Abuse of Dominance

Holding a large share of a market is lawful; the offence lies in how a very powerful firm uses that position. Authorities first define the relevant market, then judge dominance from market share, barriers to entry and the bargaining strength of buyers. Abuses fall into two groups. Exclusionary abuses push rivals out: pricing below cost, exclusive dealing, loyalty rebates that lock customers in, or refusing to supply an input a competitor needs. Exploitative abuses squeeze customers, for example through excessive prices. A dominant firm carries a special responsibility, so behaviour that is fine for a small player can be unlawful for it, unless the firm shows an objective justification or real efficiencies. In the United States the closest rule is the ban on monopolisation, which has its own test. A firm near the dominance line usually has lawyers vet pricing, bundling and exclusivity terms before they reach customers, because fines are often set as a share of turnover.

A software company holds about 70% of the market for hospital scheduling systems. It starts selling its scheduling product only together with its billing module, and offers the bundle at a price below what rivals can match. Two competitors lose their hospital clients, and the competition authority opens an inquiry into tying and exclusion.