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Abuse of Dominance
Case Studies
Layout of the Session
More detail on predatory pricing
Presentation of Aberdeen Journals case
Group discussion and feedback
Cross check against actual findings of the case
Quick discussion on BA case
Recap on Abuse of Dominance
Assessment
Define the relevant market
Determine if the undertaking under investigation
is dominant
Has the undertaking abused its dominant
position?
If 'yes' determine an appropriate penalty
Predatory Pricing (1)
Is pricing below cost in order to force a competitor from the
market or prevent a prospective competitor from entering
It's assumed the loss is recouped via excessive prices
after competitive threat is removed
Under European law:
- Price > Average Total Cost (ATC) = No Abuse
- ATC > Price > Average Variable Cost (AVC) = Abuse if
intent established [Case 62/86 AKZO v Commission (1991) ECR I3359]
- Price < AVC = Abuse
Probability of recoupment does not need to be established
[Case C-333/94P Tetra Pak v Commission (Tetra Pak II) (1996) ECR I-5951]
Predatory Pricing (2)
Under US law below cost pricing is only an
abuse if:
- price is found to be below AVC
AND
- there is a dangerous probability that alleged
predator will be able to recoup losses through
monopoly prices after rival has exited
[Brooke Group Ltd v Brown & Williamson Tobacco Corp 509 US 940 (1993)]
Predatory Pricing (3)
From a US perspective EU approach risks
penalising pro-competitive behaviour and puts
safe-harbour around inefficient firms, reducing
incentives to innovate
From an EU perspective the US approach may
allow anti-competitive behaviour to 'slip through
the net' resulting in an 'as-efficient' firm exiting
the market
Different approaches can have a material effect
on markets
Loyalty discounts
Occur where discounts are given to customers
who purchase all, or a specified portion of their
requirements for a given product from a
particular firm
Considered abusive in the EU if given by a
dominant firm unless short-term or cost justified
as deemed exclusionary
In the US such discounts are only abusive if
below cost in which case rules on predation kick
in