Report on the Analysis of Refusal to Deal with a Rival Under Unilateral Conduct Laws

This Report was prepared by the ICN Unilateral Conduct Working Group (UCWG) for the 9th Annual Conference of the ICN in April 2010. This year, the Working Group continued its work on the analysis of unilateral conduct by examining a dominant firm’s refusal to deal with a rival. The Report is based on responses to a questionnaire1 submitted by competition agencies and non-governmental advisors (NGAs) from 43 jurisdictions. Most agencies stated that their competition laws do not specifically define a refusal to deal. The agencies define refusal to deal much like the questionnaire did as the unconditional refusal by a dominant firm (or a firm with substantial market power) to deal with a rival, including in particular refusals to license intellectual property rights or to grant access to an essential facility. Several agencies define a refusal to deal more broadly to include refusals to deal with non-rivals or refer to a wider range of practices than those discussed in the Report. Most agencies noted that a refusal to deal need not consist of an outright refusal. These agencies also recognize a “constructive” refusal to deal, which is generally characterized by the dominant firm’s offering to supply its rival on unreasonable terms, such as extremely high prices, degraded service, or reduced technical interoperability. Most agencies also recognize “margin squeeze” as a potential antitrust violation, which occurs when a dominant firm charges a price for an input in an upstream market that, compared to the price it charges for the final good using the input in the downstream market, does not allow a rival in the downstream market to compete.