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Strategic Underinvestment as an Abuse of Dominance under EU Competition Rules

Pietro Merlino and Gianluca Faella, World Competition: Law and Economics Review, Vol. 36, No. 4, 2013.

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The latest frontier of the essential facility doctrine under EU competition law is the use of antitrust rules to impose on dominant firms a duty to invest in infrastructure development. While a genuine lack of capacity has traditionally been considered an objective justification for a refusal to grant access to an essential facility, the decisions issued by the Italian Competition Authority in Eni/TTPC and by the Commission in GDF Suez and Eni have questioned the dominant firms’ freedom to decide whether, to what extent and under what conditions to invest in infrastructure development. In all the above-mentioned cases, the antitrust authorities were ultimately concerned with the dominant firms’ alleged failure to make adequate investments in infrastructure development, as a consequence of the conflict of interest inherent in vertical integration. However, the objections raised by the Italian Competition Authority and by the Commission rest on profoundly different – and, to a certain extent, contradictory – grounds. Whereas the Eni/TTPC decision appears to have been heavily influenced by an extremely complex and peculiar set of facts, the GDF Suez and Eni decisions were based on the essential facility doctrine. The broad and flexible interpretation of this doctrine set forth by the Commission seems to have further lowered the threshold above which antitrust authorities may find abusive a refusal to grant access to an important facility. Furthermore, the Commission introduced a notion of strategic underinvestment based on the independent facility operator test, which seems extremely discretionary and difficult to apply.

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