Refusal to supply

Refusal to supply goods or services, or the imposition of prices so high that they amount to a constructive refusal to supply, may be an abuse of a dominant position.

We can advise parties to disputes relating to alleged refusals to supply on how they might be able to put their case or develop relevant economic evidence to support or refute the analyses outlined below.

Before a dispute has erupted, we can advise potential complainants or potential recipients of complaints about the validity of concerns raised, the steps that might be taken to ensure compliance, or the prospects for a successful complaint or claim.

*Franck Latrémolière

*Nicholas Francis

Economic analysis of refusal to supply allegations

The case law draws a distinction between two types of refusal to supply abuse.

Where an existing supply is interrupted, the claim needs to establish that the object or effect of the refusal is to exclude a competitor from the market (the Commercial Solvents test). This will often involve financial analysis to establish whether the refusal to supply might have been justifiable by reference to legitimate objectives.

In cases where there had been no previous supply, additional tests have been defined by the courts. Thus in Magill, a refusal to start a new supply was found to be abusive as it prevented the appearance of a new product for which there was potential consumer demand. Other formulations of the test have been put forward in the IMS Health and Bronner preliminary rulings. The UK decision Burgess applied these tests to a factual case.

In both these cases, the person who refuses to supply must hold a dominant position (i.e. face no effective competition).

Refusal to supply can also be attacked under Article 81, irrespective of the existence of a dominant position, where there is evidence that the refusal is in fact the implementation of an anti-competitive agreement — for example, market sharing, or an exclusive distribution arrangement not covered by Article 81(3).

We are familiar with the interplay of these various tests and the ways in which they might be applied in practice.

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Reckon LLP is an economics consultancy with expertise in data analysis, economic regulation and competition law.