Sector-specific essential facilities doctrine : a tool for remedying distortions of innovation competition for future markets

Abstract

In high-value-added industries the anticompetitive effect of refusals to deal may not pertain to existing downstream markets but to the process of innovation competition for future markets. This reveals the limitation of the current exceptional circumstances test tailored by EU judicature under what could be called a European essential facilities doctrine. The strictness of the current legal framework has resulted in its circumvention on certain occasions through the imposition of ad hoc facility sharing obligations on dominant undertakings. Against that background, the article proposes a predictable and sector-specific approach to the assessment of input foreclosures that are capable of restricting market-creating innovations. It is based on a two-stage legal test. First, the latter nuances antitrust liability according to the way in which the essential resource holder has attained that status. Second, the presence of three conditions shaping the innovation process in the relevant industry is investigated. They include: (i) the degree of transparency of research and development (R&D); (ii) the extent to which the essential resource holder innovates optimally in the R&D area from which it excludes rival innovators; and (iii) the intensity of consumer harm stemming from such exclusions. The information generated through this two-stage inquiry is essential to mitigate excessive risks for innovation incentives associated with antitrust intervention in the context of competition for the market and facilitate legal certainty. It is argued that an innovation-enabling essential facilities doctrine can function only as sector-specific.