Transcript Presentation

Abuse of Dominance
Case Studies
Layout of the Session
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More detail on predatory pricing
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Presentation of Aberdeen Journals case
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Group discussion and feedback
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Cross check against actual findings of the case
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Quick discussion on BA case
Recap on Abuse of Dominance
Assessment
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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)
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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
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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)
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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)
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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
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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