Large companies often use unfair business practices and exclusionary tactics, thereby undermining competition. Find out how you can protect yourself under Slovak and European law.
Currently, there is widespread market differentiation, with large companies using certain practices to squeeze out small businesses—and in some cases even larger companies—as their competitors, thereby essentially gaining significant market influence; ultimately, this may lead to the acquisition of a dominant market position or even the creation of a monopoly in a specific market segment.
However, the exclusion of competitors through unfair practices is not the only problem, since if a company gains a dominant position or creates a monopoly through its actions, it may later abuse that position against its customers, for example by imposing unreasonable terms and conditions, unreasonable prices, or by applying different terms to individual customers for identical or comparable services. Such practices are collectively referred to as exploitative practices, which, unlike exclusionary practices, do not directly result in a change in the competitive structure of the market (the exclusion of another business from the market), but they reduce consumer welfare, which the dominant firm unjustifiably captures for its own benefit. Exploitative practices, e.g., in the form of charging unreasonably high prices, lead to a direct reduction in consumer welfare, i.e., to the extraction of a “rent” at the consumer’s expense, which a non-dominant firm could not obtain.
Dominant market position in and of itself is neither prohibited nor illegal, however, the application of exclusionary and exploitative practices constitutes a serious violation of competition within the meaning of Act No. 187/2021 Coll. on the Protection of Competition and on Amendments to Certain Acts, as well as the Treaty on the Functioning of the European Union.
In light of the above, the primary prerequisite for a violation of fair competition is the existence of a dominant or monopolistic position, whereby an undertaking’s market power is always assessed within a specific relevant market, the purpose of which is to systematically identify the real and immediate competitive pressures faced by the undertakings involved when offering certain products in a specific area. Defining the relevant market is the very first step, and the European Commission, as the body whose primary authority is the enforcement of competition rules, establishes clear guidelines in this regard for identifying the specific relevant market on which the market power of a given undertaking must be assessed. However, market shares in a specific relevant market are not the sole indicator of a firm’s market power, as the European Commission’s guidelines also state, and depending on the specific facts of the case, other factors may also be relevant, such as market structure, barriers to market entry and expansion, as well as countervailing buyer power.
If an undertaking does indeed hold a dominant or relevant market position, there is a reasonable suspicion that, in certain cases, it may engage in specific forms of abuse of a dominant position in the form of exclusionary or exploitative practices.
The Act on the Protection of Competition, as well as the Treaty on the Functioning of the European Union, identifies the following forms of abuse of a dominant position:
Direct or indirect imposition of unreasonable prices or other unreasonable trading conditions,
Restriction of production, sales, or technical development of goods to the detriment of consumers,
Application of different conditions for identical or comparable performance to individual undertakings, whereby such undertakings are or may be placed at a competitive disadvantage, or
Making consent to enter into a contract conditional on the other party also accepting additional obligations that, by their nature or according to commercial practice, are unrelated to the subject matter of the contract. “
However, the European Commission addresses more specific forms of abuse of a dominant position in its guidelines, the purpose of which—based on specific Commission decisions—is to ensure greater clarity and predictability regarding the general analytical framework the Commission uses to determine whether it should pursue cases involving various forms of abuse of a dominant position to exclude competitors from the market, and thereby ultimately helps undertakings better assess whether certain specific conduct may lead to Commission intervention. In this context, the European Commission specifically considers, for example, exclusive purchasing, conditional discounts, tying and bundling, refusal to supply, and margin squeezing to constitute abuses of a dominant position.
However, when assessing violations of fair competition, the justification for the dominant undertaking’s conduct is also taken into account, as the dominant undertaking may demonstrate that its conduct has a positive impact on efficiency, which may offset the adverse anti-competitive effects on customers. To demonstrate this, however, several conditions set forth in the European Commission’s guidelines must be cumulatively met.
The issue of abuse of a dominant position is a broad topic and somewhat neglected, as many companies are unaware that it is possible to defend against unreasonable business terms or prices, or unfair practices by large companies, specifically through national and European rules designed to ensure fair competition. To ensure fair competition, the Directive of the European Parliament and of the Council (EU) 2019/633 of April 17, 2019, on unfair trading practices in business-to-business relationships in the agricultural and food supply chain.
If you feel that a supplier is imposing unreasonable terms or high prices on you and that supplier has no competition in its field, or if competitors are driving you out of the market through their practices, please do not hesitate to contact us, as the team at our law firm, Hronček & Partners, actively specializes in both domestic and European competition law.
