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 I- 3359] - 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