By cand.merc.jur Christian Kjær Olsen and stud.jur. Nicoline Mortensen
Dominant companies must not abuse their dominant position to suppress others in the market. There is extensive practice on this by the EU Court of Justice. For example, discounts or bonuses must not be granted in exchange for binding the supplier or customer to the company. A variant of this has recently been presented to the Danish Competition and Consumer Authority, and the dominant company has now ceased its abuse.
The circumstances of the case were that the dominant company introduced a bonus for new customers some years ago. Initially, the supplement was to last for one year, then extended to two years. Receipt of the supplement was conditional on the customer committing to the dominant company for a total of 3 years. The bonus was only given to new suppliers, i.e. to the smaller competitors’ existing suppliers, who were then bound to the dominant company for three years in order to receive the special introductory bonus.
The small ones forced to their knees
Among the advantages for the dominant company was that the supplement lured competitors’ suppliers to it and bound them to trade with it for three years. This provided production security for the dominant company and corresponding insecurity for the small ones. Another advantage – the most significant – was that the introductory supplement forced the small ones to their knees. They succumbed because they were forced to pay the bonus to all their customers in order to keep them, so they would not be lured away. Whereas the dominant company could limit itself to paying the supplement to the new customers.
In other words, the small ones were forced to raise the price to all suppliers. In this way, the small ones had to “eat themselves up” in order to survive. This would soon come to an end. In our opinion, this is clearly in violation of the EU Court of Justice’s practice, e.g. the Intel cases.
Sønderby Legal intervened in the case, and after contacting the Danish Competition and Consumer Authority, the dominant company has cancelled its abuse.