CC is required to decide whether any “feature”, or combination of features, of each relevant market prevents, restricts or distorts competition in connection with the supply or acquisition of any goods and services in the UK or a part of the UK. If so, there is an adverse effect on competition. A ‘feature’ means market structure, conduct of suppliers or purchasers or conduct of customers. Conduct includes any failure to act (whether or

18

not intentional)39

131 Power of OFT to make references

. Some relevant sections are excerpted below:

(1) The OFT may, subject to subsection (4), make a reference to the Commission if the OFT has reasonable grounds for suspecting that any feature, or combination of features, of a market in the United Kingdom for goods or services prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom.

(2) For the purposes of this Part any reference to a feature of a market in the United Kingdom for goods or services shall be construed as a reference to—

(a) the structure of the market concerned or any aspect of that structure;

b) any conduct (whether or not in the market concerned) of one or more than one person who supplies or acquires goods or services in the market concerned; or

(c) any conduct relating to the market concerned of customers of any person who supplies or acquires goods or services.

(3) In subsection (2) “conduct” includes any failure to act (whether or not intentional) and any other unintentional conduct.

(4) No reference shall be made under this section if—

(a) the making of the reference is prevented by section 156(1); or

(b) a reference has been made under section 132 in relation to the same matter but has not been finally determined.

(5) References in this Part to a market investigation reference being finally determined shall be construed in accordance with section 183(3) to (6).

(6) In this Part—

“market in the United Kingdom” includes—

(a)so far as it operates in the United Kingdom or a part of the United Kingdom, any market which operates there and in another country or territory or in a part of another country or territory; and

(b)any market which operates only in a part of the United Kingdom;

“market investigation reference” means a reference under this section or section 132;

and references to a market for goods or services include references to a market for goods and services.

[…]

134 Questions to be decided on market investigation references 39 See generally CC Guidelines on Market Investigation References (CC3) (2003) and in particular paragraphs 1.15 to 1.20.

19

(1) The Commission shall, on a market investigation reference, decide whether any feature, or combination of features, of each relevant market prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom.

(2) For the purposes of this Part, in relation to a market investigation reference, there is an adverse effect on competition if any feature, or combination of features, of a relevant market prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom.

(3) In subsections (1) and (2) “relevant market” means—

(a) in the case of subsection (2) so far as it applies in connection with a possible reference, a market in the United Kingdom—

(i) for goods or services of a description to be specified in the reference; and

(ii) which would not be excluded from investigation by virtue of section 133(2); and

(b) in any other case, a market in the United Kingdom—

(i) for goods or services of a description specified in the reference concerned; and

(ii) which is not excluded from investigation by virtue of section 133(2).

(4) The Commission shall, if it has decided on a market investigation reference that there is an adverse effect on competition, decide the following additional questions—

(a) whether action should be taken by it under section 138 for the purpose of remedying, mitigating or preventing the adverse effect on competition concerned or any detrimental effect on customers so far as it has resulted from, or may be expected to result from, the adverse effect on competition;

(b) whether it should recommend the taking of action by others for the purpose of remedying, mitigating or preventing the adverse effect on competition concerned or any detrimental effect on customers so far as it has resulted from, or may be expected to result from, the adverse effect on competition; and

(c) in either case, if action should be taken, what action should be taken and what is to be remedied, mitigated or prevented.

(5) For the purposes of this Part, in relation to a market investigation reference, there is a detrimental effect on customers if there is a detrimental effect on customers or future customers in the form of—

(a) higher prices, lower quality or less choice of goods or services in any market in the United Kingdom (whether or not the market to which the feature or features concerned relate); or

20

(b) less innovation in relation to such goods or services.

(6) In deciding the questions mentioned in subsection (4), the Commission shall, in particular, have regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the adverse effect on competition and any detrimental effects on customers so far as resulting from the adverse effect on competition.

(7) In deciding the questions mentioned in subsection (4), the Commission may, in particular, have regard to the effect of any action on any relevant customer benefits of the feature or features of the market concerned.

(8) For the purposes of this Part a benefit is a relevant customer benefit of a feature or features of a market if—

(a) it is a benefit to customers or future customers in the form of—

(i) lower prices, higher quality or greater choice of goods or services in any market in the United Kingdom (whether or not the market to which the feature or features concerned relate); or

(ii) greater innovation in relation to such goods or services; and

(b) the Commission, the Secretary of State or (as the case may be) the OFT believes that—

(i) the benefit has accrued as a result (whether wholly or partly) of the feature or features concerned or may be expected to accrue within a reasonable period as a result (whether wholly or partly) of that feature or those features; and

(ii) the benefit was, or is, unlikely to accrue without the feature or features concerned.

[..]

136 Investigations and reports on market investigation references

(1) The Commission shall prepare and publish a report on a market investigation reference within the period permitted by section 137.

(2) The report shall, in particular, contain—

(a) the decisions of the Commission on the questions which it is required to answer by virtue of section 134;

(b) its reasons for its decisions; and

(c) such information as the Commission considers appropriate for facilitating a proper understanding of those questions and of its reasons for its decisions.

(3) The Commission shall carry out such investigations as it considers appropriate for the purposes of preparing a report under this section.

(4) The Commission shall, at the same time as a report under this section is published—

21

(a) in the case of a reference under section 131, give it to the OFT; and

(b) in the case of a reference under section 132, give it to the appropriate Minister and give a copy of it to the OFT.

(5) Where a reference has been made by the OFT under section 131 or by the appropriate Minister under section 132 in circumstances in which a reference could have been made by a relevant sectoral regulator under section 131 as it has effect by virtue of a relevant sectoral enactment, the Commission shall, at the same time as the report under this section is published, give a copy of it to the relevant sectoral regulator concerned.

(6) Where a reference has been made by a relevant sectoral regulator under section 131 as it has effect by virtue of a relevant sectoral enactment, the Commission shall, at the same time as the report under this section is published, give a copy of it to the OFT.

(7) In this Part “relevant sectoral enactment” means—

(a) in relation to the Director General of Telecommunications, section 50 of the Telecommunications Act 1984 (c. 12);

(b) in relation to the Gas and Electricity Markets Authority, section 36A of the Gas Act 1986 (c. 44) or (as the case may be) section 43 of the Electricity Act 1989 (c. 29);

(c) in relation to the Director General of Water Services, section 31 of the Water Industry Act 1991 (c. 56);

(d) in relation to the Director General of Electricity Supply for Northern Ireland, article 46 of the Electricity (Northern Ireland) Order 1992 (S.I. 1992/231 (N.I. 1));

(e) in relation to the Rail Regulator, section 67 of the Railways Act 1993 (c. 43);

(f) in relation to the Director General of Gas for Northern Ireland, article 23 of the Gas (Northern Ireland) Order 1996 (S.I. 1996/275 (N.I. 2)); and

(g) in relation to the Civil Aviation Authority, section 86 of the Transport Act 2000 (c. 38).

(8) In this Part “relevant sectoral regulator” means the Director General of Telecommunications, the Gas and Electricity Markets Authority, the Director General of Water Services, the Director General of Electricity Supply for Northern Ireland, the Rail Regulator, the Director General of Gas for Northern Ireland or the Civil Aviation Authority.

(9) The Secretary of State may by order modify subsection (7) or (8).

138 Duty to remedy adverse effects

(1) Subsection (2) applies where a report of the Commission has been prepared and published under section 136 within the period permitted by section 137 and contains the decision that there is one or more than one adverse effect on competition.

22

(2) The Commission shall, in relation to each adverse effect on competition, take such action under section 159 or 161 as it considers to be reasonable and practicable—

(a) to remedy, mitigate or prevent the adverse effect on competition concerned; and

(b) to remedy, mitigate or prevent any detrimental effects on customers so far as they have resulted from, or may be expected to result from, the adverse effect on competition.

(3) The decisions of the Commission under subsection (2) shall be consistent with its decisions as included in its report by virtue of section 134(4) unless there has been a material change of circumstances since the preparation of the report or the Commission otherwise has a special reason for deciding differently.

(4) In making a decision under subsection (2), the Commission shall, in particular, have regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the adverse effect on competition concerned and any detrimental effects on customers so far as resulting from the adverse effect on competition.

(5) In making a decision under subsection (2), the Commission may, in particular, have regard to the effect of any action on any relevant customer benefits of the feature or features of the market concerned.

(6) The Commission shall take no action under subsection (2) to remedy, mitigate or prevent any detrimental effect on customers so far as it may be expected to result from the adverse effect on competition concerned if—

(a) no detrimental effect on customers has resulted from the adverse effect on competition; and

(b) the adverse effect on competition is not being remedied, mitigated or prevented.

2. Please list your jurisdiction’s criteria for an abuse of dominance/monopolization based on exclusive dealing.

As with Articles 81 and 82 EC, the criteria are not set out in detail in the legislation, but can be found in relevant caselaw. See paragraph 15 below.

Under s.60 CA98, as described above, questions arising under the Chapter I and II prohibitions are dealt with, so far as possible, in a manner which is consistent with the treatment of corresponding questions as they arise under Article 82 EC. Accordingly under sections 60(1) and 60(2) CA98, courts and competition authorities would apply the criteria set out in EC case law regarding agreements to exclusively deal40

This paper discusses briefly the EC principles, but in order to avoid repetition, it chiefly seeks to discuss how these questions have been dealt with by the UK courts and regulators. There have been few cases under the Competition Act 1998 dealing with exclusive dealing arrangements; where the UK caselaw does not add to or cite

.

40 Courts are also required under s.60(3) to have regard to relevant decisions or statements of the European Commission.

23

that under Article 82 EC, the answer below has been left blank rather than duplicating the European caselaw.

As part of a market investigation, the Competition Commission analyses rivalry within a market and must consider how the competitive process in the relevant market is affected by any features of the market as described in the Enterprise Act. Features include the conduct of buyers and sellers, of the firms in the market and of customers. Vertical agreements such as single branding agreements have the effect of foreclosing access by other manufacturers to the part of the market covered by them. The effect of this will depend in part on the proportion of the market foreclosed, the length of time before such agreements are renegotiated, and the scope for other distributors to enter the downstream market and provide alternative outlets to other manufacturers41

Exclusive Purchasing and Supply Arrangements

.

3. How does your jurisdiction define single branding or exclusive dealing? For example: Must a firm require that all purchases come from it or that all sales go to it? Can something less than “all purchases” or “all sales” be considered single branding or exclusive dealing? Please specify (providing actual percentages, as relevant).

As with Article 82 EC, the criteria are not set out in detail in the legislation, but can be found in relevant caselaw. See paragraph 16 below and paragraph 2 above.

The OFT’s guidelines42

It is plain, for example from the EC authorities, that in the words of the ECJ in Case 85/76 Hoffmann-La Roche v Commission:

define the practice of “exclusive purchasing or dealing” (i.e. “where the retailer is required to purchase, or deal in, goods from only one manufacturer”) as an example of a vertical restraint that may be considered under Article 82 or the Chapter II prohibition.

“An undertaking which is in a dominant position on a market and ties purchasers – even if it does so at their request – by an obligation or promise on their part to obtain all or most of their requirements exclusively from the said undertaking abuses its dominant position within the meaning of Article [82] of the Treaty, whether the obligation in question is stipulated without further qualification or whether it is undertaken in consideration of the grant of a rebate” (emphasis added)

The CAT stated43

4. Is the duration of the arrangement relevant to your assessment? Yes/No

that this paragraph “clearly” stated the relevant law: Claymore Dairies Ltd & Ors v Office of Fair Trading & Ors [2005] CAT 30, paragraph 291.

a. If so, please explain how and why, providing examples.

[Intentionally blank.]

41 See the Competition Commission’s guidelines on market investigation references (CC3) at paragraphs 3.76 and 3.77 42 OFT414, OFT414a. 43 http://www.catribunal.org.uk/documents/Jdg1008Claymore020905.pdf

24

5. Must the firm’s use of such arrangements cover a substantial portion of the market? Yes/No

a. If so, how do you interpret this requirement, including any relevant percentage thresholds for the purchase or supply covered, and the evidence needed to determine whether this is met?

[Intentionally blank.]

6. Does it matter whether the arrangement was requested by the non-dominant customer or supplier? Yes/No

In principle this does not matter; see paragraph 3 above - this paragraph from Hoffman-La Roche was approved by the CAT in Claymore Dairies.

a. If so, how and why?

[Not applicable]

7. Might otherwise legal exclusive dealing/single branding arrangements be deemed abusive if they contain other provisions, e.g., an “English Clause” (requiring e.g., the customer to report any better offers to the supplier, and prohibiting the customer from accepting the offer unless the supplier does not match it), rights of first refusal (right of, e.g., the supplier to enter into an agreement with the customer according to specified terms, before the customer is entitled to enter into an agreement with a third party)? Yes/No

a. If so, please explain and provide examples.

[Intentionally blank.]

Presumptions and Safe Harbors

8. Are there circumstances under which a firm’s use of single branding or exclusive dealing arrangements is presumed illegal? Yes/No

a. If so, please identify the circumstances.

b. Is the presumption rebuttable? Yes/No

i. If so, what must be shown to rebut the presumption?

[Intentionally blank.]

9. Is there a “safe harbor” from a finding of liability under your single branding/exclusive dealing provisions? Yes/No

a. If so, please explain, including its terms.

[Intentionally blank.]

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Effects

10. Must a market foreclosure effect be shown for an abuse? Yes/No

a. How is market foreclosure defined in your jurisdiction?

b. Which factors are taken into account to assess a market foreclosure effect (level of dominance, percentage of market demand/purchases or supply covered by the arrangement, existence of alternative sources of supply, entry barriers, scale economies, possibility and practicability of switching, others)? Please specify the factors considered, including, as relevant, the percentage of demand/supply covered.

c. What evidence is used to demonstrate these effects and must the effects be actual, likely or potential effects?

[Intentionally blank.]

11. Must other effects, e.g., on consumer welfare, be shown for an abuse? Yes/No

[Intentionally blank.]

a. If yes, please specify what must be demonstrated and the evidence required.

[not applicable.]

Justifications/Defenses

12. What justifications/defenses are available to the dominant firm, e.g., an efficiency, meeting competition or objective necessity defense? Please specify.

a. If there is an efficiencies defense, what efficiencies are considered (e.g., relationship-specific investments, facilitating innovation, reduced transaction costs)? How are claims of improved service quality or reputation assessed?

b. Are efficiencies balanced against competitive harm to determine whether liability attaches, or do they provide a complete defense without consideration of harm?

c. Is there a meeting competition defense? Yes/ No.

i. If yes, please explain.

[Intentionally blank.]

d. What is the standard of proof applicable to these defenses? What type of evidence is required to demonstrate that the defenses are met?

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The burden of providing evidence for all “objective justification” defences falls on the dominant company. Where it has successfully discharged this burden, then the burden falls once more on the claimant or the investigating agency to prove the absence of objective justification.

Enforcement

13. Please provide the following information for the past ten years (as information

is available):

a. The number of exclusive dealing/single branding cases your agency reviewed (investigated beyond a preliminary phase).

[Not available.]

b. The number of these cases that resulted in (i) an agency decision that the conduct violates antitrust rules; (ii) a settlement with relief.

c. The number of agency decisions issued, if any, that held that the practice did not violate your jurisdiction’s exclusive dealing/single branding rules (i.e., “clearance decisions”).

d. Each of the number of agency decisions or settlements that were (i) challenged in court and, of those, either (ii) overturned by court decision or (iii) confirmed by court decision.

Amongst the relevant cases are:

• Abuse of a dominant position by Calor Gas Northern Ireland in the supply of cylinder LPG (resolved by informal settlement)44

14. Does your jurisdiction allow private cases challenging exclusive dealing/single branding? Yes/No

Private cases to enforce the Chapter II prohibition are specifically permitted under UK law45

a. Please provide a short description of representative examples, as available.

.

• The Courage v Crehan line of cases dealt with exclusivity arrangements relating to pub tenants. However they deal with this issue from the point of view of Article 81 rather than Article 8246

44

.

http://oft.gov.uk/shared_oft/ca98_case_closures/2003.pdf and see also http://www.oft.gov.uk/news/press/2003/pn_95-03 45 See eg. the Practice Direction on such actions: http://www.justice.gov.uk/civil/procrules_fin/contents/practice_directions/competitionlaw_pd.htm 46 See Inntrepreneur Pub Company (CPC) & Ors v. Crehan [2006] UKHL 38 , on appeal from Crehan v Inntrepreneur Pub Company CPC [2004] EWCA Civ 637 , on appeal from Crehan v Inntrepreneur Pub Company (CPC) & Anor [2003] EWHC 1510: http://www.bailii.org/uk/cases/UKHL/2006/38.html,

27

15. As relevant, please provide a short English summary of the leading exclusive dealing/single branding cases in your jurisdiction and, if possible, a link to the English translation of the decision, an executive summary or the press release of the case.

• Inntrepreneur v Crehan (footnote 46 above, although as noted above, this is not a dominance case)

• Also of note, although under the old legislation, is e.g. the Competition Commission report The supply of impulse ice cream: A report on the supply in the UK of ice cream purchased for immediate consumption47

16. Please provide any additional comments that you would like to make on your experience with exclusive dealing/single branding rules and their enforcement in your jurisdiction, including, as appropriate but not limited to whether there have there been or you expect there to be major developments or significant changes in the criteria by which you assess exclusive dealing/single branding, explaining these developments as relevant.

[Intentionally blank.]

http://www.bailii.org/ew/cases/EWCA/Civ/2004/637.html, http://www.bailii.org/ew/cases/EWHC/Ch/2003/1510.html 47 http://www.mmc.gov.uk/rep_pub/reports/2000/436ice.htm. The OFT guideline Market investigation references (OFT 511) says at 6.16: “Types of vertical agreement that have been the subject of FTA monopoly references in the past and may be suitable for market investigation references in the future include exclusive purchasing (i.e. where the retailer or other downstream party is tied to a single supplier), exclusive or selective distribution (where a supplier only sells to certain downstream outlets), and tie-in sales and product bundling.”