Predatory Pricing: A Framework for Analysis

Open access

Abstract

One of the key principles of EU Competition law is a prohibition of the abuse of a dominant position established in the Article 102 of the TFEU. Predatory pricing is one of the forms of the abuse of dominant position. To decide whether the dominant undertaking has referred to predatory pricing it is necessary to check several elements: costs and prices of the dominant undertaking; the possibility to recoup losses; intent; and objective justifications. The Court of Justice, the European Commission and competition institutions in most member states perform extensive analysis of a relationship between costs and prices of a dominant undertaking while dealing with cases on predatory pricing. However, we believe that competition authorities should pay more attention to evaluation and to whether pricing will cause elimination of competitors and damage to consumers. This article critically reviews the framework of the analysis of predatory pricing in the practice of the Court of Justice and the European Commission.

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • 1. Abel Mateus. M. “Predatory pricing: a proposed structured rule of reason.” European Competition Journal Vol. 7 No. 2 (2011): 243–267.

  • 2. Ahlborn Christian and Bill Allan. “The Napp Case: A study of predation?” World Competition Vol. 26(2) (2003): 233–262.

  • 3. Akman Pinar. “'Consumer Welfare' and Article 82EC: Practice and Rhetoric.” CCP Working Paper No. 08-25 (July 31 2008) // https://ssrn.com/abstract=1210802.

  • 4. Andrews Paul. “Is meeting competition a defence to predatory pricing? The Irish Sugar decision suggests a new approach.” European Competition Law Review Vol. 19(1) (1998): 49–57.

  • 5. Areeda Phillip and Donald F. Turner. “Predatory Pricing and Related Practices under Section 2 of the Sherman Act.” Harvard Law Review Vol. 88 No. 4 (1975): 697-733.

  • 6. Baumol William J. “Predation and the Logic of the Average Variable Cost Test.” Journal of Law and Economics Vol. 39 No. 1 (1996): 49-72.

  • 7. Bavasso Antonio. “The role of intent under article 82 EC: from ‘flushing the turkeys’ to spotting lionesses in Regent’s park.” European Competition Law Review Vol. 26(11) (2005): 616–623.

  • 8. Bolton Patrick Joseph F. Brodley and Michael H. Riordan. “Predatory Pricing: Strategy Theory and Legal Policy.” Georgetown Law Journal Vol. 88 (2000): 2239–2330.

  • 9. Buttigieg Eugene. “Consumer Interests and the Antitrust Approach to Abusive Practices by Dominant Firms.” European Business Law Review Vol. 16 No. 5 (2005): 1191–1285.

  • 10. Chang Howard H. David S. Evans and Richard Schmalensee. “Has the Consumer Harm Standard Lost Its Teeth?” AEI-Brookings Joint Center Working Paper; MIT Sloan Working Paper No. 4263-02 (August 13 2002) // https://ssrn.com/abstract=332021.

  • 11. “Comments of Professor Elhauge on DG Competition Discussion Paper on Exclusionary Abuses” // http://ec.europa.eu/competition/antitrust/art82/contributions.html.

  • 12. “Commission Press Release on Digital Undertakings.” IP/97/868 (October 10 1997).

  • 13. Cseres Kati. “The Controversies of the Consumer Welfare Standard.” The Competition Law Review No. 2 (2007): 121–173.

  • 14. Cyrus Austin. Price discrimination and related problems under the Robinson-Patman act. Revised edition. Committee on Continuing Legal Education 1954.

  • 15. De la Mano Miguel and Benoît Durand. “A Three-Step Structured Rule of Reason to Assess Predation under Article 82.” Office of the Chief Economist Discussion Paper (December 12 2005): 1–48 // http://ec.europa.eu/dgs/competition/economist/pred_art82.pdf.

  • 16. Durrance Christine Piette. “Proposed standards for identifying predation: Williamson’s perspective and the Court.” The Antitrust Bulletin Vol. 55 No. 3 (2010): 663–678.

  • 17. EAGCP. “An economic approach to Article 82” (July 2005) [interactive] // http://ec.europa.eu/comm/competition/publications/studies/eagcp_july_21_05.pdf.

  • 18. Eilmansberger Thomas. “How to distinguish good from bad competition under article 82 EC: In search of clearer and more coherent standards for anti-competitive abuses.” Common Market Law Review No. 42 (2005): 129–177.

  • 19. Elhauge Einer R. “Defining Better Monopolization Standards.” Stanford Law Review (2003): 253–344.

  • 20. European Commission DG Competition. “DG Competition discussion paper on the application of Article 82 of the Treaty to exclusionary abuses” (December 2005) // http://ec.europa.eu/comm/competition/antitrust/art82/discpaper2005.pdf.

  • 21. Gal Michal. S. “Below-cost price alignment: meeting or beating competition? The France Telecom case.” European Competition Law Review Vol. 28(6) (2007): 382–391.

  • 22. Geradin Damien and O’Donoghue Robert. “The Concurrent Application of Competition Law and Regulation: The Case of Margin Squeeze Abuses in the Telecommunications Sector.” Journal of Competition Law and Economics (2005): 355–425.

  • 23. Gyselen Luc. “Rebates: Competition on the merits or exclusionary practice?”: 267–290. In: Claus-Dieter Ehlermann and Isabela Atanasiu eds. European Competition Law Annual 2003 What is an Abuse of a Dominant Position? Hart Publishing 2006.

  • 24. Gravengaard Martin Andreas. “The meeting competition defence principle – a defence for price discrimination and predatory pricing.” European Competition Law Review Vol. 27(12) (2006): 658–677.

  • 25. Grout Paul A. “Recent Developments in Definitions of Abusive Pricing in European Competition Policy.” CMPO Working Paper Series No. 00/23 (2000) (University of Bristol).

  • 26. “Higher Regional Court Düsseldorf Provisionally Confirms the Prohibition of Lufthansa’s Abusive Pricing Strategy.” FCO Press Release (April 10 2002) // www.bundeskartellamt.de/wEnglisch/News/Archiv/ArchivNews2002/2002_04_10.shtml.

  • 27. Fox Eleanor M. “Monopolization and dominance in the United States and the European Community: Efficiency opportunity and fairness.” Notre Dame Law Review No. 981 (1986): 983–1018.

  • 28. Hills Carla A. Antitrust Advisor. New York 1978.

  • 29. Hurwitz James and William Kovacic. “Judicial analysis of predation: the emerging trends.” Vanderbilt Law Review Vol. 35 (1982): 63–157.

  • 30. International Competition Network “Report on Predatory Pricing”: 1–43 // http://www.internationalcompetitionnetwork.org/uploads/library/doc354.pdf.

  • 31. Jones Paul. “Analyzing Refusal-to-Deal Cases Under Brooke Group's Predatory Pricing Test: The Tenth Circuit Misses the Mark in Christy Sports LLC v. Deer Valley Resort Co.” Brigham Young University Law Review No. 1 (2010): 135–148.

  • 32. Joskow Paul and Alvin A. Klevorick. “A Framework for Analyzing Predatory Pricing Policy.” Yale Law Journal Vol. 89 No. 2 (1979): 213–270.

  • 33. Koller Richard H. “The Myth of Predatory Pricing: An Empirical Study.” Antitrust Law and Economic Review Vol. 4 (1971): 105–124.

  • 34. Koller Richard H. Predatory Pricing in a Market Economy. New York: Arno Press 1978.

  • 35. Kon Stephen and Turnbull Sarah. “Pricing and the Dominant Firm: Implications of the Competition Commission Appeal Tribunal’s Judgment in the NAPP Case.” European Competition Law Review (2003): 70–86.

  • 36. Korah Valentine. An Introductory Guide to EC Competition Law and Practice. Hart Publishing 2000.

  • 37. Kreps David and Wilson Robert. “Reputation and Imperfect Information.” Journal of Economic Theory Vol. 27 (1982): 253-279.

  • 38. Kroes Neelie (European Commissioner for Competition Policy). “Preliminary Thoughts on Policy Review of Article 82.” Speech at the Fordham Corporate Law Institute New York (September 23 2005) // http://europa.eu/rapid/press-release_SPEECH-05-537_en.htm?locale=en.

  • 39. Lang Temple. “European Community Antitrust Law: innovation markets and high technology industries.” Fordham International Law Journal Vol. 20 (1996): 717–818.

  • 40. Leslie Christopher R. “Predatory pricing and recoupment.” Columbia Law Review Vol. 113 No. 7 (2013): 1695–1772.

  • 41. Liebeler Wesley J. “Whither predatory pricing? From Areeda and Turner to Matsushita.” Notre Dame Law Review (1986): 1052–1098.

  • 42. Lorenz Moritz Lübbig Maike and Russel Alexia. “Price Discrimination a Tender Story.” European Competition Law Review (2005): 352–386.

  • 43. Lowe Phillip (Director General EC Commission Directorate-General for Competition). “Consumer Welfare and Efficiency – New Guiding Principles of Competition Policy?” 13th International Conference on Competition and 14th European Competition Day Munich (March 27 2007).

  • 44. Lowe Phillip. “DG Competition's Review of the Policy on Abuse of Dominance.” Fordham Competition Law Institute (2004).

  • 45. Lowe Phillip. “EU competition practice on predatory pricing.” Introductory address to the Seminar ‘Pros and Cons of Low Prices’. Stockholm (December 5 2003) // http://ec.europa.eu/comm/competition/speeches/text/sp2003_066_en.pdf.

  • 46. Lowe Phillip. “Monopolization versus abuse of dominant position.” Panel discussion statement Fordham Competition Law Institute (2004).

  • 47. Mastromanolis Emmanuel. “Predatory Pricing Strategies in the European Union: A Case for Legal Reform.” European Competition Law Review Vol. 19 (1998): 211–224.

  • 48. Milgrom Paul and Roberts John. “Predation Reputation and Entry Deterrence.” Journal of Economic Theory Vol. 27 No. 2 (1982): 280–312.

  • 49. Moisejevas Raimundas “The importance of the intent in predatory pricing cases” Jurisprudencija. No. 4(122) (2010): 319-334.

  • 50. Moisejevas Raimundas “Recoupment of losses by the dominant undertaking which allegedly have used predatory pricing and legality of actions” Jurisprudencija. No. 2(120) (2010): 289-303.

  • 51. Moisejevas Raimundas “Objective justification in predatory pricing” Jurisprudencija. No. 18(1) (2011): 213-232.

  • 52. Moisejevas Raimundas Novosad Ana Bitė Virginijus. “Cost benchmarks as criterion for evaluation of predatory pricing.” Jurisprudencija. No. 19(2) (2012): 585-603.

  • 53. Moisejevas Raimundas and Novosad Ana. “Some thoughts concerning the main goals of competition law.” Jurisprudencija. No. 20(2) (2013): 627–642.

  • 54. Nagarajan Vijaya. “Predatory pricing: A search for a regulatory standard.” Working paper series No. 31 (1987) (Kingswood N.S.W. Nepean College of Advanced Education School of Business).

  • 155. Newton Carl. “Do predators need to be dominant?” European Competition Law Review Vol. 20 (1999): 121–143.

  • 56. O’Donoghue Robert. “Over-Regulating Lower Prices: Time for a Rethink on Pricing Abuses under Article 82 EC”: 371–427. In: Claus-Dieter Ehlermann and Isabela Atanasiu eds. European Competition Law Annual 2003: What is an abuse of a dominant position? Oxford and Portland Oregon: Hart Publishing 2006.

  • 57. O’Donoghue Robert Padilla Jorge. The Law and Economics of Article 82 EC. Oxford: Hart Publishing 2006.

  • 58. Ordover Janusz and Willig Robert. “An Economic Definition of Predation: Pricing and Product Innovation.” Yale Law Journal Vol. 91 No. 1 (1981): 8–53.

  • 59. Pettersson Tommy and Stefan Perván Lindeborg. “Comments on a Swedish case on predatory pricing – particularly on recoupment.” European Competition Law Review Vol. 22 (2001): 55–83.

  • 60. Posner Richard. Antitrust Law. 2nd ed. University of Chicago Press 2001.

  • 61. Posner Richard. Antitrust Law. An economic Perspective. University of Chicago Press 1976.

  • 62. Ratliff John. “Abuse of Dominant Position and Pricing Practices: A Practitioner’s Viewpoint”: 427–441. In: Claus-Dieter Ehlermann and Isabela Atanasiu eds. European Competition Law Annual 2003: What is an abuse of a dominant position? Oxford and Portland Oregon: Hart Publishing 2006.

  • 63. Ridyard Derek. “Exclusionary pricing and price discrimination abuses under Article 82: An economic analysis.” European Competition Law Review Vol. 23 (2002): 286–310.

  • 64. Ritter Cyril. “Does the law on predatory pricing and cross-subsidization need a radical rethink?” World Competition Vol. 27 No. 4 (2004): 613–649.

  • 65. Sharpes Dustin. “Reintroducing intent into predatory pricing law.” Emory Law Journal Vol. 61 (2012): 903–943.

  • 66. Slater Donald and Waelbroeck Denis. “Meeting Competition: Why it is not an Abuse under Article 82.” College of Europe Research Papers in Law (3/2004).

  • 67. Springer Ulrich. “Meeting Competition: Justification of Price Discrimination Under EC and US Antitrust Law.” European Competition Law Review (1997): 225–257.

  • 68. Steizer Irwin M. “Changing Antitrust Standard.” Remarks before the Workshop on Antitrust Issues in Today's Economy the Conference Board New York (March 5 1987).

  • 69. Vickers John. “Abuse of Market Power.” Economic Journal Vol. 115 No. 504 (2005): 244–261.

  • 70. Waelbroeck Denis. “Exclusionary Pricing and Price Discrimination under EC Competition Law”: 234–257. In: Mads Andenas Michael Hutchings and Philip Marsden eds. Current Competition Law Vol. III. British Institute of International and Comparative Law 2005.

  • 71. Waelbroeck Michael. “Meeting Competition: Is This a Valid Defence for a Firm in a Dominant Position?”: 481–490. In: A. Guiffrè ed. Divenire sociale e adeguamento del diritto: Studi in honore di Francesco Capotorti. 1999.

  • 1. Ahmed Saeed Flugreisen and Silver Line Reiseburo GmbH v. Zentrale zur Bekdmpfung unlauteren Wettbewerbs e. v. Case C-66/68 [1989].

  • 2. AKZO Chemie BV v. EU Commission. Case C – 62/86 [1991]

  • 3. Antitrust: Consumer Welfare at Heart of Commission Fight Against Abuses by Dominant Undertakings. Brussels: 3rd December 2008 IP/08/1877.

  • 4. A. Poultry Farms Inc. v. Rose Acre Farms Inc. 881 F.2d 1396 1401-02 (7th Cir. 1989) (Easterbrook J.).

  • 5. Aspen Skiing Co. v Aspen Highlands Skiing Corp. 472 U.S. 585 603 86 L. Ed. 2d 467 105 S. Ct. 2847 (1985).

  • 6. Boeing / Lockheed Martin / United Launch Alliance JV Case No. IV/M.3856. European Commission decision delivered on August 9 2005 recognizing that concentration is compatible with common market on the basis of Council Regulation No. 4064/89.

  • 7. BPB Industries and British Gypsum. Case T-65/89 [1993].

  • 8. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. 509 US 209 222–24 (1993).

  • 9. British Airways plc v. Commission of the European Communities. Case T-219/99 [2003].

  • 10. British Airways v. plc Commission of the European Communities. Case C-95/04 [2007].

  • 11. Commissioner of Competition v. Air Canada. Canadian Competition Tribunal (2003) 26 C.P.R. (4th) 476 [2003] C.C.T.D. No. 9.

  • 12. Commission Communication – Notice – Guidelines on the application of Article 81 (3) of the Treaty. OJ 101 27.4.2004.

  • 13. Communication from the Commission – Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings. 2009/C 45/02.

  • 14. Compagnie Maritime Belge SA (C-395/96 P) and Dafra-Lines A/S (C-396/96 P) v. EU Commission. [2000].

  • 15. Compagnie Maritime Belge SA (C-395/96 P) and Dafra-Lines v. Commission. Opinion of Advocate General Fennelly delivered on October 29 1998 Joined cases C-395/96 P and C-396/96.

  • 16. Deutsche Post AG. Decision of the European Commission of March 20 2001 OJ L 125/27.

  • 17. Decision of 18 February 2002 Case B-9-144/01. Federal Cartel Office.

  • 18. ECS v. AKZO-temporary measures. Decision of the European Commission on 29th of July 1983 case COMP/30.698 [1983] O.J. L252/13.

  • 19. Europemballage Corpn and Continental Can v. Commission of the European Communities. Case C-6/72 [1973].

  • 20. Eurofix-Bauco v Hilti. Decision of Commission of December 22 1987 case COMP/30.787 [1988] O.J. L 65/19.

  • 21. France Telecom SA v. Commission. Case C – 202/07.

  • 22. France Télécom v. Commission. Case T – 340/03.

  • 23. France Telecom SA v. Commission. Case C-202/07. Opinion of Advocate General Mazák delivered on September 25 2008.

  • 24. First Edinburgh / Lothian. Decision of the Office of Fair Trading (now CMA) No. CA98/05/2004 (April 29 2004) (Case CP/0361-01).

  • 25. GlaxoSmithKline Services Unlimited v. Commission of the European Communities. Case T-168/01 [2006].

  • 26. Guidelines on Vertical Restraints. OJ 2000 C 291/1.

  • 27. Hanson v. Shell Oil Co. 541 F.2d 1352 1359 (9th Cir. 1976) cert. denied 429 U.S. 1074 (1977).

  • 28. Hoffman-La Roche v. Commission. Case C – 85/76 [1979].

  • 29. Hilti v. Commission. Case T-30/89 [1991].

  • 30. IMS Health Inc. v. Commission of the European Communities. T-184/01 R Order of the President of the Court of First Instance [2001].

  • 31. International Air Indus. v. American Excelsior Co. 517 F.2d 714 724 (5th Cir. 1975) cert. denied 424 U.S. 943 (1976).

  • 32. Irish Sugar v. Commission. Case T-228/97 [1999].

  • 33. Lufthansa case decision 2002-02-18 B9-144/01. German Bundeskartellamt.

  • 34. Michelin v. Commission of the European Communities. Case T-203/01 [2003].

  • 35. Microsoft Corp v. Commission of the European Communities. Case T-201/04 [2007].

  • 36. NDC Health GmbH & Co KG and NDC Health Corporation v. Commission of the European Communities. C-481/01 Order of the President of the Court [2002].

  • 37. Northeastern Tel. Co. v. AT&T Co. 651 F.2d 76 88 (2d Cir. 1981) cert. denied 455 U.S. 943 (1982).

  • 38. Notice on the application of the competition rules to access agreements in the telecommunications sector. European Commission OJ C 265/2 [1998].

  • 39. Notice on the application of the competition rules to the postal sector and on the assessment of certain State measures relating to postal services. European Commission OJ C 39 06.02.1998.

  • 40. Notice on the application of competition rules to access agreements in the telecommunications sector – framework relevant markets and principles. OJ C 265 22.08.1998.

  • 41. Österreichische Postsparkasse AG and Bank für Arbeit und Wirtschaft AG v. Commission of the European Communities. Joined cases T-231/01 and T-214/01 [2006].

  • 42. Post Danmark A/S v Konkurrencerådet. Case C-209/10 [2012].

  • 43. Predation by Aberdeen Journals Limited. Case No. CA98/14/2002 September 16 2002 Decision of the Director General of Fair Trading.

  • 44. Standard Oil Co. of New Jersey v. U.S. 221 U.S. 1 (1911).

  • 45. Tetra Pak v. Commission. Case T-51/89 [1990].

  • 46. Tetra Pak International SA v. EU Commission. Case C – 333/94 [1996].

  • 47. United Brands v. Commission. Case C - 27/76 [1978].

  • 48. United States v. Grinnell Corporation. 384 U.S. 563 570 (1966).

  • 49. United States v. Microsoft Corporation. 253 F3d 34 54 (D.C. Circ.) (2001).

  • 50. United States v. Am. Tobacco Co. 221 U.S. 106 (1991).

  • 51. United States v. AMR Corp. 335 F.3d 1109 (10th Cir. 2003).

  • 52. Wanadoo case. European Commission decision delivered on July 16 2003 No. COMP 38.233 Commission press release lP/03/1025.

Search
Journal information
Impact Factor


CiteScore 2018: 0.42

SCImago Journal Rank (SJR) 2018: 0.138
Source Normalized Impact per Paper (SNIP) 2018: 0.281

Target audience: researchers and scholars in the fields of law and politics, with an acute interest in the cross-pollinations of disciplines, comparative approaches to regional issues, and active dialogue on pressing contemporary issues of theoretical and practical import.
Metrics
All Time Past Year Past 30 Days
Abstract Views 0 0 0
Full Text Views 1086 397 18
PDF Downloads 555 224 18