Abuse of economic dependence and its interaction with competition policy: the economics perspective

Abstract

A number of jurisdictions, including in the European Union, have adopted legal provisions that ban situations in which one contractual party holds and abuses a position of economic strength relative to a counterparty. This practice, typically referred to as ‘abuse of economic dependence’, can be invoked by companies before national courts, or by or before national competition authorities if they deem that such abuse has implications for competition. A recent yet sudden increase in abuse of economic dependence decisions by national competition authorities indicates that this enforcement tool is gaining traction, possibly due to its lower evidentiary bar compared to the more established abuse of dominance under EU or national competition law. However, if competition policy is intended to protect competition and ultimately consumers, it is unclear how the relationship between two companies can affect competition, especially if the stronger negotiating party is not dominant and the weaker party is too small to make a tangible impact on consumer welfare ‒ unless the same contractual terms are imposed on a large number of weaker parties. This article sets out the principal provisions of such legislation in Belgium, France, Germany and Italy and its enforcement in France and Italy, before considering the economics of bargaining and offering some policy recommendations and conclusions. This article shows that the issues that laws prohibiting the abuse of economic dependence are intended to safeguard can be dealt with by other means, for example contract law. If it is intended to apply these legal provisions to highly innovative sectors such as digital, other regulatory tools may be better placed to bring competition and fairness in the online world, such as the EU’s Digital Markets Act. Nevertheless, it is likely that these enforcement tools will be used more often. As such, it is important to set high thresholds for when such enforcement tools can be used by competition authorities and to introduce quantitative analyses to inform their assessment.