## Facts

- AKZO Chemie BV manufactured organic peroxides, including benzoyl peroxide used in flour additives and plastics.
- Engineering and Chemical Supplies (ECS), a smaller producer focused on flour additives, began expanding into the plastics sector where AKZO was strong.
- After ECS won plastics business from AKZO by offering lower prices, AKZO threatened to retaliate in flour additives unless ECS withdrew from plastics.
- AKZO then implemented selective price cuts directed at ECS’s flour-additive customers, while maintaining higher prices for other customers.
- The targeted prices were substantially below ECS’s offers and, for certain customers, below AKZO’s own costs.
- The Commission found additional exclusionary conduct, including securing competitors’ offer information and imposing exclusive purchasing obligations on some customers.
- The Commission determined AKZO held a dominant position in the Community market for organic peroxides, found an abuse of dominance, and imposed a 10 million ECU fine.
- AKZO sought annulment of the Commission decision before the Court of Justice.

## Issues

1. Whether the Commission infringed AKZO’s rights of defense by limiting access to the file or by an insufficiently clear statement of objections.
2. Whether the relevant product market was properly defined and whether AKZO held a dominant position within it.
3. When below-cost pricing by a dominant firm constitutes an abuse, including the treatment of prices below average variable cost (AVC) and prices between AVC and average total cost (ATC).
4. Whether the conduct was objectively justified as lawful meeting of competition.
5. Whether obtaining competitors’ offer information and imposing exclusive purchasing obligations constituted abusive conduct in context.

## Decision

- The Court dismissed AKZO’s action in substance and upheld the Commission’s finding of dominance and abuse, and essentially upheld the fine.
- The Court held the rights of defense were respected: the Commission need not disclose its entire file, but it may not rely on undisclosed documents; AKZO had an effective opportunity to respond to the evidence used.
- The Court affirmed a relatively narrow relevant product market for organic peroxides based on limited interchangeability for constant needs.
- The Court confirmed AKZO’s dominance, relying on its stable market share of about 50% and related market conditions; very large shares are, absent exceptional circumstances, strong evidence of dominance.
- The Court found abuse through selective, targeted price cuts designed to exclude ECS, including prices below AVC and prices below ATC.
- The Court rejected justification based on price alignment, given the selective, below-cost character of the pricing and the surrounding threats and strategy.
- The Court upheld findings that acquisition of competitors’ offer information and exclusive purchasing obligations were abusive when part of an exclusionary plan.

## Legal Principles

- Rights of defense require that an undertaking be able to respond effectively to the evidence on which the decision is based; the Commission is not obliged to disclose the entire administrative file but cannot base findings on undisclosed documents.
- The statement of objections must clearly set out the facts relied upon and their legal classification so the undertaking can defend itself.
- A “very large” and stable market share is, save in exceptional circumstances, evidence of a dominant position.
- Predatory pricing by a dominant firm is abusive when aimed at eliminating a competitor:
  - Pricing below AVC is presumed abusive because it is rational only as a means of excluding rivals.
  - Pricing below ATC but above AVC is abusive when it forms part of a plan to eliminate a competitor, shown by contextual evidence (e.g., threats, selectivity, internal strategy documents).
- A dominant firm may meet competition only within reasonable limits; purported alignment will not justify selective, loss-making measures linked to exclusionary intent.
- Conduct such as systematically obtaining competitors’ confidential offer information and imposing exclusivity obligations may constitute abuse when used to exclude competitors and restrict remaining competition.

## Conclusion

The Court sustained the Commission’s determination that AKZO abused a dominant position by selectively cutting prices below cost to drive a smaller rival from the market, and it articulated a structured predatory-pricing approach distinguishing prices below AVC from prices between AVC and ATC based on evidence of an exclusionary plan.


AKZO Chemie BV v. Commission, Case C-62/86, 1991 E.C.R. I-3359 (C.J. July 3, 1991)