Refusal to Supply – Case of Asiana Foods

According to Article 102 TFEU, any misuse by one or more companies in a dominant position within the common market or a significant part of it shall be banned as incompatible with the common market because it may impact trade between member countries; such abuse may comprise in particular imposing dissimilar conditions to relevant transactions with trading players thereby putting them in a competitive disadvantage. The refusal to supply appears to be a right that firms would maximize because the establishment of services has the right to bar and refuse, but this is not the real scenario of affairs since the refusal to supply commodities is a violation of EU Commercial and Competition law. Article 82EC maintains that the refusal to supply is abused if a dominant firm implements it to disadvantage the competitors. In this case, the abuse would mean applying unfair trading policies to inferior firms by refusing to trade or supply. Therefore, this essay entails a refusal to supply and whether there are fixed rules of application or if there are any existing principles to uphold such an abuse. The paper will look into the scenario of refusing essential services and apply it to competition law. Moreover, the essay will look into the composition of abuse according to Article 82EC and the vital elements that address such abuse in the Article.

When advising Asiana Foods, I will first elaborate on the elements that constitute the refusal of goods supply policy. According to the essential facility, a mandate to supply goods or services resulting from these goods or services not being supplied will negatively impact living standards. Examples of essential services are the supply of clean water, heating energy, electricity, and medical care. If the named services and goods are not supplied to primary individuals, their fundamental needs would not be met. Under the competition law, essential services comprise the basic rule that there is a contract requirement to supply and not discriminate during the supply. The primary reason why the EU has a broad interpretation regarding the misuse of the refusal to supply is that it operates in a market that is not completely integrated. Additionally, the EU broadly interprets and tracks the abuse of refusal to supply. It wants to ensure that local laws are not promoting the right for dominant firms to refuse the supply of critical services.

The EU’s concept is true on the ground that there will be a likelihood that every country will permit refusal to supply on the protectionist grounds, in accordance to solely promoting domestic essential goods and services hence leaving consumers to suffer at the mercy of this local pricing since these consumers must have access to these basic goods and services. This is the abuse of refusal to supply essential services like energy, medical, public transport, and water regimes because they are owned by the state or subsidised by the state, hence promoting monopolies instead of competition. Concerning an essential service, the EU has a very narrow interpretation that is only limited to primary services and any goods or services safeguarded by local laws to block the access rivals where the lack of competition would lead to severe or permanent damage to consumers. Consequentially, this would make the actions of the country or firm in question uneconomic. The EU law has elaborated that the plaintiff’s function must be that of a primary player in ascertaining that competition is promoted. But it is also likely that the defendant’s actions would be inhibitive irrespective of the plaintiff’s function in the economy.

The broadness of the EU law’s interpretation of the elements leading to the abuse of the refusal to supply is due to its principle being used to ascertain that firms and states are not censoring competition in basic services. Therefore, the EU has widened to include any good services and commodities where a nation’s state laws are very protectionist to the extent that market competition is barred. Moreover, the EU has included competition barring to interpret cases of dominant firms refusing to supply goods and services to competitors, which leads to refusal due to their dominant status described as an anti-competitive activity. The EU’s embracing such a stringent line is that protectionist and state-owned organisations’ availability is much more common.

The key element in Article 82EC is that the abuse can be executed by a firm that has huge dominance in the market. Therefore, this Article examines whether a firm’s actions in a dominant position are done purposefully to impede competition or influence the market structure. The types of abuse mentioned in Article 82EC include predatory pricing, exploitation, excessive pricing, rolling loyalty, anti-competitive exclusionary acts tying and quantity rebates, and refusal to supply. Therefore, the primary aim of Article 82 is to ensure that there is sufficient freedom of production, movement, and supply by firms of all magnitude and various member states without allowing dominant firms to construct an abusive and exploitive market for customers and violating the essential competition laws of the EU.

Asiana Foods first need to understand all the elements surrounding refusal to supply or deal. If a dominant firm refuses to form an unfair market, then there is a threat, and such a danger is equal to punishment. But in this case, it is not like other basic articles where there is a broader interpretation regarding the available defences. The applicable defences include forwarding integration, reaction to shortages, and treated as normal competitive behaviour. This implies that it is a broader interpretation of the defence, and it appears to be limitless. For instance, in United Brands, its reselling prohibition was upheld as it was interpreted to be permissible since the primary focus was to safeguard the brand name and ascertain that consumers get high-quality goods. As such, the principal question to ask is whether that kind of refusal can be justified objectively. In this case, a legitimate stock shortage is justifiable on how an organization can supply what they do not produce or have. Considering prospective versus current customers’ issue, if there are shortages, it is advisable to supply prospective instead of existing customers.

In the scenario of encouraging competition and rivalry in BBI/Boosey & Hawks, the court determined that a dominant firm is permitted to review and halt a relationship with a customer. But in the case of United Brands, it was held that it is hard to stop in a longer customer relationship and violate Article 82. It was determined that United Brands aimed to give a threatening message to rivals. If it is noticed that a customer has a bad or poor credit score, the refusal of supply is justifiable. Forward integration is an accepted approach of expansion for ventures implying that it takes over another firm closer to the retail stage when an organization merges. The issue of concern is the implemented decisions inhibiting competition that is not supplying to firms’ rivals at a similar stage as their new acquisition. In a case involving Commercial Solvents, it was determined that refusing to supply to a rival of its Italian subsidiary was a misuse of refusal to supply as it is a restricted competition. In another case involving Polaroid ISS Europe, it was ruled that refusing to supply because the customer ordered too much was abuse in that they had a chance to supply what they could manage to produce. Therefore, the key point of Article 82EC is that the abuse is formed based on deliberate or the practices of a dominant firm will lead to a near-monopoly and inhibit competition amongst distributors and suppliers. This is a crucial aspect because creating a monopoly causes exploitation for the supplier versus the consumer. It can also distort the ground of the basic competition laws.

As a general rule, suppliers have a right to choose who to do business with, and we have myriad reasons why a supplier may choose to refuse to supply goods to a particular customer. For instance, a supplier may decide not to do business on the ground relating to the business reliability, the presentation of goods and services, and the high cost of delivery. Moreover, a wholesaler may find it challenging to deal with everyone who asks for an opportunity to work with them. Suppose a supplier decides to refuse to supply goods or services, and they give the wrong reason. In that case, the client business can negotiate terms with the supplier in question or seek alternative suppliers. Asiana Foods did a vertical refusal to deal, which means trying to leverage or control the market by choosing certain people to do business. However, this does not translate into saying that a company is prohibited from choosing who to do business with. Still, if the choice is made through a conspiracy with another competitor, they are likely breaking the competition law. Asiana Foods should understand that refusal to deal is also a breach of the anti-trust laws since its detriments the boycotted business by removing them a market, facility, or product supply. By destroying the boycotted business in that manner, the competing company monopolises the market by unreasonably blocking competition.

The best advice I would give to Asiana Foods is to halt their refusal practices since it is likely to be interpreted as abuse. There is a possibility that Asiana Foods’ acts will be interpreted as refusing to supply a potential competitor for fear of rivalry. Asiana’s Foods case is the same as that of BBI Boosey & Hawks in the case of the interim measure. In this case, it was identified that in an exclusionary approach, if a supplier refuses to supply goods to a customer who has the potential of becoming a rival, it can be treated as abuse. Just like it was determined in BBI Boosey & Hawks that the act of a dominant firm to refuse to supply brass to a distributor immediately had ambitions to begin manufacturing goods in the same product line in the future was a misuse of dominant position. The Commission ruled that taking reasonable approaches by the dominant has to be fair and proportional, but withholding all supply all over a sudden is abusing its dominant position in the market.

Therefore, my final word to Asiana Foods will be that it is illegal for a firm to monopolise and try to monopolise trade, implying that it should not act to uphold and gain a dominant position by it has the market power eliminating rivals or inhibiting the entry of new competitors. While it is not illegal for a firm to have a monopoly position, it becomes unlawful to use aggressive methods to acquire a monopoly via unreasonable approaches.

In conclusion, the foundation of Asiana Foods’ advice relies on the premises of Article 82EC, which needs comprehensive compliance by the member states. Therefore, although broad in its usage, the refusal to supply exists to ascertain that competition is not distorted and stifled. This logic exists to help classify refusal to supply by companies as a violation of the competition law since it permits a situation where there are business affairs barriers to minor companies or organisations from other member states. Punishment occurs when there is a violation of competition law, for instance, the horizontal creation of subsidiaries and the acquisition of interests nearer to the distribution level. In the case of Asiana foods, to ensure that the competition law is protected and does not go against Article 82EC, they will need to engage their rivals on why they have stopped supplying their rice. The reasons for refusal to supply the rice must be credible and free from the conspiracy. Asiana Foods should not create the concept of monopoly power by excluding potential competitors from practicing businesses with the relevant product market. For Asiana Foods to prove that it did not breach the competition law, there should be no signs of excluding competitors. When Falafel ltd seeks the EU court’s advice, Asiana Foods should not confirm that it was illegally denied access to goods; hence, there is a scheme to exclude it from the market or reduce its market share.

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