Oligopolistic Markets Under EU Law From the Aspect of Collective Dominance

Ilgaz SARIOĞLU

1. Introduction

European Commission when controlling the anticompetitive behaviors in the market has three major legal instruments. While Art 81 (ex Article 85) of the Treaty prohibits “all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market”, Art 82 (ex Article 86) prohibits “any abuse by one or more undertakings of a dominant position”. Merger Regulation on the other side aims to prevent the creation or strengthening of market structures distorting competition by prohibiting “any concentration which creates or strengthens a dominant position”. Whereas Art 81 and Art 82 deal with anticompetitive behaviors ex post, Merger Regulation deals with cases exante. These legal instruments are designed and therefore supposed to cover all the possible anticompetitive behaviors in various types of markets such as pure competition, oligopoly and monopoly. However, Commission, by time, recognized that a certain type of oligopoly, namely tight oligopolies, may lead to anticompetitive behavior and yet not be caught under Community Competition Law.

The challenge is inherent in the structure of tight oligopolies. There exist only a few numbers of players in the market, which have to consider each other’s decisions regarding price or output. Actions of one player affect the actions of other players in the market. Thus, the players are dependent on each other while trying to maximize their profits. Game Theory indicates that, in repeated games, once they recognize their interdependence, firms prefer not to compete due to the fact that they are better off in this way. Thus, the prices may rise to an anticompetitive level with parallel behavior of oligopolists but without explicit coordination. The gap in the regulation emerges at this point. The parallel anticompetitive behavior does not arise due to agreements between parties.

Commission was faced with an anticompetitive behavior but articles of Treaty did not seem to provide legal means for the regulatory intervention. If it were a cartel agreement or a concerted practice between oligopolists, it would be caught under Art 81 of the Treaty. However, there is no explicit collusion, there is no explicit coordination. Prices rise as a result of interdependence inherent in the structure of the market, therefore, cannot be caught under Art 81. On the other side, because that Art 82 has been associated with single dominance by ECJ, Art 82 cannot handle the issue as well.