Moot III Flashcards
Why not act against excessive pricing?
1) normal market forces, have their way and will self-correct. Supra-competitive profits should, in the absence of barriers to expansion and entry, attract new entrants to the market. Excessive pricing is therefore generally not a concern as it produces pro-competitive effects. You can then accept periods where an undertaking earns a monopoly profit. Direct control will then have bad affects (AG Wahl).
2) Setting off high prices provides the necessary incentive to carry out taking risks and research and development (Supreme Court - Trinko 2004)
3) Competition authorities are generally reluctant to act on excessive pricing
What is the legal basis?
Art. 102 (2) (a) TFEU.
“directly or indirectly imposing unfair selling or purchasing prices or other unfair trading conditions”
The article states that the price must be unfair. Unfairness is beyond excessiveness, and both therefore must be proven.
Why act against excessive pricing?
1) If there is also exclusionary behaviour in order to maintain high prices causing the market not to automatic correct itself. But then a more suitable response would be to act against the exclusionary behaviour.
2) Market imperfections could be the cause, legislation would then be more a solution.
3) excessive pricing are not meant to be exploitative, but to foreclose a competitor in the downstream market.
General test
A prices is excessive when the price bears no reasonable relationship with the economic value of the product.
Excessive limb test
Is the difference between the costs actually incurred and the price actually charged excessive? The question is aimed at knowing if the firm is taking too large a margin or making too much profit.
An examination of the price charged with the cost is only one way among others (United Brands and AKKA/LAA). Competition authorities have a certain margin of manoeuvre’ with respect to the methodology. It may be sensible to combine different ones (AG Opinion AKKA/LAA).
In some cases a price/cost analysis may not be feasible. For example if there is no reliable cost data. Then it is more suitable to compare the disputed price with those in other markets.
There can be a comparison with:
- non dominant firms
- different point in time
- different geographical location (AG opinion)
Whichever methods of comparison there must be a ‘significant and persistent’ difference between the disputed price and the price that would be expected in a competitive market.
Unfair limb test
Is the price that has been imposed fair in itself or when compared to competing products?
It is sort of subjective assessment.
1: Unfair in itself.
Test: bears the excessive price no reasonable relation to the economic value of the product?
Important here to note is that the economic value of a product does not always or necessarily correspond
2: Unfair when compared to competing products.
Test:
