Competition Law Review

Volume 10 - Issue 2

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Competition Law Review - Volume 10 Issue 2


Editorial - Competition Law and Pricing Mechanisms

Liza Lovdahl GormsenLiza Lovdahl Gormsen


Interpreting the As-Efficient Competitor Test in Abuse of Dominance Cases
Derek Ridyard Vol 10 Iss 2 Art 1 - Ridyard

The As-Efficient Competitor (AEC) test plays a central role in the EU Commission Guidelines on Article 102 enforcement and in the case law of the European Courts.  It is used explicitly by the ECJ in its Post Danmark Judgment in a way that clearly signals a preference for an effects-based approach to enforcement of the law against price abuse.  This paper analyses how the AEC test can be interpreted in the context of price-cost tests for exclusionary conduct, with particular emphasis on the distinctions between long run and avoidable costs, and between average and incremental costs.  It also explores some of the underlying economic and public policy questions that are raised by different approaches to these key cost concepts.

Margin Squeeze amid the Modernisation of Article 102 TFEU: Endorsement of the Effects-based Approach?
Ahmet Fatih Özkan Vol 10 Iss 2 Art 2 - Özkan

Recent years have seen a notable increase in the number of leading EU Court judgments on margin squeeze, including Deutsche Telekom, TeliaSonera and Telefónica. One notable feature of the case law on margin squeeze is that for the first time, the EU Courts demanded an effects-based approach into an abusive practice under Article 102 TFEU even when the Commission was satisfied with its very existence in the absence of effects on competition. However, as the modernisation of Article 102 TFEU has shown, it was normally the Commission who was pushing for a more economics- and effects-based approach towards the interpretation of abuse of a dominant position. Mainly because the relevant case law on margin squeeze is shaped in the aftermath of the Guidance on the Commission’s enforcement priorities and at the same time puts greater emphasis on the analysis of effects and on the use of the as efficient competitor test, one may be tempted to argue that the EU Courts have ultimately endorsed the effects-based approach of the Commission as encapsulated in the Guidance. Against this background, this article deals with one of the most questioned issues in the context of Article 102 TFEU following the publication of the Guidance: whether the leading judgments on margin squeeze can be taken as an evidence of the abandonment of the formalistic approach to Article 102 TFEU in favour of the effects-based approach and of the endorsement of the Guidance by the EU Courts.

The regulation of a margin squeeze in the European Union and the intersection of competition law and sector-specific regulation
Kathryn McMahon Vol 10 Iss 2 Art 3 - McMahon

In a series of recent decisions, Telefónica, Deutsche Telekom and TeliaSonera, the European Commission and European Courts have imposed liability and extensive fines under Article 102 TFEU for the abuse of a margin squeeze in liberalized telecommunications markets. These decisions are important for their consideration of the “as efficient competitor” test under Article 102 in narrowly construed downstream markets and for their assessment of the relationship between competition law and sector-specific regulation. This paper will evaluate these margin squeeze decisions within the context of a broadening role for competition law in liberalized and regulated markets and the purported shift in the European Commission’s Enforcement Priorities towards a “more economic” and “consumer welfare” approach. It will also seek to draw some comparisons with the treatment of a margin or price squeeze in the United States under section 2 of the US Sherman Act 1890, where the likelihood of a successful claim in this area has significantly diminished after the Supreme Court decision in linkLine.

Post Danmark’s Recoupment Element
Jay Matthew Strader Vol 10 Iss 2 Art 4 - Strader

An initial determination of dominance historically has relieved the EU Commission of any duty to prove recoupment. The argument goes that the same factors that establish dominance also prospectively demonstrate an ability to recoup. But the inquiries are not identical: Dominance represents the past and present ability to raise prices above competitive levels. Recoupment analysis involves prospectively determining whether a company will have the market power to raise prices high enough and long enough - above the level of pricing that would have existed absent predation - to recover the initial investment in below-cost pricing, which can vary in magnitude from case-to-case. By crafting a standard that the Commission, relative to US plaintiffs, more easily can satisfy, EU Institutions have sought to promote lower prices indirectly by strengthening competition. Regardless of whether that indirect route has succeeded, presuming recoupment constitutes a less effects-based approach than requiring evidence demonstrating that the lower prices now likely will harm consumers eventually. By recently requiring proof in Post Danmark that price-cuts produce actual or likely exclusionary effects that harm competition and ‘thereby’ consumers, the Court of Justice arguably grafted a recoupment element into the pre-existing EU predation test, at least for prices between incremental costs and average total costs.