United Brands Co v Commission (1978)

Facts
UB produced bananas.
Accused of infringing Article 86 (now 82).
Product market
Initial issue concerned definition of relevant product
market.
UB argued bananas part of larger market in fresh
fruit, and cross-elasticity between bananas and other fruit was high.
Commission contended cross-elasticity low and bananas
were distinct market:
– Constituted important part of diet of certain
sections of consumers (eg v young, elderly, sick).
– Had specific qualities which made other fruits
unacceptable as substitutes (eg taste, softness, seedlessness, constant year-long
production)
For reasons given by Commission, ECJ held banana market
sufficiently distinct from market for other fresh fruit.
[Problem with reasoning is that v young, elderly and
sick are not the whole range of consumers.
Really important people are the marginal consumers –
people who may switch to different fruit]
Geographic market
UB said Commission had misconstrued nature of
geographic market.
Commission had excluded France, Italy and UK from
market due to particular trading conditions that existed there, eg preferential
treatment for bananas coming from overseas territories of these countries.
ECJ held community had not established common
organization and agricultural market in bananas.
States other than three above however were completely
free markets; applicable tariffs and transport costs are necessarily different
but not discriminatory.
These 6 states form an area which is sufficiently
homogenous to be considered in its entirety.
Abusive behaviour
One allegation of abusive behaviour by UB was that it
had refused to supply distributor in Denmark.
UB argued this was because distributor had started to
sell competitor’s product and neglect sale of UB’s produce.
ECJ held that fact undertaking is in a dominant
position to does disentitle it from protecting its own commercial interests if
they are attacked.
Undertaking is allowed to take reasonable steps to
protect its interests, but such behaviour cannot be countenanced if its actual
purpose is to strengthen this dominant position and abuse it.
Sanction of refusal to supply by undertaking in
dominant position was in excess of what might reasonably be contemplated as a
sanction for conduct similar to that for which UB blamed distributor.
Correct legal test
Question is whether undertaking can ‘prevent effective
competition being maintained on the relevant market by giving it the power to
behave to an appreciable extent independently of its competitors, customers and
ultimately of its consumers’.