The Gazette 1992

JANUARY/FEBRUARY 1992

GAZETTE

The product market is generally defined as those products which may reasonably be substituted for each other. In determining this it is particularly important to review market trends and consumer pre- ferences. For example, if the con- sumer would readily purchase product X when there are shortages of product Y then products X and Y may be deemed to be part of the same product market. The geographical market is referred to in Section 5 as the "State or a substantial part of the State". At EC level the equivalent term in Article 86 has been defined as a substantial part of the European Community in economic terms; in other words, for the purposes of Article 86, an area may constitute a substantial part of the EC because, although geographically small, it is economically significant in the context of the relevant p r oduct market. If a similar approach is taken by the Irish authorities then, for example, Dublin is likely to be a substantial part of the State for many issues under Section 5. Once the relevant market is defined, a party's position in that market must be assessed. A market share of 50% or more may be prima facie evidence of dominance. However, it is im- portant to review not only market share but other issues which affect the company's position in the market, for example, its financial and technical resources, its ability to survive downturns in the market, brand loyalty, consumer trends, the relative position of its competitors and, in particular, barriers to entry to the market. If a company is dominant any abuse of that dominant position is prohibited - there are no approval procedures in relation to Section 5. For example, predatory pricing may infringe Section 5. A refusal to supply a long standing customer with the intent to undermine the competitive threat that company poses may also constitute an abuse of a dominant position. Similarly, any discrimination in the terms of

if necessary. It is not entirely clear from the Act whether this principle applies where an agreement is notified before 1 October, 1992 but after proceedings have been instituted, but the general con- sensus of opinion is that it does. In addition to its power to review notified agreements, the Com- petition Authority may undertake an investigation into a dominant position on the request of the Minister. To this end, the Authority has power to enter and search company premises. The Authority wi ll report to the Minister. Ultimately, the Minister may regulate the s t r uc t u re of a domi nant company. However, indications are that this procedure will not be used very often. As noted, the competition rules are to be enforced primarily through private litigation. In general, actions based upon Sections 4 and 5 must be taken in the High Court, pending the introduction of Section 6 (2) (b). Parties may seek a declaration that a particular agreement or practice is unlawful and damages, including exemplary damages, where appropriate. Parties may also seek injunctive relief. Proceedings may be taken by "ag- grieved" persons. It remains to be seen how this term will be inter- preted. There is also provision for proceedings to be taken by the Minister, though the Minister cannot seek damages. Proceedings can be taken against any undertaking which is, or has been, a party to an unlawful agreement or practice. For example, a company denied supplies by a dominant company, might seek a declaration that the refusal to supply constitutes an abuse of a dominant position and an order that the dominant com- pany resume supplies. The buyer might also seek damages. The Mergers Act The Competition Act introduces a number of important amendments to the 1978 Mergers, Take-overs and Monopolies (Control) Act. For example, an acquisition of shares

business offered by a dominant company, whether it be in relation to discounts, payment periods, or whatever, may be unacceptable under Section 5 unless objectively justified, i.e., perhaps, because the company receiving the best terms buys in bulk. As a general comment, it is often helpful to consider why a dominant company chose to act in a certain way and the effect that had on competition. If the company's intention appears "malicious" from a competition perspective, and the impact upon competition detri- mental, the company is likely to have abused its dominant position. Enforcement of the competition rules The Competition Authority's pri- mary role is to review notifications under Section 4 of the Act. The Competition Authority does not have powers of enforcement as such. The competition rules are to be enforced primarily through the courts. The Competition Authority has published a Form CA which must be completed on notification. Parties provide basic details on the Form CA, i.e., details on the parties and a general explanation of the agreement that is being notified. An annex should be attached to the Form CA which will contain the substance of the notification. The Authority has published a docu- ment outlining the information which must be included in the annex. In particular, the parties must provide arguments to justify the grant of a certificate or licence. These procedures are based upon those applied at the EC Level. There is also a notification fee of IRE100. Parties to an agreement which was in place prior to 1 October, 1991 have until 1 October, 1992 to notify their agreement to the Competition Authority if they wish to seek a licence or certificate. If such an agreement is notified by 1 October, 1992 court proceedings may not be taken in respect of the agreement until the notification has been determined, on appeal to the courts