Abuse of a Dominant Position

Technological or industry standards

Para 11-077 The Commission has issued a statement of objections against a US chip company, Rambus, which manufactures DRAMS, a memory chip. JEDEC is a standard that applies to the manufacture of these chips. The Commission's objection is that Rambus is charging unreasonable royalties for patents that are essential to the JEDEC standard which were not disclosed at the time that the JEDEC standard was set up. It claims that such amounts to a "patent ambush". The Commission requires that Rambus charge RAND (reasonable and non-discriminatory royalties).

Para 11-080 In joined Cases C-468/06 to C-478/06, the Greek Competition Commission referred the Syfait case to the Greek Court (Efetio Athinon). The ECJ, having held that the Greek competition commission had no jurisdiction, the Greek court referred the same issues to the ECJ who thus had an opportunity to determine the issues raised in Syfait. The ECJ reiterated the basic principle that a dominant undertaking who refuses without objective justification to meet orders from an existing customer is an abuse of a dominant position. However, the ECJ clearly recognised the force of GSK's arguments that competition in the whole Community market was distorted and thus, its refusal to meet extraordinary orders was justified because if it failed to do so, it would have a very detrimental effect on research and development. Thus, it held that a dominant undertaking was entitled to refuse orders where such orders were out of the ordinary if such was necessary to protect its own commercial interests. It held that such could be the case where orders from wholesalers were out of all proportion to those previously sold by the same wholesalers to meet the needs of the market in that Member State. It is clear from this case that the ECJ felt torn by the need to uphold the sanctity of the single internal market which thrives on parallel imports and the need to ensure that pharmaceutical companies did not have to suffer from price regimes imposed in certain Member States which almost punitive. To effectively export those price regimes to the entirety of the European Community risked killing the golden gooses (the R&D pharma companies) that lay the eggs (the pharmaceuticals) and thus jeopardising inter-brand competition.

Discriminatory pricing

Para 11-100 See C-52/07 Kanal 5 v STIM discussed below at para 11-101.

Excessive royalties

Para 11-101 The Commission has issued a statement of objections against a US chip company, Rambus, which manufactures DRAMS, a memory chip. JEDEC is a standard that applies to the manufacture of these chips. The Commission's objection is that Rambus is charging unreasonable royalties for patents that are essential to the JEDEC standard which were not disclosed at the time that the JEDEC standard was set up. It claims that such amounts to a "patent ambush". The Commission requires that Rambus charge RAND royalties (reasonable and non-discriminatory royalties).

In C-52/07 Kanal 5 v STIM, the ECJ was asked to provide judicial assistance on the approach by national courts to the compatibility of methods of levying charges employed by collecting societies against public and commercial television broadcasting companies with regard to the playing of musical copyright works. A Swedish collecting society, STIM, which had a de facto monopoly in the market of making available music protected by copyright for television broadcasts. It charged, following negotiation, a flat rate for the public state-owned television company (SVT) but for commercial television broadcasting companies, it charged a rate based upon the revenue of the company and the amount of music broadcast.

In proceedings brought by the commercial television companies that such practices were contrary to Art.82, the Swedish court referred a number of questions to the ECJ about the validity of STIM's fees with Art.82. In a well-pitched judgment, the ECJ referred back to the general principles of Art.82 and the "discotheque" cases of Basset and Tournier where the ECJ had approved royalties charged by French collecting societies based upon the revenue of the discotheques.

The ECJ held that it was appropriate for STIM to charge according to the revenue of the companies provided that (i) the charge was proportionate to the amount of music works protected by copyright actually broadcast or likely to be broadcast (ii) there was not another method which permitted more accurately the audience to be identified and the level of use of the works which did not result in a disproportionate increase in the administrative and supervision costs.

The ECJ also held that the difference of approach of STIM to charging public and commercial television companies might amount to a discriminatory practice under ARt.82(c) (applying dissimilar conditions to equivalent transactions) and such was a matter for the national court. However, it said that the national court must consider

·     the fact that SVT does not have advertising revenue or subscription charge revenue.

·     whether SVT competed with Kanal 5

·     whether there was objective justification for such practices, in particular whether such could arise from the task and method of financing of public  service undertakings

Refusal to supply

Para 11-102 In joined Cases C-468/06 TO C-478/06, the Greek Competition Commission referred the Syfait case to the Greek Court (Efetio Athinon). The ECJ, having held that the Greek competition commission had no jurisdiction, the Greek court referred the same issues to the ECJ who thus had an opportunity to determine the issues raised in Syfait. The ECJ reiterated the basic principle that a dominant undertaking who refuses without objective justification to meet orders from an existing customer is an abuse of a dominant position. However, the ECJ clearly recognised the force of GSK's arguments that competition in the whole Community market was distorted and thus, its refusal to meet extraordinary orders was justified because if it failed to do so, it would have a very detrimental effect on research and development. Thus, it held that a dominant undertaking was entitled to refuse orders where such orders were out of the ordinary if such was necessary to protect its own commercial interests. It held that such could be the case where orders from wholesalers were out of all proportion to those previously sold by the same wholesalers to meet the needs of the market in that Member State. It is clear from this case that the ECJ felt torn by the need to uphold the sanctity of the single internal market which thrives on parallel imports and the need to ensure that pharmaceutical companies did not have to suffer from price regimes imposed in certain Member States which almost punitive. To effectively export those price regimes to the entirety of the European Community risked killing the golden gooses (the R&D pharma companies) that lay the eggs (the pharmaceuticals) and thus jeopardising inter-brand competition.