Abuse of a dominant market position

A company with a dominant market position has such a significant influence over the market that it can act to a large extent independently of its competitors,
suppliers, customers, or end users. This may lead to unfair competition and harm to other companies or consumers. For this reason, the abuse of a
dominant position is prohibited under the Competition Ordinance. Holding a dominant position on itself is not prohibited.

 

When is there a dominant market position?

A company has a dominant market position if it holds such a strong position in a particular market that it can behave independently of other
market players. AFTA assesses this in two steps:

 

1. Defining the relevant market

The first step is to determine which market is involved. In general, a market refers to the supply and demand for products or services, where buyers and sellers come together to trade. In competition law, however, this concept is defined more narrowly. In that context, we refer to the relevant market. Defining the relevant market is important. This helps to determine which companies truly compete with one another and whether there is excessive market power or agreements that limit competition.

The relevant market has two components:

• The relevant product market: This includes all products or services that serve approximately the same purpose for customers and can be substituted for one another.
• The relevant geographic market: This is the area in which competition takes place. The relevant market must at least partly be located in Aruba; otherwise, the Competition Ordinance does not apply.
  For example: the market for car insurance in Aruba or the market for bakery products in Oranjestad.

 

2. Assessing the dominant market position

Once the relevant market has been defined, the next step is to assess whether the company(s) concerned hold an economic dominant market position within that market. In this assessment, the market structure is particularly important.

A high market share (at least 60% or more) may indicate that a company holds a dominant market position. However, this may also exist with a lower market share, depending on other factors. These include the number of competing suppliers, how difficult it is for new businesses to enter the market, and the competitive relationships between the market players.

 

What is abuse of a dominant market position?

Holding a dominant market position is allowed. However, abusing that position is prohibited.

The Competition Ordinance lists the following examples of abuse:

• Unfair Prices or Conditions
  For example: extremely high selling prices or conditions that are unfair to the customers.
• Limiting Production or Innovation
  For example: deliberately producing fewer products in order to keep prices high.
• Unequal Treatment of Customers
  For example: charging different prices for the same product to different customers.
• Mandatory Bundling of Products or Services
  For example: requiring customers to purchase an additional product or service that unrelated to what they actually need.

 

Example Situations of Abuse:

• A company with a dominant market position reuses to supply a customer, without having a valid business reason.
• Two customers order the same product in the same quantity, but one receives a substantial discount and the other does not, without a clear explanation.
• A company with substantial dominant market power temporarily sets extremely low prices in order to push competitors out of the market.

 

What can the AFTA do in case of a dominant market position?

AFTA can intervene where there is abuse of a dominant market position. Even if no abuse has (yet) occurred, AFTA may impose preventive measures
on company that hold a dominant market position.

 

Examples of preventive obligations:

• Sharing certain information with specific parties.
• Treating customers equally in comparable situations.
• Offering products separately (unbundling), so that customers are not required to purchase an additional product.
• Keeping separate accounts for different products or services.
• Accepting reasonable requests for supply from customers.
• Other obligations may be imposed by national decree.

These obligations apply for a maximum period of three years. They may be amended or extended.

In urgent and exceptional cases, AFTA may also impose provisional obligations for a maximum period of six months (which may be extended once).

 

Exception for public services

In some cases, companies are entrusted with public service obligations on behalf of the government, aimed at the general economic interest. If the application of competition rules would prevent the proper execution of such public service obligations, AFTA may, upon request, decide that the prohibition on abuse of a dominant market position does not temporarily apply
to these public service obligations. This is regulated in Article 2.7, paragraph 5 of the Competition Ordinance.

 

Strict conditions:

This exception applies only if all of the following conditions are met:

• The company carries out an economic activity
  This concerns commercial activities, not purely social services or powers that may only be exercised by the government.
• The company has been entrusted by the government with a public service obligation
  For example: managing a service of general economic interest, as described in Article 1.1 of the Competition Ordinance.
• The conduct is necessary to properly perform the public task
  The company must be able to demonstrate that the conduct is essential for fulfilling the task.
• The conduct is proportionate
  This means that the conduct must not go beyond what is strictly necessary and must not eliminate competition to a large extent.

Companies must apply to AFTA themselves to obtain this exception.
AFTA will assess whether all conditions are met before issuing a decision.

• Apply for an exemption from the prohibition on abuse.

 

Do you suspect abuse?

Then contact AFTA. We carefully assess all signals and reports.

 

Sources:

• Article 2.7 CO (abuse of a dominant market position)
• Article 2.8 CO (preventive measures)
• Article 2.9 CO (urgent preventive measures)
• Article 1.1 CO (definitions)