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16 October 2008
In its decision of April 8 2008 the Supreme Court ruled on the abuse of a dominant market position through promotional giveaways that conformed to the provisions of the Act against Unfair Competition.(1) The court had to judge the legitimacy of a newspaper that held a dominant position offering promotional giveaways to potential subscribers. When buying an annual subscription for €225.60, subscribers also received a voucher for a free motorway tax sticker, which was officially sold for €72.67.
In its decision the Supreme Court considered that abuse of a dominant position occurs when an undertaking that is economically superior to its competitors influences market developments in such a way that it has negative effects on market and competitive relations. However, an undertaking holding a dominant position and restricting competitors does not automatically abuse its position.
As the mere market presence of a dominant undertaking has the effect of preventing or lessening competition, such undertakings must be seen to be behaving fairly. Therefore, dominant undertakings are prohibited from forcing competitors out of the market by unfair means in order to strengthen their own position. Market-related practices are considered unfair when an undertaking convinces not through quality and price, but through actions that have nothing in common with basic economic principles of competition.
There are no explicit provisions in Austrian antitrust law to prevent dominant undertakings from promoting their sales or services through promotional giveaways, provided that these giveaways themselves do not violate the relevant provisions of the Act against Unfair Competition. Nonetheless, selling products below their acquisition price may be considered an illegal abuse of dominance, thus infringing Section(5)(1)(5) of the Cartel Act. The wording of Section 5(1)(5) does not cover the use of promotional giveaways as additional extras to the main product.
However, an undertaking holding a dominant position could impede the intended purpose of Section 5(1)(5) of the Cartel Act by selling its products on the relevant market at their acquisition price together with additional promotional giveaways. Taking into account the value of the promotional giveaway, the offered product may finally be sold below its acquisition price. Such behaviour clearly affects two different relevant markets: the market of the main product and the market of the product used as a promotional giveaway. To assess whether abuse of a dominant position has occurred, it is necessary to examine the economic effects, taking both markets into consideration. The behaviour will be deemed as abusive only if both relevant markets are affiliated with one another under the meaning of the antitrust law.
It can be concluded that promotional giveaways offered by market dominant undertakings, which are per se permitted according to the Act against Unfair Competition, may violate Section 5(1)(5) of the Cartel Act if: (i) the two relevant markets of the main product and the giveaway are affiliated in such a way that consumers on one market may be potential consumers on the other; and (ii) the price charged for the main product is lower than its acquisition price plus the value of the promotional giveaway.
In the present case the two relevant markets were not affiliated with one another, so no abuse was established.
For further information on this topic please contact Dieter Hauck or Peter Resch at Preslmayr Attorneys at Law by telephone (+43 1 533 16 95) or by fax (+43 1 535 56 86) or by email (firstname.lastname@example.org or email@example.com).
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