Continental Can

Continental Can is the first EU case on the application of Article 102 to the abuse of

dominant position.657 The case concerns the Commission decision (Continental Can Decision)658 against Continental Can Company Inc. (Continental) of New York (USA), a firm producing different types of metal containers for food packaging. The Commission found that Continental abused its dominant position which it held through its subsidiary Schmalbach-Lubeca-Werke AG of Brunswick (SLW) in a market for light metal containers for meat, meat products, fish and crustacean as well as in a market for metal closures for glass jars. The Commission further argued that Continental abused its dominant position by acquiring about eighty per cent of market shares659 (through its subsidiary Europemballage) of Thomassen & Drijver-Verblifa N.V. (TDV).

Continental appealed,660 arguing that the Commission’s findings of a dominant position were purely based on theoretical evidence. The only concrete evidence supplied by the Commission, as argued by the defendants, was based on Continental’s market share which does not “suffice to prove the existence of a dominant position, since it gives no indication of the effective margin of action available to the undertaking”.661

This highlights two main important issues: First, due to being the first case on the assessment of dominance, Continental had thought that eighty percent market share did not provide concrete evidence

656

72/21/CEE: Commission Decision of 9 December 1971 relating to a proceeding under Article 86 of the EEC Treaty (IV/26 811—Continental Can Company) OJ 1972, L7 (hereinafter Continental Can Decision); Case 6/72, Europemballage Corp & Continental Can Co Inc v Commission. Related cases: Europemballage Corp and Continental Can Inc v Commission of the European Communities (6/72 R) (No. 1) [1972] ECR 157; Europemballage Corp and Continental Can Inc v Commission of the European Communities (6/72 R) (No. 2) [1975] ECR 495.

657 _{Key cases citing Continental Can: T-24/05, Alliance One International Inc v European Commission} [2011] 4 CMLR 9; T-177/04 EasyJet Airline Co Ltd v Commission of the European Communities [2006] ECR II-1931; T-210/01, General Electric Co v Commission of the European Communities [2005] ECR II- 5575.

658 _{Continental Can Decision.}

659 _{Despite the fact that Continental’s market share is above seventy percent threshold, this case was selected} for a number of reasons. First, it is the first EU case where (now) Article 102 was applied. Second, it is the only case where the (now) CJEU overturned the Commission Decision. Last, it provides a good explanation on the way a relevant market should be delineated. All these points will be discussed.

660 _{Europemballage Corp & Continental Can Co Inc v Commission.} 661

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of a dominant position, and, second, the heavy reliance of the Commission on market shares dated back to 1971.

The way Continental Can is structured is similar to Standard Oil as, in both cases, the courts deal with the application of antitrust law on the control of market power for the first time. Unlike other EU cases, Continental Can did not have any discussion of other factors apart from a brief mentioning of market shares and, like Standard Oil, it had a brief discussion of the main antitrust legal provisions. This case, however, remains important because it gives an insight of the first steps in the development of law on the assessment of market power.

The CJEU made it clear that a link of causality between dominance and abuse should be present for the correct application of Article 102, which Continental denied.662 The court’s response was that “the condition imposed by [Article 102] is to be interpreted whereby in order to come within the prohibition a dominant position must have been abused”.663

This is the first statement made by the CJEU confirming that for Article 102 to be triggered there must be an abuse of a dominant position. The CJEU then continued that “abuse may therefore occur if an undertaking in a dominant position strengthens such position in such a way that the degree of dominance reached substantially fetters competition, i.e. that only undertakings remain in the market whose behaviour depends on the dominant one”.664 The link of causality, in the CJEU’s opinion, does exist between the dominant position and abuse “regardless of the means and procedure by which it is achieved”.665

In assessing the existence of dominance, the Commission saw Continental strengthening its market power through the acquisition of the majority of holding in a competing firm.666 The Commission, in particular, argued that following a careful investigation, it based its decision on “the vary high market share already held by SLW in metal containers, on the weak competitive position of the competitors remaining in the market, on the economic weakness of most of the consumers in relation to that of the new unit and on the numerous

662 _{In particular, the applicants also argued that based on the definition of dominant position and the link of} causality, the abuse must occur on the same market as is allegedly dominated: Ibid. at pp. 225-226. 663 _{Ibid. at p. 245, para.26.}

664 Ibid.

665 _{Ibid. at p. 245, para. 27.}

666 _{The CJEU held that dominant firms could undermine the very core aims of Article 102 “by an alteration} to the supply structure which seriously endangers the consumers freedom of action in the market” on the condition that all competition is eliminated—Ibid. at p. 246, para. 29

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legal and factual links between Continental and potential competitors”.667 This is the first example when the Commission considered Continental’s superiority over its competitors, weakness of the consumers and other connections between Continental and its rivals as an additional evidence of market power. Korah, for instance, argued that the Commission defined the concept of dominance “in much the same terms as would an economist […] it focused on the discretionary power of the monopolist to set its prices and make other market decisions without being tightly constrained by competitive pressures”.668

As was discussed in Chapter 4, the definition of a relevant market is the first step in the assessment of market power. The importance of Continental Can lies in the fact that the CJEU disagreed with the Commission’s delineation of the relevant market, in particular, the CJEU pointed out that the Commission considered several separate markets for light metal containers, namely a market for light containers for meat products, a market for light containers for canned seafood and a market for metal closures for the food packing industry. The Commission failed, according to the CJEU, to explain how these three markets differ from a market for light metal containers, i.e. a larger market. For such reasons, the CJEU held that “to be regarded as constituting a distinct market, the products in question must be individualised, not only by the mere fact that they are used for packing mere products, but by particular characteristics of production which make them specially suitable for this purpose”.669

The CJEU, therefore, required products to be individualised in order to be able to distinguish them from a more generic market. As was discussed in Chapter 4, the boundaries of a relevant market have effects on the definition of dominance because the narrower the market the more dominant a firm becomes. The Commission prefers a narrow definition of a relevant market as evidenced in the Continental case. This can also be applied to a firm’s size (i.e. market shares) and bigness (i.e. other factors) because in a narrow relevant market a firm’s size and bigness will be exaggerated. The opinion of the CJEU does not show whether the court preferred a narrow or wide definition of the relevant market. It does show, however, that the Commission has to be very thorough in its analysis of dominance. Furthermore, despite the fact that the Commission used the weak competitors as one of the factors it considered in addition to Continental’s market shares, it did not measure the competitive force of other rivals in those markets.

667 _{Ibid. at p. 247, para. 30.}

668 _{Korah, V., An Introductory Guide to EC Competition Law and Practice (9}th _{edition, Hart Publishing,}

North America: 2007) at p. 105. 669

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The CJEU was not entirely satisfied with that fact and concluded that the Commission decision should be annulled.670

This case is interesting for the reasons that the CJEU did not agree with the Commission which, at the time of writing, has not happened in any of other EU high-profile cases.

Continental Can was the first firm to be subjected to the abuse of dominance test under

Article 102. Keeping this fact in mind, it is not surprising that Continental tried to argue that dominance and abuse have to exist in the same market for Article 102 to apply. At a later stage of the development of law on dominance, it will become clear that Article 102 will also be violated when firm’s anticompetitive actions go beyond its primary market.671 The CJEU, in Continental, made a very important point, i.e. “the provision is not only aimed at practices which may cause damage to consumers directly, but also at those which are detrimental to them through their impact on an effective competition structure, such as is mentioned in [Article 3(b) of the TFEU]”672 which provides for “the establishing of the competition rules necessary for the functioning of the internal market”. This shows that the CJEU, from the very first judicial interpretation of Article 102, held that dominance test has to be assessed in a way which would be in conformity with the main goals of the TFEU. In other words, the functioning of the internal market should not be fettered by the abuse of a dominant position.