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(pubblicato il 19.1.2011)

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I. INTRODUCTION

Article 82 EC provides that “any abuse by one or more undertakings in a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States”. Article 82 (b) EC specify, under the non-exhaustive exemplification provided by the said provision, that an abuse could also constitute, in particular, in “limiting production, markets or technical development to prejudice of consumers”. The Court of Justice had found “a course of conduct adopted by a dominant undertaking with a view to excluding a competitor from the market by means other than legitimate competition on the merits may constitute an infringement of Article 82 EC” [1]. According to the European Courts, indeed, the special responsibility of dominant companies requires them to be prevented from acting in a way “to impair genuine undistorted competition on the common market”[2]. On that basis, in Commercial Solvents [3] the Court affirmed that the fact that an undertaking, which has a dominant position in a particular market, refuses to supply its customer, it abuses dominant position by eliminating all competition on the part of this customer. After the explicit admission of the Court of Justice that a refusal to supply could be regarded as an abuse of dominant position prohibited by Article 82 EC, in many occasion occasions the Commission used this principle to impose a duty to deal with on dominant companies and, in particular, to the ex monopolists.

Nevertheless, although the main idea according to which the special responsibility of a dominant company requires it not to act in a way to distort competition it is quite clear in principle, what it seems to be still not clarified is how much competition a dominant company can legitimately exercise. None of the EC Treaty provisions require a dominant company not to compete actively on the market and Article 82 EC does not provide dominant company to assist competitor or to promote competition. Competing on merits alone does not infringe Article 82 and even a firm in a dominant position is entitled “to defend that position by competing with rivals on the market. This also applies with respect to conducts that is likely to exert vigorous competitive pressure on other, probably smaller competitors unable to respond to such competition”[4].

In the recent years, however, the application of Article 82 by the European Commission and National Competition Authorities in order to impose mandatory dealings on dominant companies and ex monopolists has been strongly used in the open markets as well as in sector-regulated industries. Recently, on 11 May 2007 the European Commission has decided to open antitrust proceedings against the Italian energy company ENI to asses if the latter had abused its dominant position on the Italian gas market[5].

The Commission proceedings focus on behaviour by the ENI Group, which it suspects may have been aimed at exclusion of potential competitors from Italian gas supply markets (i.e. so-called market foreclosure). In particular, in light of the information published by the Commission, the alleged infringement takes the form of capacity hoarding and strategic underinvestment in the transmission system leading to the foreclosure of competitors and harm for competition and customers in one or more supply markets in Italy[6].

It should be noted that the conduct contested to ENI by the Commission has great similarity with the one recently contested to the same company by the Italian competition authority (the Autorità Garante della Concorrenza e del Mercato, hereinafter the “AGCM”), which fined ENI (of 290 million euros) for abuse its dominant position. In particular, in its decision adopted on 15 February 2006[7] (hereinafter, the “Decision”) the AGCM had found that ENI had breached Article 82 of the EC Treaty by having induced its wholly-owned subsidiary Trans-Tunisian Pipeline Company Ltd (hereinafter, “TTPC”) to safeguard ENI’s dominant position in the Italian wholesale gas market.

It must preliminarily noted that, while the AGCM focus its assessment on the way ENI used its influence over the controlled company (affirming that ENI should not engage in practices to influence its subsidiary to the detriment of its competitors), and the Commission explicitly contest ENI a strategic underinvestment and capacity hoarding (without any reference to the functional independence of the subsidiaries), both the aforementioned arguments have a clear relation with the duty to deal with competitors under Article 82 EC and the essential facility doctrine.

In the following part of this paper, after having briefly described the abuse contested to ENI by the AGCM (chapter II) and having illustrated the rationale of the duty to deal with competitors and the application of the essential facility doctrine to the physical property under Article 82 EC (chapter III), some comments will be given with regard to the obligation imposed to dominant companies and to the analysis provided by the AGCM (chapters IV and V)[8].

1. background of the case

In its decision adopted on 15 February 2006[9] the AGCM had found that ENI had breached Article 82 of the EC Treaty by having induced its wholly-owned subsidiary Trans-Tunisian Pipeline Company to safeguard ENI’s dominant position in the Italian wholesale gas market. On 30 March 2007 the Italian Administrative Tribunal (hereinafter, the “TAR Lazio”) annulled the fine imposed on ENI. It should be noted that this was not the first time ENI was found guilty of an abuse of dominant position in the gas market in Italy.

In November 2002, the AGCM found that ENI had abused its dominant position on the gas sales market through its actions taken in response to an Italian law requiring ENI to reduce the amount of gas it sold in Italy to 75% of national consumption. More specifically, the AGCM found that ENI had sold gas abroad to Italian operators from its own ‘take or pay’ contracts in sufficient volumes to ensure that until 2007 it would be able to keep the whole of the residual share that was reserved for third operators under an Italian law (the relevant legal provision required ENI to reduce the amount of gas sold in Italy to 75% of national consumption). According to the AGCM, ENI had also used its subsidiary (formerly Snam) to sell its own gas abroad in priority to that of independent operators.

The AGCM fined ENI a token amount of 1,000 euros and gave ENI 90 days to supply detailed documentation on the measures ENI intended to adopt to remedy the situation. The measures finally proposed in 2003 included increasing the capacity of the TAG oil pipelines and of the TTPC gas pipeline for the benefit of third parties. ENI subsequently declared that this increase had become financially untenable and submitted new measures in February 2004.

Considering these new measures to be inadequate to remedy the original breach, the AGCM opened an investigation into ENI in March 2004. The AGCM then agreed to extend the deadline for closing this investigation as a result of ENI’s commitment to increase volumes of gas for sale, to allocate these gas volumes under a quota-based mechanism to a number of different operators and to set a price for the gas as close as possible to the international natural gas market price charged to independent operators.
Although these measures were found adequate, they came too late and in October 2004, the AGCM fined ENI 4.5 million euros for delays in presenting and implementing the measures designed to remove the abusive conduct identified in 2002. On 22 November 2006, the Italian Supreme Court upheld the AGCM’s decision ordering ENI to pay 4.5 million euros for abuse of dominance.

Before turning to the description of the case, it must be noted that, in the scenario delineated above, on 19 June 2004, the AGCM and the Autorità per l’Energia Elettrica e il Gas (hereinafter, the ‘AEEG’) published a joint sector inquiry on the progress of liberalization of the natural gas market in Italy. This inquiry concluded that the liberalization of the Italian market for natural gas had not achieved the expected results, mainly due to the dominant position of the ENI group in the markets for the wholesale supply, the international and national transport, the storage and the retail sales (at national level) of gas. In order to develop a healthy competitive environment, it would be essential to promote entry of new operators independent from ENI. “More specifically, with take-or-pay contracts the rule, what the market needs in order to prevent the vending market from simply being parcelled out among operators is for the supply to be flexible enough with respect to fluctuations in demand, thanks to an adequate excess of transport capacity, and for this to trigger competition for market shares”[10]. One of the recommendations suggested by the two authorities was therefore that ENI should make new investments to increase the import capacity of existing facilities.

In line with the evidence carried out by the AGCM and AEEG in their joint assessment, the Commission, in its report on the Energy Sector enquiry, affirmed that “for gas, available capacity on cross-border import pipelines is limited. New entrants are unable to secure transit capacity on key routes and entry capacity into new markets. Very often, the primary capacity on transit pipelines is controlled by incumbents based on preliberalisation legacy contracts which are not subjected to normal third party access rules. Incumbents have little incentive to expand capacity to serve the needs of new entrants. This is reinforced by ineffective congestion management mechanisms, which make it difficult to secure even small volumes of short-term, interruptible capacity on the secondary market. In many cases, new entrants have not even been able to obtain a sufficient amount of capacity when there have been expansions of transit pipeline capacity”[11].

2. facts of the original agcm decision in ttpc case

TTPC was the holder of exclusive rights to use the gas pipeline running through Tunisia for the purposes of importing gas from Algeria to Italy.  Between 2002 and 2003, TTPC decided to increase the transport capacity of the gas pipeline and accordingly assigned the additional capacity pro rata on the basis of requests received, entering into ‘ship or pay’ contracts with a number of shippers.  As the pipeline was at the time fully utilised, this increase in capacity represented the only opportunity for independent operators/shippers to enter the market.

The ‘ship or pay’ contracts were subject to the fulfilment of certain conditions.  TTPC first delayed the date for satisfaction of these conditions and then refused to finalise the ‘ship or pay’ contracts, claiming that the conditions had not been met.  The AGCM therefore decided to investigate whether the decision to cancel the planned increase in capacity constituted an abuse of a dominant position contrary to Article 82 of the Treaty. In particular, the AGCM focused on the fact that ENI had stopped work on the upgrading of the gas pipeline, for which ‘ship or pay’ contracts with certain shippers had already been signed. 

The evidence acquired by the AGCM revealed that this was the result of a decision by the controlling company, ENI.  The AGCM alleged further that TTPC’s actions (following ENI’s decision) could only be explained by ENI’s fear that an excess of supply on the Italian market would result in increased competition from the above shippers and by its resulting intention to protect its dominant position on the national wholesale gas supply market.

The AGCM held that, by virtue of its dominant position, ENI should not engage in practices to influence its subsidiary, TTPC, the holder of exclusive rights to use the pipeline, to the detriment of its competitors.  ENI did not have an obligation to upgrade the Tunisian gas pipeline, but had an obligation to refrain from engaging in any practice which would have induced TTPC to act in a way that was contrary to the commitments it had previously made, for the sole purpose of safeguarding ENI’s dominant position in the Italian wholesale gas market[12].

According to the AGCM, if TTPC had been acting as an independent operator in the international gas transport sector, it would have had a more co-operative approach with respect to its contracts with the shippers and would have allowed deadline postponements in relation to the satisfaction of the conditions.  Indeed, it would have been in TTPC’s commercial interest, if it had been acting as an independent operator, to continue with the upgrading of the pipeline, especially as the contracts with the shippers were already in existence and the additional capacity had already been allocated[13].

ENI was fined 290 million euros and was ordered to grant third parties access (through TTPC) to the additional capacity increase that had been announced in 2002/2003[14].  In addition, ENI had to guarantee that a first tranche[15] of this increase in capacity would be available by 1 April 2008 and a second tranche[16] by no later than 1 October 2008.  In setting the fine, the AGCM took into account the mitigating circumstance that ENI started the procedure for allocating some additional capacity during the proceedings.  ENI will also have to produce certain reports relating to the allocation procedure to show that this procedure is fair and non-discriminatory.

3. the tar lazio’s decision

ENI appealed the Decision on several grounds. In particular, ENI contended that the TTPC’s pipeline was not an essential facility and in any case, even if it were, there would have been no mandatory obligation to increase capacity but only a duty to grant access to the pipeline on an equal and non-discriminatory basis, as originally planned. Furthermore, according to ENI, in the energy sector there was no obligation to guarantee the functional autonomy of the controlled companies, and therefore its conduct was perfectly lawful.

In its decision published on 30 March 2007 the TAR Lazio upheld the AGCM’s finding in relation to the abuse of a dominant position, but annulled the fine. The TAR found that, regardless at whether the TTPC pipeline was an essential facility or not, ENI abused its dominant position by interfering with the decision-making process of its subsidiary in order to preserve its strong position on the downstream market. According to the Tribunal, under Article 82 EC, the special responsibility of companies holding a dominant position required ENI not to act in such a way that, though fully lawful considered by itself, had the sole purpose of reducing the degree of competition on the downstream market.

With regard to the fine, the Tribunal held that the AGCM did not sufficiently prove that ENI’s abuse could be considered a very serious infringement according to the definition offered by the Commission Guidelines on the method of setting fines[17]. According to the Guidelines, only for very serious infringements can fines higher than 20 million euros – as in this case – be imposed. These infringements are generally “horizontal restrictions such as price cartels and market-sharing quotas, or other practices which jeopardize the proper functioning of the single market, such as the partitioning of national markets and clear-cut abuse of a dominant position by undertakings holding a virtual monopoly” (emphasis added)[18].

According to the TAR, the AGCM’s finding of abuse by ENI of a dominant position in the relevant market was based on its having particularly strong market power deriving from being an ex public monopolist. However, the AGCM failed to demonstrate that the abuse was incontestable, as required by the Commission’s Guidelines. The Court therefore found that, with regard to the calculation of the fine, the Decision was vitiated by lack of motivation and consequently annulled the sanction imposed, though leaving the AGCM free to re-impose the fine against ENI in the future.

As it will be further discussed below both the AGCM decision and the TAR Lazio judgment lay themselves open to criticism. In particular, what it must be better clarified is if the TTPC pipeline had to be considered as an essential facility, concluding that there was an obligation of ENI to increase its capacity in order to allow new operators on the downstream market or, differently, that the violation of Article 82 EC results only by the way of exercising its decisive influence over the TTPC, insofar as it induced TTPC not to implement contracts it had signed with shippers. The lack of clarity is confirmed by the fact that although the AGCM clearly affirms in the Decision that there was no obligation for ENI to increase capacity, the Commission, in the similar proceeding recently started, explicitly affirms that the alleged infringement takes the form of strategic underinvestment.

In the following part, therefore, a brief discussion on the scope of the duty to deal will be provided, with particular regard to the cases in which mandatory access to physical facility should be granted.

1. basic scope of the duty to deal under article 82 ec

According to Article 82 EC undertakings holding a dominant position may be required, in limited situations, to deal with third parties, competitors or customers. This imposition has been always highly criticized since it constitutes a clear interference with the right to freely choose the third parties with whom it wishes to have dealings.

Freedom of contract is, indeed, a fundamental principle recognized by the laws of Member States and EC competition law. As Advocate General Jacobs stated in Bronner, “the right to choose one’s trading partners and freely to dispose of one’s property” are “generally recognized principles in the laws of the Member States, in some cases with constitutional status.” 13 Any contrary rule would effectively require a dominant firm to sell to any and all available buyers. This would be an onerous and unjustified interference with a company’s freedom to organize its commercial activities in the manner it prefers and it would certainly not be considered competition on merits.14

But a part from the unjustified restriction of freedom of contract, another problem is related to the fact that a duty to deal may also affect the incentives of company to develop new tangible and intangible assets that increase the consumer welfare. It is clear to be understood that if innovators knew that valuable property would be subject to compulsory sharing they may decide not to innovate, maybe deciding to share competitors’ discoveries. As a general remark, it should also be considered that competition based on several undertakings using the same inputs may direct to a reduced product choice and that, conversely, it is generally pro-competitive to consent to companies to keep for their own exclusive use assets which they have acquired or constructed[19].

Notwithstanding the arguments above, in particular cases when serious damage to competition is likely to occur, the undertaking contractual freedom can be squeezed. A clear example, even if is not so common in practice, is where a facility cannot be duplicated due to physical constraints (e.g., a port or tunnel). A more common example concerns inputs that have traditionally been regarded as “natural monopolies” – a facility for which total production costs would rise if two or more firms produced – such as utility networks (e.g., telecommunications, gas, electricity, and water)[20]. Regardless the different cases in which a compulsory access can be provided, the basic rationale for sharing is always that the facility cannot be duplicated for a variety of reasons (physical, legal, or economic) and the refusal to share it would therefore substantially eliminate competition[21].

The obligation to supply for dominant company on the market imposed by Article 82 EC has a close link with the “essential facilities” doctrine elaborated by the United Sates Courts[22]. According to this doctrine, a single firm, or group of firms, controlling an input at an upstream level of production that is essential for competitors on a downstream market may be obliged to deal with third parties where a refusal to do so would eliminate all competition on the relevant downstream market.

Therefore, even if in the last few years the Community Courts have indeed referred to that principle when assessing the refusal to deal cases under Article 82 EC[23], it should be remembered that the “essential facility principle” does not represent, however, a different rule under Article 82 EC. As it has been authoritatively noted, “there is no conceptual distinction between the commercial Solvents doctrine and the essential facility doctrine”, and the latter is simply another way of classifying cases where the essential input is an infrastructure or a service[24].

The duty to provide access to a facility occurs where the effect of the refusal to supply on competition is objectively serious enough[25]. As it has been noticed, a duty to deal rises if without access “there is, in practice, an insuperable barrier to entry for competitors of the dominant company, or if without access competitors would be subject to a serious, permanent and inescapable competitive handicap which would make their activities uneconomic. Hence, access to a facility is ‘essential’ when refusal to supply would exclude all or most competitors from the market”[26] (emphasis added).

However, it should be noticed that even if competition rules impose, in particular circumstances, mandatory dealings on dominant companies, the duty to deal under Article 82 EC is not a duty merely to assist competitors. Instead, the duty can only be invoked where the refusal to deal would cause some serious harm to competition in the relevant downstream market for the final product in which the input is an essential component. As Advocate General Jacobs stated in Bronner, it is important to remember that “the primary purpose of Article 8[2] is to prevent distortion of competition – and in particular to safeguard the interests of consumers – rather than to protect the position of particular competitors.”[27]

For this reason, the reduction of competition and more generally of the consumer welfare play a big role in order to define the extent of the duty to deal. As the Advocate General Jacobs noticed there must therefore be “some exceptional harm to competition,” and a clear benefit to competition that outweighs the harm to the property owner, for a duty to deal to arise[28]. In this regard, it should be noticed that a duty to deal is not always pro-competitive insofar as it could discourage competition instead of increasing it. It is indeed clear that a duty to deal, squeezing the very nature of the property rights, reduces, to some extent, the incentives of the owner and, in general, of all the companies active on the market, to make valuable investments in future. This disincentive to invest and to innovate, in the long term, could prejudice consumer welfare as much as do, in the short term, the refusal to supply a competitor or a customer.

In the European Union, the clear reference to the essential facility was first made in the interim decision in Sea Containers-Stena Sealink, where the Commission hold that “[a]n undertaking which occupies a dominant position in the provision of an essential facility and itself uses that facility (i.e. a facility or infrastructure, without access to which competitors cannot provide services to their customers), and which refuses other companies access to that facility without objective justification or grants access to competitors only on terms less favourable than those which it gives its own services, infringes Article 8[2] if the other conditions of that Article are met. An undertaking in a dominant position may not discriminate in favour of its own activities in a related market. The owner of an essential facility which uses its power in one market in order to protect or strengthen its position in another related market, in particular, by refusing to grant access to a competitor, or by granting access on less favourable terms than those of its own services, and thus imposing a competitive disadvantage on its competitor, infringes Article 82”[29]

Even if the earliest essential facility cases involved infrastructures (like bridges, ports, airports) for which there were no valuable alternative, the doctrine became more and more actual with the implementation within the EU of the liberalization of public utilities. In many of these markets (like telecommunications[30] or energy sectors[31]), it is indeed indispensable for the downstream competitors to have access to the facility in order to compete on the market.

However, it is incontestable that where the owner of an essential facility is also active on the downstream market, that operator could be inducted to deny access to competitors, or at least to provide it at conditions more onerous, in order to eliminate the competition in downstream market and therefore to start practicing monopolist prices on the downstream market. Although the owner of the facility is allowed to earn profits from the market on which the facility is sold – otherwise there would be no incentive to create it – it is clear that it can not be used to expand its monopoly on the vertically related market[32]. It is indeed clear that in these cases, such operator would not been competing “on the merits” (that is, by offering better goods or lower prices) in the downstream market with prejudice of competition and, lastly, of consumers.

2. the relevant case law

The obligation to grant access to an essential facility was first imposed in London European/Sabena[33] where the Commission found abusive Sbena’s conduct to refuse access to London European, another airline company, to the Saphir computer reservation system, managed by Sabena. In that particular case, London European contested that the access to Saphir reservation system was denied because its lower fare and since London European had given the management of its aircraft to other companies (other than Sabena). The Commission took the view that this conduct should be regarded as abusive because it would have caused the elimination of an important competitor on the relevant route.

Subsequently, a number of cases arose concerning essential infrastructure and services in the airline sector. A similar conclusion to the one achieved in London Europe/Sabena was reached by the Commission in British Midland/Aer Lingus[34]. Aer Lingus had been working with British Midland on the basis of a multilateral agreement on interlining services. Nevertheless, after British Midland started to compete with Aer Lingus on the route London-Dublin, the latter did not accept anymore the interchangeability with British Midland’s ticket on the competing route, but continued to maintain valid the interlining agreement with British Airways, which was the other competitor on the route. According to the Commission the refusal of Aer Lingus to interline with British Midland constituted an abuse. In particular, the Commission held that “[B]oth a refusal to grant new interline facilities and the withdrawal of existing interline facilities may, depending on the circumstances, hinder the maintenance or development of competition. Whether a duty to interline arises depends on the effects on competition of the refusal to interline; it would exist in particular when the refusal or withdrawal of interline facilities by a dominant airline is objectively likely to have a significant impact on the other airline’s ability to start a new service or sustain an existing service on account of its effects on the other airline’s costs and revenue in respect of the service in question, and when the dominant airline cannot give any objective commercial reason for its refusal (such as concerns about creditworthiness) other than its wish to avoid helping this particular competitor. It is unlikely that there is such justification when the dominant airline singles out an airline with which it previously interlined, after that airline starts competing on an important route, but continues to interline with other competitors.”

However, as it has been noted earlier, the first case where the Commission explicitly referred to the term “essential facilities” was the Commission’s interim decision in Sea Containers[35]. Sea Containers wanted to set up a new fast ferry service to the Holyhead-Dun Laoghaire route. In order to do this, it had to have access on port facilities provided by Sealink, which was also active in the market for the supply of passenger ferry services. According to the Commission, port services available at the port of Holyhead were an essential facility for the provision of such services insofar as facilities available at other ports in the same area could not be considered as effective substitutes. In particular the Commission found that Sealink, differently from how happened with regard of its own fast ferry service, systematically delayed access to Sea Containers to port’s facilities, in so doing discriminating against Sea Containers[36]. The Commission followed this precedent in a series of subsequent decisions regarding ports and related infrastructure in other Member States60.

Notwithstanding several Commission decisions on that topic, until the preliminary reference from an Austrian court in the case Bronner/Mediaprint, the Court of Justice had never expressed its view on the condition should be met in order to impose an obligation to grant access to a physical infrastructure. In particular, the Court of Justice was asked to determine in which circumstances Mediaprint, a dominant company active on the market of daily newspapers, would engage in abusive conduct for not having provided access to its home-delivery network. Mediaprint, indeed, provided to independent operators several services including, among others, the delivery of its newspaper. However, the home delivery service of the said newspaper was sold together with other services (printing, sale in shops) each of them was not sold independently.

In its ruling, the Court of Justice suggested to the Austrian court that there was not possible to impose a duty on Mediaprint to provide access to its home-delivery service to Bronner. In particular the Court, confirming the importance that should be reserved to the indispensability of the product or service requested, affirmed that in order to plead the existence of an abuse within the meaning of Article 82 it would be necessary “not only that the refusal of the service comprised in home delivery be likely to eliminate all competition in the daily newspaper market on the part of the person requesting the service and that such refusal be incapable of being objectively justified, but also that the service in itself be indispensable to carrying on that person’s business, inasmuch as there is no actual or potential substitute in existence for that home-delivery scheme”[37].

In carrying on this analysis, the court affirmed that in order to assess the “indispensability” of the service or product required it should be looked at whether there are “technical, legal or even economic obstacles” to making an alternative facility[38]. Furthermore, with regard to the possibility for competitors to build up their own facilities, the Court also suggested that it should used an objective standard, therefore looking at whether a company operating on the same scale of the dominant firm could develop an alternative facility and not merely whether the requesting party could do it. Taken together, the Court’s judgment and the opinion of the Advocate General advocate a less interventionist approach to refusals to deal under Article 82 EC, with greater recognition of the underlying policy and welfare considerations[39].

IV. THE LEGAL CONDITIONS REQUIRED FOR THE APPLICATION OF THE ESSENTIAL FACILITY DOCTRINE

After having clarified the rationale of the imposition of a duty to supply under Article 82 EC and the relevant case law, in the following part, some comments will be made on whether, if the case were assessed on the basis of the essential facility doctrine, an obligation to upgrade its pipeline (doing so increasing its capacity) in order to deal with shippers wanted to enter the market could be found on ENI.

According to the relevant case law and the jurisprudence of the European Courts, in order for a refusal to supply to be in breach of Article 82 EC, four conditions it must be cumulatively satisfied[40]. In particular: (i) the input in question must be essential for competition on the second market, insofar as it cannot be duplicated by other competitors; (ii) there must be two markets, an upstream market where a company is dominant and a downstream market where the input of the former is indispensable for competing; (iii) the refusal to deal would eliminate competition on the second market; (iv) no objective considerations can justify the refusal.

1. the indispensability of the input

The first condition should be met for a refusal to be abusive is that the input requested must be indispensable for the activity in question[41]. According to the definition provided by the Commission, a facility is essential if without access there is, in practice, an insuperable barrier to entry for competitors of the dominant company, or if without access competitors would be subject to a serious, permanent and inescapable competitive handicap which would make their activities uneconomic[42].The Court of Justice in Bronner clearified that the existence of an insuperable barrier must be understood in an abstract and absolute way. In this regard, the Court noticed that, in particular, it must be assessed if “there are products or services which constitute alternative solutions, even if they are less advantageous” [43] for competitors. As it has been confirmed by the Commission in the Notice on the Application of the Competition Rules to Access Agreements in The Telecommunications Sector, “it will not be sufficient that the position of the company requesting access would be more advantageous if access were granted – but refusal of access must lead to the proposed activities being made either impossible or seriously and unavoidably uneconomic”[44].

Since, according to the Court the crucial aspect is that there must be no actual or potential “viable alternatives”[45] to the products of the dominant firm, it need to be assessed if an efficient competitor (or a group of them) could be considered economically profitable to create their own facility. As it has been punctually noted, the decision to duplicate the facility will be obviously related to the entrant’s expectations about earns it could gain after the entry[46]. This aspect has been clarified by the Court that, answering the argument arose by Bronner according to which it could not replicate the home delivery system due to its limited distribution, clarified that in order for an access to be capable of being regarded as indispensable “it would be necessary at the very least to establish…that it is not economically viable to create a second home-delivery scheme for the distribution of daily newspapers with a circulation comparable to that of the daily newspapers distributed by the existing scheme”[47].

This view was confirmed in European Night Services where the Court of first Instance hold that the access to a railway infrastructure granted by a parent company of a joint venture to the joint venture should not be regarded as an essential facility[48]. It should be noted that even if the indispensability of a product is more likely to occur in market characterized by few competition, the presence of a concentrate market it is not, by itself, sufficient to prove the essentiality of certain products. At the very last, what is crucial is if it is possible for an alternative facility to be created and not if competitors will do it insofar as the test of an essential facility is whether competitors are objectively able to develop and offer their own products or services[49].

In light of the above, it should be preliminarily mentioned that it is not possible to exclude that the TTPC pipeline represents an essential facility. In the decision, however, the AGCM focus its attention only on the possibility that shippers in question had to enter the market and not on the possibility that a company with the same scale of the dominant one had to replicate the facility[50]. In the decision, indeed, the AGCM affirms that due to the fact that the existing capacity was fully used by other operators an increase of capacity would have represented, for the requiring shippers, the only opportunity for importing gas from Algeria. This because, according the AGCM, for the requesting party the decision to start an importing activity of gas from Algeria was not interchangeable with the possibility of importing gas from other countries (i.e. North Europe, Russia, Libya).

As it has been recently confirmed also by the Commission in the Discussion Paper on Article 82 EC a facility is indispensable “only when duplication of the existing facility is impossible or extremely difficult, either because it is physically or legally impossible to duplicate, or because a second facility is not economically viable in the sense it would not generate enough revenues to cover its costs”[51]. The indispensability concept must therefore be assessed in an objective manner, and not with regard to the particular competitors that require access. Indeed, if the viability to replicate the facility was assed using as a benchmark only the scale of the third party seeking access, all the small and inefficient competitors would always be in the position to require and obtain access to a facility owned by a dominant company, since in the vast majority of the cases they will never be in a position to develop their own facility. In the long term, such approach will certainly produce more detriment of competition than the benefits related to the entry in the market of small and maybe inefficient competitors.

It should be never forgot that, as Advocate General Jacobs clearly affirmed in Bronner, “in the long term it is generally pro-competitive and in the interest of consumers to allow a company to retain for its own use facilities which it has developed for the purpose of its business. For example, if access to a production, purchasing or distribution facility were allowed too easily there would be no incentive for a competitor to develop competing facilities. Thus while competition was increased in the short term it would be reduced in the long term. Moreover, the incentive for a dominant undertaking to invest in efficient facilities would be reduced if its competitors were, upon request, able to share the benefits. Thus the mere fact that by retaining a facility for its own use a dominant undertaking retains an advantage over a competitor cannot justify requiring access to it.”[52].

Even though the fact that the facility was not replicable individually by each shipper does not exclude by itself that neither another large-sized company (with a scale comparable to ENI) could have do it, any evaluation on this possibility is completely missing in the AGCM decision. It is indeed not possible to exclude that a bigger firm or a group of them would have considered profitable to create their own pipeline. In the latter scenario, obviously, the requirement of the indispensability of the input would be not satisfied.

2. the two-markets requirement

Since the essential facility doctrine was first suggested in United States, it was clear that it was related to vertical integration and that the existence of two different markets was required. In particular, it must be present an upstream market for the input in question and a downstream market in which that input is essential[53]. As it has been well illustrated under the US essential facility doctrine, the main idea below that requirement seems to be related to the principle that if there were only one market, it would be more difficult to impose an obligation to share with its own competitors a legitimately-acquired property on a facility. In reality, notwithstanding the mere fact that a dominant company retains a facility for its own use it is not unlawful by itself, differently, when a company intends to exploit its monopoly power on a market where it holds an infrastructure to prevent competition in another market where the said infrastructure is essential for companies active on that market, there will no more competition on merits. In this regard, it has been noticed that competition law tolerates a monopoly in one market, but does not confer the possibility to a firm to use its control over an input that is essential for competition to also create a monopoly in the second market. In other words, an input that allows a firm to enjoy a monopoly in one market is considered a legitimate competitive advantage, whereas using control over that input to monopolize other markets is not competition on the merits[54].

Although a separation between the two markets has always been present in the cases where the Commission[55] found an obligation to deal on a dominant company under Article 82 EC, in the recent years a dispute has been arisen with regard to the definition of the upstream and downstream markets. In this regard, some commentators suggest that the doctrine would require the existence of two different markets while others believe that a less formalistic approach should be followed. In particular, according the more formalistic view, the doctrine requires a fundamental distinction between, on the one hand, the market of the facility itself where the owner of the essential facility is, by definition, dominant and, on the other hand, an ancillary market for which access to the facility is essential[56]. Conversely, the supporters of a more realist approach, suggests that a less strict criterion should be followed. In other words, the problem is to which extent the two level of production should be properly considered, according to the general meaning attributed under the other antitrust provisions, as two different product markets.

For the purpose of this paper, however, it appears sufficient to mention that notwithstanding for long time the more formalistic approach was preferred, the Court of Justice in IMS embrace the view that for the two markets requirement to be met it is enough to identify a potential or hypothetical upstream market, and that what is determinative is “that two different stages of production may be identified and that they are interconnected, the upstream product is indispensable in as much as for supply of the downstream product” [57] (emphasis added).

In light of the above, and with regard to the case at issue, it must be said that the market of international transport of gas and the Italian wholesale gas market could be certainly considered two interconnected different stages of production. On that basis, and due to the dominant position of the ENI group in the markets for the wholesale supply, the international and national transport, the storage and the retail sales (at national level) of gas, the fulfilment of the two-market requirement, as above defined, seems to be unquestionable.

3. the elimination of competition

In order for a mandatory dealing to be imposed is necessary that the refusal to access to the facility hold by a company will cause an “elimination or substantial reduction of competition to the detriment of consumers in both the short and the long term” [58]. However it is clear in its principle, the requirement of the elimination of competition has always been controversial. In particular, the questions to be clarified are (i) the level of foreclosure required for a duty to deal to arise, and (ii) which competitor should be used as benchmark for this purpose.

With regard to the degree of reduction of competition (point sub (i)) it should be noted that the said ambiguity is based on the vagueness of the decisional practice of the Court of Justice and the Commission. Indeed, while in Bronner the Court affirmed that a refusal to supply has to be considered abusive under Article 82 EC when it “exclude all competition in the secondary market” [59], subsequently, the Commission, in Microsoft, affirmed that it should be looked at whether there is a “risk of elimination of competition”, but not necessary of all competition. In this regard, it must be considered that if the test were based on the elimination of all competition there would be easy for a dominant firm to overcome the risk of a duty to deal for example by simply deciding to supply only one small competitor, in so arguing that there is still some competition.

That question has great implications for the understanding of the AGCM decision because if the condition at issue, in order the refusal to be abusive, required the elimination on the downstream market of all competition ENI, to avoid the risk of mandatory dealings, could be easily argue that there still will be competition, even if few. According to the information provided in the AGCM decision, in the downstream market ENI’s market shares are about 60 % – 65 % of the market but certainly not 100 %. Although even a duopoly or an oligopoly is in most cases uncompetitive, the requirement to verify that the owner of the facility holds 100 % market share will probably fall outside the scope of Article 82 EC. It is indeed important to remember that Article 82(b) EC only requires “limiting production” to the “prejudice of consumers”, and therefore requiring a total absence of any competition would probably be out of the scope of the said provision.

This view has been also supported by the Discussion Paper of the Commission on the application of Article 82 EC that, in order to clarify the interpretation of the requirement of the elimination of competition, affirms that the “likely exclusion of one individual competitor from the downstream market does not in itself constitute an abuse. An abuse only may arise when the exclusion of competitor is likely to have a negative effect on competition in the downstream market. This should however not be understood to mean the complete elimination of all competition” [60]. However, what it seems to be clear is that, for a duty to deal to be imposed, the refusal should be likely to cause at least a substantial reduction of competition on the downstream market and this will happen any time a dominant company on an upstream market will, through the refusal, achieve a dominant position even on the downstream market[61].

With regard to the benchmark that must be used to assess the lessening of competition required by Article 82 EC (point sub (ii)), it must be affirmed that what is sure is that the test cannot be referred to the elimination of the competitor whishing to access the facility. First, it should be remembered that according to the seminal opinion of Advocate General Jacobs in Bronner “the primary purpose of Article 82 is to prevent distortion of competition – and in particular to safeguard the interests of consumers – rather than to protect the position of particular competitors”[62], and therefore the test should be correctly related to the detriment of competition as such rather than of a particular competitor. Secondly, as it has been noticed above, if the test was based on the elimination of a competitor, in the long term, the less efficient competitors could found more profitable to exploit other facilities rather than invest to create their owns, with a clear prejudice of the consumer welfare. The test in Bronner was indeed based on the possibility to create a second home-delivery scheme for an operator “with a circulation comparable to that of … the existing scheme”[63] and not to the one of the requesting party[64]

Having clarified that Article 82 EC does not require to be abusive that the refusal is likely to eliminate all competitors but only a substantial reduction of competition, it is reasonable to believe that – if the present case were assessed on the basis of the essential facility doctrine – the requirement in discussion would be considered satisfied. The said fulfilment, nevertheless, does not derive merely by the fact that the new shippers would have increased competition on the downstream market. In this scenario, indeed, a dominant company would always be in a duty to grant access to its own property to new operators, and this is not the purpose of Article 82 EC [65]. In our case, more correctly, the refusal to supply new shippers, if it was not justified by other reasons (see paragraph 4 below), could probably be considered prohibited by Article 82 EC, because it will be likely to further jeopardize the competition condition on a market where, for the very presence of a dominant company (ENI), the competition condition had already been weakened.

4. absence of objective gustification for the refusal

As it has been noted earlier, in order for a refusal to supply to be found in breach of Article 82 EC, it must be unjustified. Generally, the Commission believes that the fact that the party making the request is creditworthiness or that it will be unable to use the facility could be generally regarded as a valid refuse. Furthermore, and with particular regard to physical facilities, it must be stressed that justifications related to the absence of available capacity are generally suitable defences. As the Commission has explicitly recognized in its Discussion Paper on the application of Article 82 EC “in the case of an essential facility, access may be denied if the facility is capacity constrained or if granting access would lead to a substantial increase in its cost that would jeopardize the economic viability of the facility holder”[66]. Indeed, differently from IP rights cases, where there is in principle no limitation of the licenses that can be granted, in the physical facility cases, the number of the users of the facility is intrinsically limited. However, considering to the proxy of the Commission (see infra), justifications related to lack of capacity should be carefully assessed.

As a general remark, it should be mentioned that if the capacity of the facility is not fully used or, as it has been mentioned earlier, by its very nature, it is unlimited, it is certainly difficult to justify the decision of the holder of the facility not to provide access. On the contrary, if the capacity is already fully used by different competitors (like in the case at issue), there would be a modest increase of competition if all the operators active on the market were required to decrease its own production in order to free up the capacity needed to the new operator to enter the market. As it has been authoritatively argued, in a situation where there is no spare capacity and there is already competition on the downstream market, a new entrant must be given access only if he intends to “provide goods or service significantly different from and more competitive than those provided by the incumbents” [67].

Nevertheless, in the Frankfurt Airport [68] case, the Commission did not agree with the argument of the airport operator according to which the access to allow self-handling or additional ramp handling suppliers were refused because of insufficient capacity, and found that the refusal was unjustified. As it will be further discussed infra, what has been strongly criticized of the decision is that the Commission held that the dominant operator had an obligation to increase its capacity and to make available additional ramp handling space to its competitors, in particular by adding capacity, relocating some cargo services and closing some stands to make to make available capacity[69].

As it has been noted by some commentators[70], the principle affirmed by the Commission according to which the saturation of the capacity does not represent an objective justification for the refusal to provide access to a third access, is very weak and therefore must be reconsidered. In particular, it should be noticed, that the interpretation of the Commission could be understandable only if the owner of the facility had wasted its capacity with the sole purpose to maintain an artificial saturation in order to avoid any new third operator from entering the market. Differently, when the actions of the owner of the facility are not characterized by the premeditated intention to exclude new competitors, and the choices of the dominant company can show other suitable business reasons, the possibility to exercise the business autonomously must prevail.

It could be argued, that where the dominant company assert to have fully used its capacity – and especially in cases where the incumbent claims the capacity is fully used by its own operations and it is dominant on the downstream market – it is indispensable to verify if, in reality, the capacity is not allocated inefficiently or if the actual capacity could be increased by a more efficient use and without new investments. If it is not, and therefore the owner has managed the facility in an efficient way, no unlawful conduct could be attributed to the incumbent (even if it will be no possible for a new operator to enter the market).

Moreover, such conclusion is in line with the principle of proportionality, according to which the action should be taken must relay in a reasonable manner to the objective to be obtained, requires a clear distinction between the situation in which there is a spare capacity to be allocated and cases in which capacity is missing[71]. It is indeed comprehensible that the effort required to an incumbent to reorganize its own production or make new investments in order to allow in the market a new small operator, is disproportionate with respect to the benefit that the more competition exercised by the new small competitor will create.

With particular regard to the AGCM decision, it should be pointed out that the investment planned by TTPC required the reorganization of the production system and substantial investments and therefore there could be a number of legitimate business reasons for which TTPC could have decided to not invest millions of euros in order to complete the upgrading of the gas pipeline (for the benefit of its competitors). The decision not to implement the upgrading of the pipeline is not therefore intrinsically related to the sole purpose to exclude its competitors, but could be based on several other legitimate reasons.

In order to conclude that ENI’s conduct was not justified, it should have be proved that ENI, against any other legitimate business reasons and with the mere exclusive purpose, did not complete the upgrading on the pipeline. The AGCM, however, in order to show the absence of legitimate reasons for not increasing its capacity, only refers to the fact that a normal operator would have found profitable to increase capacity since the latter has already been allocated to the shippers. In particular, According to the AGCM, if TTPC had been acting as an independent operator in the international gas transport sector, it would have had a more co-operative approach with respect to its contracts with the shippers and would have allowed deadline postponements in relation to the satisfaction of the conditions.  Indeed, it would have been in TTPC’s commercial interest, if it had been acting as an independent operator, to continue with the upgrading of the pipeline, especially as the contracts with the shippers were already in existence and the additional capacity had already been allocated.

Although the AGCM consideration is certainly correct, it does not imply by itself the absence of any other legitimate business reasons that could be have induced ENI not to complete the upgrading of the pipeline. A part from the ENI’s claim according to which the ship or pay contracts were not finalized because the shippers did not satisfy the conditions provided by such contracts, many other justifications could be available. ENI, for example, could have also decided to invest to expand the production of subsidiaries active on other markets or simply to complete the upgrading of the TTPC pipeline subsequently.

It should be never forget that, in such a case, the limitation of the property right of the owner of the facility would not simply require, as it usually happens, an obligation to allow competitors to use the facility (or to have access to the spare capacity of an input), but would imply an imposition to manage its business, decide its own strategies, make investments, and free up capacity, in order to increase competition. This is not what Article 82 EC requires. Such obligation is not related to any special responsibility embodied in Article 82 EC since the latter does not require dominant companies to actively promote, stimulate or increase competition, but only to compete on the merits. It is obvious that, entering the market, the new shippers would have produced more competition (how much?), but this is not enough to impose ENI to make investments and reorganize its production system accordingly. At very end, and rude as it may appear, unless a clear exclusionary purpose has been unequivocal identified, deciding whether or not investing money in order to increase capacity, is generally competition on merits, even if it will prevent some small operators from entering the market.

V. FINAL REMARKS

On the basis of the aforementioned considerations, it seems to be arguable that the case at issue could be regarded as an “essential facility” case. Although, as affirmed above, it is not clear if the AGCM correctly assessed the indispensability of the TTPC pipeline having regard to the possibility for another company with a scale comparable to ENI – rather than with regard to the scale of the particular parties seeking to enter the market – to develop their own facility, it seems to be unquestionable that both the two-markets requirement and the condition of reduction of competition are satisfied. However, many arguments leave doubts that ENI’s conduct could be regarded as justified and that the imposition of a duty to invest and to increase capacity seems to go far beyond the scope of the duty to deal under Article 82 EC.

But a part from the fact that a similar intrusion in extremely strategic business choices seems not to be embodied in Article 82 EC, there is another reasoning used by the AGCM in its decision that deserves few comments. The AGCM – being probably not really persuaded itself that a duty to increase its capacity could be found on ENI – suggested that, regardless to the essential facility doctrine, simply by virtue of its dominant position, ENI should not engage in practices to influence its subsidiary, TTPC, the holder of exclusive rights to use the pipeline, to the detriment of its competitors.  According to the AGCM, in this scenario, “ENI did not have an obligation to upgrade the Tunisian gas pipeline, but had an obligation to refrain from engaging in any practice which would have induced TTPC to act in a way that was contrary to the commitments it had previously made” [72].

Although, in principle, the fact that there is no ground for an imposition of a duty to deal based on the essential facility doctrine does not imply by itself that it is not possible to contest ENI another exclusionary conduct, the reasoning used by the AGCM appears a bit tortuous. In particular, what seems to be unclear is why, since in the gas sector the law does not require the incumbent to guarantee the functional independence of such subsidiaries, ENI, only because of its dominance, could not exercise its power of control. It is indeed well known that, according to the general antitrust principles, no obligation could be found on ENI not to use its “decisive influence” on TTPC. Since the general meaning of control does not require – as an existing pre-requisite – that the power is materially used, it is on the parent company to decide whether to use it or not. It is in fact possible that a mother company decide to leave its subsidiary free to determine its own behaviour on the market, but at the very end, even the latter decision is a way of exercising control.On the contrary, more often companies do exercise actively the power of control they legitimately acquired over their subsidiaries, without for this incurring in any antitrust violation. What it matters, is in fact not whether or not they use their influence, but how they do it[73].

Having clarified that ENI did not incur in any antitrust violation for merely having exercised its influence over the subsidiary (TTPC), it remains to be assessed if the fact that the ENI group, trough its subsidiary TTPC, acted in a way contrary to the commitment it had previously made with the shippers, could be regarded as an antitrust violation. This issue arises because, having not increased its capacity, TTPC was not able to supply the shippers with which an agreement had already been signed. Nevertheless, the answer to this question has actually a close relation with another aspect discussed earlier: if there was an obligation on TTPC to deal with shippers or not. Indeed, from an antitrust point of view, there is non conceptual difference between the decision not to supply at all and the decision to break an agreement of supply which has already been signed, the point being, in both cases, if there was an obligation to deal with shippers or not and, with particular regard to our case, if the refusal could be justified or not.

The answer to that question, therefore, would not differ from the one provided earlier with regard to the possible justification of the TTPC refusal to increase its capacity. It is indeed clear that if initially the decision of ENI group not to invest to increase capacity could be considered a refusal justified by objective consideration it is difficult to believe that the decision not to implement the aforementioned increase could become abusive subsequently. Either if the case were assessed on the basis of the essential facility doctrine or on the basis of the special responsibility of dominant companies, the abuse could never be based on the fact that ENI acted in a way contrary to the commitment it had previously made[74] (like the AGCM decision seems to suggest), but only and exclusively on the fact that the refusal to increase capacity was unjustified.

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[1] Case 85/76 Hoffmann La Roche & Co AG v Commission [1979] E.C.R. 461

[2] See, inter alia, Case 322/81 NV Nederlandsche Banden-Industrie Michelin v Commission [1983] E.C.R. 3461. See also Case T-83/91 Tetra Pak International SA v Commission [1994] E.C.R. II-755; Case T-65/89 BPB Industries Plc v Commission [1995] E.C.R. II-389; Case T-24/93 Compagnie Maritime Belge Transports SA v Commission [1996] ECR II-1201 and most recent cases Case T 191, 212 & 214/98 Atlantic Container Line and Others v Commission [2003] E.C.R. II-3275, Case T-210/99 General Electric Company v. Commission [2006] 4 C.M.L.R. 15.

[3] Case 6 and 7/73 Istituto Chemioterapico Italiano S.p.A. and Commercial Solvents Corporation v Commission.

[4] See Ritter and Braun, Eropean Competition Law: a practitioner’s guide, Third edition, pag. 452.

[5] According to the information published by the Commission, the case arises out of the inspection carried out in 2006 on ENI premises and premises of ENI subsidiaries in Italy, Austria and Germany. As expressively stated by the Commission, the proceedings against ENI Group are not part of the energy sector competition inquiry, on which the final report was presented on 10th January 2007.See press release of the European Commission n. MEMO/07/187 published on 11/05/2007 on the European Union website: www.europa.eu.

[6] According to the information published by the Commission these suspected practices, constituting possible infringements of Article 82 of the EC Treaty, are allegedly engaged in by ENI S.p.A. and by its subsidiaries and companies under their control, including Trans Austria Gasleitung GmbH, Trans Europa Naturgas Pipeline GmbH & Co. KG, ENI Deutschland S.p.A. and Eni Gas Transport International SA.

[7] The full text of Decision A358 ENI Trans Tunisian Pipeline can be found in Bolletino 5/2006 and on the AGCM website: www.agcm.it

[8] The comments will be provided in the following part are based on the non-confidential information published in the AGCM decision and in other press sources. It is therefore possible that, having had access to the whole dossier, the view expressed of the case would differ.

[9] The full text of Decision A358 ENI Trans Tunisian Pipeline can be found in Bolletino 5/2006 and on the AGCM website: www.agcm.it

[10] Quote from ‘Fact-finding Investigation into the State of Liberalization in the Natural Gas Sector’ published by the AEEG and dated 17 June 2004.

[11] DG Competition report on energy sector inquiry (SEC(2006)1724, 10 January 2007), pag. 3, available on the Commission website: http://ec.europa.eu/comm/competition/sectors/energy/inquiry/index.html. [12] ‘Annual Report on Competition Policy Developments in Italy – 2005’ – published by the OECD on 16 October 2006 40 for discussion at its meeting on 18-10 October 2006, at paragraph 40.[13] ‘Annual Report on Competition Policy Developments in Italy – 2005’ – published by the OECD on 16 October 2006 40 for discussion at its meeting on 18-10 October 2006, at paragraph 40.

[14] The increase announced in 2002/2003 was 6.5 billion cubic metres per year.

[15] The first ‘tranche’ would be equivalent to 3.2 billion cubic metres per year.

[16] The second ‘tranche’ would be equivalent to 3.3 billion cubic metres per year.

[17] Guidelines on the method of setting fines imposed pursuant to Article 15 (2) of Regulation No 17, Official Journal C 9, 14.01.1998, p. 3-5.

[18] Guidelines on the method of setting fines imposed pursuant to Article 15 (2) of Regulation No 17, Official Journal C 9, 14.01.1998, p. 3-5.

13 Opinion of Advocate General Jacobs in Bronner, above note [ ], at para. 56. See also Opinion of Advocate General Rozes in Case 210/81 Oswald Schmidt v Commission [1983] ECR 3045 at 3072. See also Case T–41/96 Bayer AG v Commission [2000] ECR II-3383, para.180 (“Under Article 8[2], refusal to supply, even where it is total, is prohibited only if it constitutes an abuse. The case-law of the Court of Justice indirectly recognizes the importance of safeguarding free enterprise when applying the competition rules of the Treaty where it expressly acknowledges that even an undertaking in a dominant position may, in certain cases, refuse to sell or change its supply or delivery policy without falling under the prohibition laid down in Article 8[2].”).14 It should be remembered that the right to property is protected under Article 295 EC and many Member States’ laws Article 295 of the EC Treaty provides that the existence of property rights under national law, including intellectual property, is not affected by the provisions of the EC Treaty. The Community Courts have therefore consistently held that the determination of the conditions and procedures under which intellectual property is protected is a matter for national law. See, e.g., Case 262/81 Coditel 2 [1982] ECR 3381, para 13 (“the existence of a right conferred by the legislation of a Member State in regard to the protection of artistic and intellectual property…cannot be affected by the provisions of the Treaty.”). See also Case 144/81 Keurkoop v. Nancy Kean Gifts [1982] ECR 2853, para. 18.

[19] Even if price competition is certainly one of the most important instruments to achieve consumer welfare, the latter may also be significantly improved by new products for which there is unsatisfied demand. Competition based on different facilities and product offerings is therefore preferable to competition based on sharing the same facility, even because cooperation among competitors can always reduce each undertaking’s scope for independent action.[20] For a detailed treatment of the concept of a natural monopoly in industrial organisation, see D. Carlton & W. Perloff, Modern Industrial Organisation, (2005) (Pearson, Fourth Edition), p.104.

[21] Intellectual property (IP) rights may also be subject to compulsory sharing in exceptional circumstances.

[22] The origin of the essential facilities doctrine is commonly traced to the Supreme Court’s decision in United States v. Terminal Railroad Ass’n, 224 U.S. 383 (1912) which concerned the acquisition by a group of railroads of railroad switching and terminal facilities in St. Louis that served both local and interstate railroads and industries. The Court determined that the owners of the facilities adopted policies that discriminated against some other railroads who needed access to these facilities to compete in the market for the interstate transportation of goods to and from St. Louis. The Court therefore required the owners of the facilities to permit other railroads to participate in ownership of the assets on terms equivalent to those of the existing owners. Although the Supreme Court did not use the term “essential facility” in Terminal Railroad, the case has been invoked by many lower courts interpreting and applying the legal principles enumerated in Terminal Railroad. See, e.g., MCI Communications Corp. v. AT&T, 708 F.2d 1081, 1132 (7th Cir. 1983) (“A monopolist’s refusal to deal under these circumstances is governed by the so-called essential facilities doctrine. Such a refusal may be unlawful because a monopolist’s control of an essential facility (sometimes called a ‘bottleneck’) can extend the monopoly power from one stage of production to another, and from one market to another.”).

[23] See, e.g., Opinion of Advocate General Jacobs in Case C-7/97 Oscar Bronner GmbH v. Mediaprint Zeitungs- und Zeitschriftenverlag GmbH (hereinafter Bronner), para. 45. See also Case T-374/94 European Night Services [1998] ECR II-3141, para. 191, where the Court of First Instance used the term “essential facilities.”

[24] R. Whish. “Competition Law”. 5th Ed. LexisNexis. London. [2001]. p. 668.

[25] Determining what are essential facilities is primarily related to the extent of the handicap to competitors, and whether it would be permanent or merely temporary.

[26] See “The Essential Facility Concept,” OECD (1996), p. 94 (document available at .)

[27] Opinion of Advocate General Jacobs in Bronner., para. 58

[28] Ibid., para. 66.

[29] Sea Containers-Stena Sealink, OJ 1994 L 15/8.

[30] See Notice on the application of the competition rules to access agreements in the telecommunications sector, OJ 1998 C 265/2, para. 88 (“If there were no commercially feasible alternatives to the access being requested, then unless access is granted, the party requesting access would not be able to operate on the service market. Refusal in this case would therefore limit the development of new markets, or new products on those markets, contrary to Article 86(b), or impede the development of competition on existing markets. A refusal having these effects is likely to have abusive effects.”).

[31] See, e.g., Article 1(6) of Commission Directive 96/19 with regard to the implementation of full competition in telecommunications markets OJ 1996 L 74/13; Articles 16-18 of Directive 96/92/ of the European Parliament and of the Council concerning common rules for the internal market in electricity OJ 1997 L 27/ 20; and Articles 14-16 of Directive 98/30 of the European Parliament and of the Council concerning common rules for the internal market in natural gas, OJ 1998 L 204/1.

[32] In this regard, it has been noticed that “It should be clear from the outset that the essential facility doctrine concerns vertical integration – in particular, the duty of a vertically integrated monopolist to share some input in a vertically related market, which we call market 1, with someone operating in an upstream or downstream market, which we shall call market 2. If the facility is truly “essential,” then the 1 monopoly facility also establishes a 2 monopoly … Understanding the ‘vertical’ nature of essential facility claims helps to focus the analysis: The essential facility claim is about the duty to deal of a monopolist who is able to supply an input for itself in a fashion that is so superior over anything else available that others cannot succeed unless they can access this firm ’s input as well.” See Areeda & Hovenkamp, Antitrust Law, Vol. III A (1996), at 172 and 174.

[33] London European/Sabena, OJ 1988 L 317/47. See also Amadeus Sabre, Twenty-first Competition Policy Report (1991) p. 73-74 (similar non-discrimination duty imposed on the second other large computer reservation system owners).

[34] British Midland/Aer Lingus, OJ 1992 L 96/34.

[35] Sea Containers v. Stena Sealink, OJ 1994 L 15/8.

[36] The Commission in several subsequent decisions followed the same principle. See, inter alia, Port of Rødby, OJ 1994 L 55/52 (refusal by Danish Government to allow EuroPort A/S to build a new port in the immediate vicinity of the port of Rødby or to operate from the existing port facilities at Rødby found abusive); Port of Elsinore, Commission Press Release, IP/96/456 (refusal by Danish government to grant access to Elsinore port to the shipping line Mercandia for routes between Elsinore and Helsingborg found abusive); and Irish Continental Group CCI Morlaix-Port of Roscoff, XXVth Competition Policy Report (1995), para. 43 (refusal by CCI Morlaix to grant access to Irish Continental to Roscoff port for services between Ireland and France found abusive).

[37] Judgment of the Court of Justice in Bronner, above note [ ], para. 41.

[38] Ibid., paras. 44-45.

[39] In this regard see, inter alia, Treacy, “Essential facilities: is the tide turning?” [1998] European Competition Law Review p.501-505, Hancher “A Review of Bronner” [1999] Common Market Law Review p.1289-1307, and Temple Lang, “The Principles of Essential Facilities in European Community Competition Law – The Position Since Bronner,” J. of Network Industries 375 (2000).

[40] In cases in which there is a request for licensing an IP rights, for the refusal to be abusive, it is usually required also that the refusal prevents the emergence of a new product for which there is consumer demand.

[41] In Ladbroke, supra note, the refusal was regarded lawful because the requested IP, live pictures of French races, was not indispensable to compete in the relevant market.

[42] See report by the Commission in OECD/GD(96)113, The essential facility concept, 97, available at http://olis.oecd.org/olis1996doc.nsf/LinkTo/OCDE-GD(96)113.

[43] Bronner at paras. 43 and 44.

[44] Commission in the Notice on the Application of the Competition Rules to Access Agreements in The Telecommunications Sector, OJ [1998] C 265/2, CMLR 82, para 91 (a).

[45] See Case T-374/94 European Night Services [1998] ECR II-3141, para. 209.

[46] In this regard see Mats Bergman, “The Role of the Essential Facilities Doctrine”, Antitrust Bulletin, 2001 and Mats Bergman, “When Should an Incumbent Be Obliged to Share its Infrastructure with an Entrant under the General Competition Rules?,” Uppsala University, 2003.

[47] Bronner at para. 46.

[48] In particular, the Court affirmed that it has not been proved that the company required access to the infrastructure could not find trains elsewhere (i.e. from manufacturers or, ultimately, by renting them from other undertakings active on the same market). Furthermore, confirming that an objective standard of prove have to be required for a duty to deal to be imposed, the Court hold that the fact that the joint venture was the first to have acquired the locomotives in question on the market was not sufficient prove the indispensability of the facility, but it needed to be proved that they were the only company able to do so. See, European Night Services, paras. 215-216.

[49] In this regard see Temple Lang, “The Principle of Essential Facilities in EC Competition Law – the Position since Bronner,” Journal of Network Industries, 2000, at 382.

[50] See AGCM decision, paras. 129-141.

[51] Discussion Paper on the Application of Article 82 of the Treaty to exclusionary abuses, paras. 228-229, available on the Commission website: http://ec.europa.eu/comm/competition/antitrust/art82/index.html.

[52] Opinion of Advocate General Jacobs in Bronner , para. 57.

[53] This idea is substantially confirmed by many commentators like, inter alia, Temple Lang, “ Defining Legitimate Competition: companies’ duties to supply competitors and access to essential facilities,” 18 Fordham International L. Jour., (1994) 437, at 488 (“A vertically integrated company is not necessarily obliged to provide access to a facility that other companies wish to use if it is not providing them to any independent users. The key test seems to be whether its upstream operations are merely part of the same business, or separate in nature”); also in Hawk (ed.), 1994 Fordham Corporate Law Institute (1995) 245-313; Temple Lang, “The principle of essential facilities and its consequences in European Community competition law,” 1996, Oxford, Regulatory Policy Institute, 19-46; Temple Lang, “The principle of essential facilities in European Community competition law – the position since Bronner,” Journal of Network Industries (2000), 375-405; Doherty, “Just what are essential facilities?” 38 Common Market Law Rev. (2001) 397-436; Owen, “Determining optimal access to regulated essential facilities,” 58 Antitrust L. Jour., 887, at 888 (“Access problems arise generally when the bottleneck monopolist is partially vertically integrated”); Bishop and Overd, “Essential Facilities: The rising tide,” [1998] European Competition Law Review, 183 (“The argument for such a requirement is that it might increase competition in a downstream market to the benefit of consumers”).

[54] See R. O’Donoghue & JA Padillia, The Law and Economics of Article 82 EC, (Oxford/Portland, Hart Publishing, 2005) Ch. 8.

[55] See, e.g., Commercial Solvents ((1) raw material; (2) derivative products of the raw material); Case C-18/88 Régie des télégraphes et des téléphones v. GB-Inno-BM SA [1991] ECR I-5941 ((1) Establishment and operation of the public telecommunications network; (2) importation, marketing, and maintenance of equipment for connection to the network); Frankfurt Airport ((1) provision of airport facilities for the landing and take-off of aircraft; (2) ramp-handling services; Magill ((1) broadcasting; (2) television program guides); Sea Containers v. Stena Sealink ((1) port services; (2) passenger ferry services.

[56] In this regard see V. Hatzopoulos, The EU essential facility doctrine, (available at: www.umich.edu/~iinet/euc/PDFs/2006%20Papers/HatzopoulosEUpaper.pdf) who believes that the market where a company held the essential facility could be, in relation to the secondary market, upstream (e.g. a port for the provision of transport services), downstream (e.g. the grid for the transport and distribution of electricity) or parallel (e.g. the patented software which is necessary to operate a computer).

[57] Judgment, para. 45. However, what the Court did not clarify is if in order to identify the “two stages of production” is enough to identify a request of a third party seeking access to the facility or if each stage of production needs to be clearly recognized as separated. According to some commentators, the lack of clarity of the Court of Justice’s judgment in IMS is likely to create many interpretation problems particularly in the IP rights sector (R. O’Donoghue & JA Padillia, The Law and Economics of Article 82 EC, affirm that “the view that a potential market is enough could lead to the definition of separate product markets for many IP rights that are just used as inputs – often critical ones – in products or services that are commercialised successfully. Under this standard any intellectual property right could ‘hypothetically’ be marketed as a stand-alone item,” and hence potentially subject to an obligation to license, which would represent a huge disincentive for dominant firms to invest in new production processes that would allow them to gain a competitive advantage vis-à-vis competitors”). However, for the purpose of this paper, it seems enough to say that there is a progressive change of prospective according to which the less formalistic approach should be preferred and that in order the two market requirements to be met is sufficient to recognize the possibility of identifying a separate market even if it does not exist yet.

[58] Opinion Advocate General Jacobs in Bronner, para. 61.

[59] Bronner, para. 40

[60] Discussion Paper on the Application of Article 82 of the Treaty to exclusionary abuses, para. 231, available on the Commission website: http://ec.europa.eu/comm/competition/antitrust/art82/index.html.

[61] In this regard, it has been noticed that “What qualifies as a “substantial” effect on competition may vary from case to case, but it should at least mean the absence of effective competition on the market, i.e., dominance on the relevant downstream market. Thus, the issue seems to be whether dominance in the upstream market would also lead to dominance in the downstream market, regardless of whether this has already occurred or not at the stage when a competition authority or court intervenes. In most cases, however, a small number of reasonably efficient rivals should be enough to make the market reasonably competitive” (See R. O’Donoghue & JA Padillia, The Law and Economics of Article 82 EC, (Oxford/Portland, Hart Publishing, 2005) Ch. 8.

[62] Ibid., para. 58

[63] Bronner at para. 46.

[64] For the purpose of this paper another question in relation to the detriment of competition for a duty to deal to be imposed is whether the essential facility doctrine should be applied in the regulated markets (such as telecom, gas, energy, rail transport). Although the US Court in Trinko followed the idea that in those markets there will be less scope for the application of the antitrust provisions, the European Commission in Deutsche Telecom affirmed the opposite. In that case, indeed, the Commission hold holds that, notwithstanding the access tariffs were previously notified and authorized by the national regulatory authority according to the EU Directive, the access prize required by the incumbent monopolist to its downstream competitors were found to be contrary to Article 82 EC. See, Commission decision Deutsche Telekom, 21 May 2003, OJ 2003, L 263/9.

[65] In this case, it could never exist a lawful refusal since it is clear that every time a new operator enters the market there will be more competition than before.

[66] Discussion Paper on the Application of Article 82 of the Treaty to exclusionary abuses, para. 234, available on the Commission website: http://ec.europa.eu/comm/competition/antitrust/art82/index.html.

[67] Temple Lang, “Defining Legitimate Competition: companies’ duties to supply competitors and access to essential facilities”, Fordham International L. Jour., (1994), pag. 292.

[69] How it has been promptly observed, the most controversial aspect of the decision is that, at the very end, the cost of the investment required by the Commission, would have involved additional cost that would have finally passed onto the airport users. In this regard see, among others, R. O’Donoghue & JA Padillia, The Law and Economics of Article 82 EC, pag. 36, and M. Siragusa & M. Beretta, ‘La dottrina delle essential facilities nel diritto comunitario ed italiano della concorrenza’ (1999) Contrato e impressa, Europa, 260 para. 6(a).

[70] M. Siragusa & M. Beretta, ‘La dottrina delle essential facilities nel diritto comunitario ed italiano della concorrenza’ (1999) Contrato e impressa, Europa, 260, para 6(a).

[71] Temple Lang, “Defining Legitimate Competition: companies’ duties to supply competitors and access to essential facilities”, Fordham International L. Jour., (1994), pag. 292.

[72] According to the AGCM, if TTPC had been acting as an independent operator in the international gas transport sector, it would have had a more co-operative approach with respect to its contracts with the shippers and would have allowed deadline postponements in relation to the satisfaction of the conditions. Indeed, it would have been in TTPC’s commercial interest, if it had been acting as an independent operator, to continue with the upgrading of the pipeline, especially as the contracts with the shippers were already in existence and the additional capacity had already been allocated. This decision was also substantially confirmed by TAR that, after having surprisingly affirmed that the refusal to supply is a theory not yet well acknowledged by the antitrust law, held that ENI abused its dominant position by interfering with the decision-making process of its subsidiary in order to preserve its strong position on the downstream market. In particular, the TAR, in its judgment, affirmed that the refusal to deal is “un ordine di idee ancora non pienamente recepito nel diritto antitrust, non essendo del tutu chiara, a tacer d’altro, la natura della infrastruttura essenziale”.

[73] The fact that ENI had concretely exercised or not its decisive influence will be relevant to decide whether the fine should be imposed jointly and severally. Indeed, according to the consolidated jurisprudence of the Court of Justice, the anticompetitive conduct of a an undertaking can be attributed to its parent company where it has not decided independently upon its own conduct on the market, but has carried out, in all material aspects, the instruction given to it by that parent company (See, among others, Commercial Solvents, para. 51).

[74] The decision not to complete the upgrading of the gas pipeline, for which ‘ship or pay’ contracts with certain shippers had already been signed, if considered by itself, has nothing to do with antitrust issues and with the “special responsibility” of the dominant company, and should be better scrutinized in the light of contractual responsibility rather than according to Article 82 EC.

(pubblicato il 23.7.2010)

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L'articolo The refusal to supply under article 82 ec: was there any duty on eni to increase capacity to deal with competitors? proviene da Giustamm.