1. Discussion Paper Art. 82 VvM & Kenniscentrum Financieel en economisch recht 17 maart 2006

2. Introductie Praktische toepasbaarheid van de draft guidelines Art 82 EC. Praktijkvoorbeelden van Roofprijzen (‘predatory pricing’): - Lothian vs First Edinburg (OFT) - Drogheda (Ierse mededingingsautoriteit)

3. Motto Judge Learned Hand: ‘t]he successful competitor, having been urged to compete, must not be turned upon when he wins.’

4. Michelin II en ‘vorm’ Michelin II: … that prices below average variable costs.. are regarded as abusive in themselves because the only interest which the undertaking may have in applying such prices is that of eliminating competitors ….

5. Wat literatuur D. Waelbroeck, Michelin II: a per se rule against rebates by dominant companies?, Journal of Competition and Economics 1(1), 149-171, maart 2005. K. Elzinga, Predatory pricing and strategic theory, Georgetown Law Journal, http://www.findarticles.com/p/articles/mi_qa3805/is _200108/ai_n8992779/print http://www.findarticles.com/p/articles/mi_qa3805/is _200108/ai_n8992779/print

6. First Edinburg Decision of the Office of Fair Trading, No. CA98/05/2004, First Edinburgh / Lothian, 29 April 2004 Twee busmaatschappijen

7. First Edinburg: productmarkt Productmarkt: The relevant product market comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer by reason of the products' characteristics, their prices and their intended use. Hier: commerciële busdiensten

8. First Edinburg: geografische markt Geografische markt: The relevant geographic market comprises the area in which the undertakings concerned are involved in the supply and demand of products or services in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas. Hier: Greater Edinburg en de omgeving

9. First Edinburg: dominantie 1 Dominantie: a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market byallowing it the power to behave to an appreciable extent independently of its competitors, its customers and ultimately of consumers. [United Brands]

10. First Edinburg: dominantie 2 Hier: marktaandelen gebaseerd op aantallen kilometers en op omzet. Greater Edinburg: Lothian meer dan 70%, First minder dan 20 Omgeving: Lothian minder dan 20, First meer dan 70

11. First Edinburg: dominantie 3 The OFT considers it unlikely that an undertaking will be individually dominant if it has a market share of below 40 per cent, especially where a competitor in that market has a larger market share.

12. First Edinburg: dominantie 4 In considering whether First Edinburgh does hold a dominant position.. the OFT would also have to consider the extent to which potential competition is likely to constrain First Edinburgh's behaviour. Factors that might influence the likelihood of entry into these markets include the lack of nearby depots owned by other operators, the financial strength of First Edinburgh.. and the impact that any predatory attack might have on its reputation for responding strongly to competition.

13. First Edinburg: dominantie 5 Vgl. Commissie in rnrs. 31-32: This would be the case where an undertaking holds 50% or more of the market, provided that rivals hold a much smaller share of the market. … The strength of any indication based on market share depends on the facts of each individual case. Market share is only a proxy for market power, which is the decisive factor. It is therefore necessary to extend the dominance analysis beyond market shares…

14. First Edinburg: dominantie 6..the fact that there are no other large operators within the region surrounding Edinburgh suggests there is no ready supply of entrants that could easily establish significant operations in Edinburgh by expanding from an existing base. It would, of course, be possible in these circumstances for an entrant to purchase Lothian's assets as a means of entry, although such a purchase may be unattractive if First Edinburgh were to obtain a reputation for predatory behaviour.

15. First Edinburg: klacht 1 First Edinburgh had abused a dominant position by: engaging in predation in the Greater Edinburgh area, by reducing prices (both on particular routes and for certain 'day' and 'weekly' tickets valid throughout Edinburgh), increasing frequencies on a number of routes and introducing a number of new routes.

16. First Edinburg: klacht 2 (OFT:) Predation … comprises strategic behaviour whereby a dominant undertaking deliberately incurs losses in order to eliminate a competitor, or deter market entry by potential competitors, so as to be able to charge excessive prices in the future.

17. First Edinburg: klacht 3 (Cie., rnr. 96): The predatory nature of charging lower prices to all or certain customers is found in the predator making a sacrifice by deliberately incurring short run losses with the intention to eliminate or discipline rivals or prevent their entry… exclusion should thus allow the predator to return to, maintain or obtain high prices afterwards…

18. First Edinburg: Akzo test AKZO-test OFT:… although evidence of pricing below average variable cost provides a strong presumption of predation, an undertaking may be able exceptionally to rebut this presumption providing, inter alia, the pricing strategy is not directed towards eliminating a competitor.

19. First Edinburg: Akzo test en Commissie (Cie., rnr. 109): If the price charged by the dominant company is below AAC this means that the dominant company incurred a loss that it could have avoided. It is, at least in the short run, not minimising its losses. This is sufficient to presume that the dominant company made this sacrifice in order to exclude the targeted competitor. This is however a rebuttable presumption; there may be exceptional circumstances under which a price below AAC is justified

20. First Edinburg: AAC Commissie rnr. 108: The AAC benchmark is the appropriate and practical answer to the question about avoidable losses. If a dominant company charges a price below AAC this means that the price it is charging for (that particular part of) its output is not covering the costs that could have been avoided by not producing that (particular part of its) output.

21. First Edinburg: analyse 1 (OFT:) there is strong evidence of First Edinburgh having set prices below its average total cost. There is also evidence that it was pricing below average variable cost on a significant number of the routes in the sample considered …..Lothian responded to First Edinburgh's increased activity and lower fares by increasing frequencies on some of its routes that were in direct competition with the First Edinburgh services...First Edinburgh's revenues may have been below costs as a result of Lothian's actions, rather than as the result of predatory intent.

22. First Edinburg: analyse 2 (Cie., rnrs. 131-132).. although the price is below the relevant cost benchmark and although there is a likely exclusionary effect, the dominant company is actually minimising its losses in the short run. Such justification is, for the reasons explained above, unlikely for pricing below the AAC benchmark, although … A change in market conditions could also be provoked by entry by a rival. In case the rival is asking a price lower than the dominant company, the dominant company may invoke the meeting competition defence, to the extent that this is the response that minimises its short run losses.

23. First Edinburg: analyse 3 these losses were incurred because First Edinburgh saw future benefits in establishing a more comprehensive network within the Greater Edinburgh area and in rationalising its depots serving that market at no stage did First Edinburgh intend to force Lothian from the Greater Edinburgh market, or believe that it was capable of so doing.

24. First Edinburg: intent.. the documents … point to the strategy as being an attempt to improve on poor performance in the Greater Edinburgh area.

25. First Edinburg: effect the OFT considers it unlikely that Lothian was at risk of elimination from that market as a result of First Edinburgh's conduct, or of damage that would prevent it from competing effectively in the future.

26. First Edinburg: conclusie 1 The balance of evidence suggests that First Edinburgh was deliberately incurring losses in the short-run in an attempt to establish a more secure commercial basis for its Edinburgh operations and so compete more effectively with Lothian in that market in the longer term.

27. First Edinburg: conclusie 2 The OFT has therefore concluded that First Edinburgh's conduct, and Lothian's reaction to it, could be characterised as legitimate competition between rival undertakings, which ultimately benefited consumers within the Greater Edinburgh market by resulting, for a time, in lower fares and higher route frequencies, with no danger that this would lead to competition being weakened in the future.

28. First Edinburg: conclusie 3 (Cie. rnr. 133:) An efficiency defence can in general not be applied to predatory pricing. It is highly unlikely that clear efficiencies from predation can be shown and even when they exist that predation is the least restrictive way to achieve them. In addition it is similarly unlikely that, in the case that such benefits arise, that in the longer run some of these benefits are passed on to the customers and that these benefits outweigh the loss of competition brought about by the predation.