Abusive marketing strategies

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Brief : 193232 Delivery Date : 26/02/2007 Title: Alpha, a large German firm, is the leading provider in the EU of VCMP tuning box.. VCMP tuning box is essential for the operation of video and satellite phones. Alpha has a market share in the EU of 58%.

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It has few competitors. The largest among them holds a market share of 15%. VCMP tuning box requires substantial research and development as well as a significant amount of know-how. Alpha has invested a lot of money on it in the last five years. VMCP tuning box cannot be performed without a spare tool known in the sector as ‘the link’. Alpha produces its own version of this tool, ‘Key’, which has proved to be much more reliable than those tools produced by Alpha’s competitors. Alpha sells Key to a variety of customers. The formula of Key is protected by patents in the majority of the Member states on the EU. Key tool is compatible only with VCMP tuning box.. Beta, a UK firm and one of Alpha’s competitors, has come to learn about the following behaviour on the part of Alpha: a) Alpha refuses to provide VCMP tuning boxes to customers who purchase ‘the link’ from another source b) Alpha reduces its prices to customers which Alpha suspects are about to switch to obtain tuning boxes from other competitors c) Alpha enjoys a market share of 98% in Spain, where it has developed a very sophisticated distribution network. Alpha denies access to its distribution network by its competitors.. d) Alpha offers substantial discounts to French customers if they exceed the number of ‘Key’ tools purchased in the preceding year. Advise Alpha whether any of its arrangements might infringe Article 82 EC Treaty. What further information would you require from Alpha? ANSWER Alpha can be advised that Article 82 of the Treaty of Rome[1] controls the unilateral conduct of firms which have an economically powerful or so-called dominant position in the markets in which they participate. Article 82 provides that:[2] “Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common 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,

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