DOCSLIB.ORG

When Does Buyer Power Become Monopsony Pricing?

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
When Does Buyer Power Become Monopsony Pricing? Antitrust , Vol. 27, No. 1, Fall 2012. © 2012 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. X+Y Company has a large percentage of purchases in the market; and X+Y Company has sufficient buyer When Does Buyer power to drive hard bargains and pay “low” prices to Power Become the farmers. X+Y Company’s downstream, sell-side market is nation - al, includes many competitors, and includes products Monopsony Pricing? beyond those made by X+Y Company. Competition is strong, and X+Y Company has a low market share and BY JOHN D. SHIVELY no ability to increase consumer prices or decrease qual - ity. Any harm from the price X+Y Company pays for inputs is felt directly by the farmers whose profits are HE STRUCTURE OF AGRICULTURAL depressed, but there is no increase in price, or decrease industries breeds monopsony claims, and conse - in quality, to consumers who ultimately buy X+Y quently, those industries are a major arena for Company’s product. conflicting schools of thought on monopsony pric - Ting. The 2 01 0 USDA-DOJ Agriculture Industry The key issue is how to determine whether X+Y Com - Work shops raised issues of buyer power and monopsony pany’s power to pay “low” prices to farmers is (1) buyer pricing by concentrated agribusiness to new prominence power that exists in all competitive markets 1 or (2) anticom - and encouraged the DOJ’s Antitrust Division to take more petitive monopsony power. 2 Several schools of thought aggres sive enforcement positions. As a result, the ABA Anti - invoke the concept of “consumer welfare” to answer this trust Section’s Agriculture and Food Committee sponsored question. If “consumer welfare” is enhanced, X+Y Company’s two recent panel discussions on monopsonies, one at the pricing is legal; if “consumer welfare” is diminished, it is to 2012 Antitrust Section Spring Meeting and the second in a be condemned. But what precisely is “consumer welfare?” May 2012 webinar. Both programs discussed an analytical Note that the situation often presented in agricultural issue that may be the economic key to antitrust treatment of markets involves only one allegedly anticompetitive act: X+Y buyer power in agricultural industries: “What role should Company’s “underpricing” as a buyer in input markets. The consumer welfare play in analyzing the anticompetitive merger is not alleged to have empowered any anticompetitive impact of mergers that present buyer power/monopsony conduct in downstream or consumer markets. 3 The question pricing concerns?” is: What proof of harm to consumer welfare in downstream markets (created as a ripple effect from pricing actions in the The Consumer Welfare Question upstream market) is necessary to establish that those actions To explore this issue, I present the following brief hypothet - are anticompetitive? ical based on common facts seen in agriculture industries: The Origins of the Consumer Welfare Debate Newly-merged agribusiness X+Y Company buys The roots of this debate are found in Robert Bork’s 1978 inputs, such as farm animals or crops, from farmers in work, The Antitrust Paradox , which argued that “consumer a narrow, local geographic market, and then processes welfare” is the exclusive goal of antitrust law. Bork argued that the inputs and sells processed, packaged food items to (1) “consumer welfare” was found in the aggregate welfare of consumers through retail grocery stores nationwide. all market participants, achieved through the allocative effi - ciencies created by competitive markets, and (2) maximizing Because the farm products it buys are perishable and aggregate welfare best served consumers as a whole. have high transportation costs, X+Y Company’s up - Not all agree with Bork. The result has been a debate over stream, buy-side market consists of a few competing what facts antitrust law should require, and what economic buyers (processors with plants in a rural area), and a assumptions it should make, to prove harm, or lack of harm, large number of sellers (farmers within a short dis - to aggregate welfare. Should private plaintiffs or government tance of these plants). The farmers have few options; agencies have to prove the precise mechanisms by which allocative efficiency is disrupted, and aggregate welfare is diminished, to establish monopsony ?4 Should they have to John D. Shively is a member of the Food, Agricultural and Bio-Fuels prove only some brighter-line economic facts that serve as a Practice of Faegre Baker Daniels LLP in its Denver, Colorado, office. He served as a Co-Chair of the ABA Antitrust Section’s Agriculture & Food reasonable proxy for harm to allocative efficiency, such as 5 Committee from its founding until August 2012. decreased production volume by the defendant ? Or can they reasonably make the assumption that because “farmer/pro - FALL 2012 · 87 ARTICLES ducers . are forced to accept lower profits and to make inef - Brooke Group to the effect that “making a showing on the ficient substitutions to other products,” there will be a “dead - recoupment pricing will require ‘a close analysis of both the weight” loss [to aggregate welfare] equal to that produced by scheme alleged by the plaintiff and the structure and condi - the orthodox seller’s cartel, except that those experiencing the tions of the relevant market.’ ”10 This result created a relatively loss are growers rather than consumers? ”6 clear, and stringent, standard for proof in a Section 2 monop - This debate heated up in 2006 as the U.S. Supreme Court sony case when injury was alleged by a rival manufacturer, considered a version of the X+Y Company hypothetical in the but left critical questions regarding harm to “consumer wel - context of a manufacturer’s challenge to a competing man - fare” entirely unresolved. ufacturer’s input pricing scheme in Weyerhaeuser .7 The Court It should be noted that the recurring X+Y Company sit - had the opportunity to resolve debates over the economic uation in agriculture markets does not involve the situation importance of consumer welfare issues in that case, and com - the Supreme Court addressed in Weyerhaeuser —a competi - mentators eagerly awaited its decision. tor’s claim that its rival was monopolizing, or attempting to During the period anticipating the Supreme Court’s pro - monopolize, by paying anticompetitively high prices to sup - nouncement on these issues, another school of thought pliers. While both excessive buyer power injuring suppliers emerged, arguing that “consumer welfare” should mean “end- and the Weyerhaeuser fact situation are discussed under user welfare”—the welfare of the subset of consumers who are the rubric of “monopsony,” they are different. 11 Indeed, the ultimate purchasers of X+Y Company’s product (and not Weyerhaeuser’s suppliers benefited in the first phase of its all consumers generally impacted by allocative inefficiency, as alleged scheme (high input prices raising its rival’s cost), and Bork argued). This argument would (1) require plaintiffs to would have been harmed only in the second phase (low input show an increase in the price paid, or decrease in quality of the prices to recoup), when customers in downstream markets product purchased, by the consumers who bought X+Y would also have been injured by reduced lumber production. Company’s product, to establish that X+Y Company was a Weyerhaeuser simply did not address the requirement for monopsonist, and (2) permit a defendant to avoid such a proof of harm to competition, allocative efficiency, or con - finding by showing it had no market power in downstream sumer welfare. As a result, all schools of thought can pluck markets. 8 dicta from Weyerhaeuser to support their arguments on this issue. Weyerhaeuser In Weyerhaeuser , a sawmill sued a competing sawmill for 2010, the Agriculture Workshops, and the “predatory buying” in violation of Section 2 of the Sherman Revised Merger Guidelines Act. Specifically, the defendant was accused of bidding up the During 2 01 0, two significant events focused monopsony price for sawlogs. The plaintiff alleged that this business prac - analysis on agriculture. The first was the series of USDA-DOJ tice was an attempt to monopolize the upstream input mar - Agriculture Industry Workshops held around the country. 12 ket for sawlogs in order to force competitors out of the down - At these meetings, Antitrust Division lawyers heard vehement stream market for finished hardwood lumber. complaints from livestock producers and poultry growers In its decision, the Supreme Court sidestepped any dis - that increasingly concentrated packers and processors were cussion of what type of “consumer welfare” was most appro - forcing the prices paid for animals down to the point where priate for antitrust analysis. Emphasizing (1) the analytical farmers are now receiving a smaller percentage of the food similarity between monopsony and monopoly; (2) the dan - dollar than in previous periods. Only the last workshop in ger of wrongly condemning any lowering of prices (“the Washington, D.C., which was focused on margins at the essence of competition”); (3) potential procompetitive rea - various levels of the agricultural production chain, discussed sons for paying high input prices; and (4) the fact that failed impact on consumers. There, the consensus was that con - monopsonistic schemes (without a recoupment phase) would sumers were not paying higher prices for food; packers and be procompetitive and benefit consumers, the Court imposed processors were also receiving a lower share of the food dol - a buy-side version of the monopoly predatory pricing test set lar; and concentrated retail grocers were taking a larger share.
Load more

Recommended publications
  • Antitrust Enforcement and the Consumer
    Many consumers have never heard of antitrust laws, but when these laws are effectively and responsibly enforced, they can save consumers millions and even billions of dollars a year in illegal overcharges. Most States have antitrust laws, and so does the Federal Government. Essentially, these laws prohibit business practices that unreasonably deprive consumers of the benefits of competition, U.S. Department of Justice resulting in higher prices for inferior Washington, DC 20530 products and services. This pamphlet was prepared to alert consumers to the existence and importance of antitrust laws and to explain what you can do for antitrust enforcement and for yourself. 1. What Do the Antitrust Laws Do for the Consumer? Antitrust Antitrust laws protect competition. Free and open competition benefits consumers Enforcement by ensuring lower prices and new and better products. In a freely competitive and the market, each competing business generally Consumer will try to attract consumers by cutting its prices and increasing the quality of its products or services. Competition and the profit opportunities it brings also stimulate businesses to find new, innovative, and more efficient methods of production. Consumers benefit from competition through lower prices and better products and services. Companies that fail to understand or react to consumer needs may soon find themselves losing out in the competitive battle. When competitors agree to fix prices, rig bids, or allocate (divide up) customers, consumers lose the benefits of competition. The prices that result when competitors agree in these ways are artificially high; such prices do not accurately reflect cost and therefore distort the allocation of society’s resources.
    [Show full text]
  • Amazon's Antitrust Paradox
    LINA M. KHAN Amazon’s Antitrust Paradox abstract. Amazon is the titan of twenty-first century commerce. In addition to being a re- tailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and ex- pand widely instead. Through this strategy, the company has positioned itself at the center of e- commerce and now serves as essential infrastructure for a host of other businesses that depend upon it. Elements of the firm’s structure and conduct pose anticompetitive concerns—yet it has escaped antitrust scrutiny. This Note argues that the current framework in antitrust—specifically its pegging competi- tion to “consumer welfare,” defined as short-term price effects—is unequipped to capture the ar- chitecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are height- ened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have re- warded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible.
    [Show full text]
  • The Three Types of Collusion: Fixing Prices, Rivals, and Rules Robert H
    University of Baltimore Law ScholarWorks@University of Baltimore School of Law All Faculty Scholarship Faculty Scholarship 2000 The Three Types of Collusion: Fixing Prices, Rivals, and Rules Robert H. Lande University of Baltimore School of Law, [email protected] Howard P. Marvel Ohio State University, [email protected] Follow this and additional works at: http://scholarworks.law.ubalt.edu/all_fac Part of the Antitrust and Trade Regulation Commons, and the Law and Economics Commons Recommended Citation The Three Types of Collusion: Fixing Prices, Rivals, and Rules, 2000 Wis. L. Rev. 941 (2000) This Article is brought to you for free and open access by the Faculty Scholarship at ScholarWorks@University of Baltimore School of Law. It has been accepted for inclusion in All Faculty Scholarship by an authorized administrator of ScholarWorks@University of Baltimore School of Law. For more information, please contact [email protected]. ARTICLES THE THREE TYPES OF COLLUSION: FIXING PRICES, RIVALS, AND RULES ROBERTH. LANDE * & HOWARDP. MARVEL** Antitrust law has long held collusion to be paramount among the offenses that it is charged with prohibiting. The reason for this prohibition is simple----collusion typically leads to monopoly-like outcomes, including monopoly profits that are shared by the colluding parties. Most collusion cases can be classified into two established general categories.) Classic, or "Type I" collusion involves collective action to raise price directly? Firms can also collude to disadvantage rivals in a manner that causes the rivals' output to diminish or causes their behavior to become chastened. This "Type 11" collusion in turn allows the colluding firms to raise prices.3 Many important collusion cases, however, do not fit into either of these categories.
    [Show full text]
  • Experimental Evidence on Predatory Pricing Policies
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Edlin, Aaron S.; Roux, Catherine; Schmutzler, Armin; Thöni, Christian Working Paper Hunting unicorns? Experimental evidence on predatory pricing policies Working Paper, No. 258 Provided in Cooperation with: Department of Economics, University of Zurich Suggested Citation: Edlin, Aaron S.; Roux, Catherine; Schmutzler, Armin; Thöni, Christian (2017) : Hunting unicorns? Experimental evidence on predatory pricing policies, Working Paper, No. 258, University of Zurich, Department of Economics, Zurich, http://dx.doi.org/10.5167/uzh-138188 This Version is available at: http://hdl.handle.net/10419/173418 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu University of Zurich Department of Economics Working Paper Series ISSN 1664-7041 (print) ISSN 1664-705X (online) Working Paper No.
    [Show full text]
  • Predatory Pricing, a Case Study: Matsushita Electric Industries Co. V. Zenith Radio Corporation
    PREDATORY PRICING, A CASE STUDY: MATSUSHITA ELECTRIC INDUSTRIES CO. V. ZENITH RADIO CORPORATION M. STEVEN WAGLE INTRODUCTION There is an abundance of predatory pricing theories. Scholars have created a barrage of rules and thresholds designed to detect un- lawful predatory practices. The most influential work on predatory practice was written almost thirty years ago by John S. McGee.1 Mc- Gee showed that although it was widely believed that the Standard Oil Company used predatory pricing in its virtual monopolization of the oil refining market, there was no hard evidence to show that Standard Oil in fact employed such pricing. Since McGee, many scholars have reviewed the theories of pric- ing, and recent literature on the law and economics of antitrust has devoted increasing attention to this issue.2 There has also been an outpouring of cost-based rules appearing in court opinions dealing with predatory pricing.3 These rules can essentially be attributed to t J.D., Washburn University, 1986; M.A., Wichita State University, 1986; B.A., Unmversity of Kansas, 1980. Law clerk to the Hon. John K. Pearson, Wichita, Kansas. I would like to thank Dr. Philip Hersch, Professor of Economics, Wichita State Umver- sity, for patiently reviewing this article and offering invaluable criticism of it. 1. McGee, Predatory Price Cutting: The Standard Oil (NJ.) Case, 1 J.L. & EcON. 137 (1958). 2. For additional perspectives, see Areeda & Turner, PredatoryPring and Re- lated Practices Under Section 2 of the Sherman Act, 88 HARV. L. REV. 697 (1975); Jos- kow & Klevorick, A Frameworkfor Analyzing PredatoryPrmcng Policy, 89 YALE L.J.
    [Show full text]
  • Buyer Power: Is Monopsony the New Monopoly?
    COVER STORIES Antitrust , Vol. 33, No. 2, Spring 2019. © 2019 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. Buyer Power: Is Monopsony the New Monopoly? BY DEBBIE FEINSTEIN AND ALBERT TENG OR A NUMBER OF YEARS, exists—or only when it can also be shown to harm consumer commentators have debated whether the United welfare; (2) historical case law on monopsony; (3) recent States has a monopoly problem. But as part of the cases involving monopsony issues; and (4) counseling con - recent conversation over the direction of antitrust siderations for monopsony issues. It remains to be seen law and the continued appropriateness of the con - whether we will see significantly increased enforcement Fsumer welfare standard, the debate has turned to whether the against buyer-side agreements and mergers that affect buyer antitrust agencies are paying enough attention to monopsony power and whether such enforcement will be successful, but issues. 1 A concept that appears more in textbooks than in case what is clear is that the antitrust enforcement agencies will be law has suddenly become mainstream and practitioners exploring the depth and reach of these theories and clients should be aware of developments when they counsel clients must be prepared for investigations and enforcement actions on issues involving supply-side concerns. implicating these issues. This topic is not going anywhere any time soon.
    [Show full text]
  • Resale Price Maintenance: Economic Theories and Empirical Evidence
    "RESALE PRICE MAINTENANCE: ECONOMIC THEORIES AND EMPIRICAL EVIDENCE Thomas R. Overstreet, Jr. Bureau of Economics Staff Report to the Federal Trade Commission November 1983 RESALF. PRICE INTF.NANCE: ECONO IC THEORIES AND PIRICAL EVIDENCE Thomas R. Overstreet, Jr. Bureau of Economics Staff Report to the Federal Trade Commiss ion November 1983 . FEDERAL TRDE COM~ISSION -f. JAMES C. ~ILLER, III, Chairman MICHAEL PERTSCHUK, Commissioner PATRICIA P. BAILEY, Commissioner GEORGE W. DOUGLAS, Commissioner TERRY CALVANI, Commi S5 ioner BUREAU OF ECONO~ICS WENDY GRA~, Director RONALD S. BOND, Deputy Director for Operations and Research RICHARD HIGGINS, Deputy Director for Consumer Protection and Regulatory Analysis JOHN L. PETE , Associate Director for Special Projects DAVID T. SCHEFF N, Deputy Director for Competition and Anti trust PAUL PAUTLER, Assistant to Deputy Director for Competition and Antitrust JOHN E. CALFEE, Special Assistant to the Director JAMES A. HURDLE, Special Assistant to . the Director THOMAS WALTON, Special Assistant to the Director KEITH B. ANDERSON, Assistant Director of Regulatory Analysis JAMES M. FERGUSON, Assistant Director for Antitrust PAULINE IPPOLITO, Assistant Director for Industry Analysis WILLIAM F. LONG, ~anager for Line of Business PHILIP NELSON, Assistant Director for Competition Analysis PAUL H. RUBIN, Assistant Director for Consumer Protection This report has been prepared by an individual member of the professional staff of the FTC Bureau of Economics. It rsfle cts solely the views of the author, and is not intended to represent the position of the Federal Trade Commission, or necessarily the views of any individual Commissioner. -ii - fI. ACKNOWLEDGMENTS I would like to thank former FTC Commissioner David A.
    [Show full text]
  • Price Fixing and Repeated Games
    9781405176323_4_014.qxd 10/19/07 8:12 PM Page 323 14 Price Fixing and Repeated Games In February 2007, the European Union Competition Directorate imposed their largest-ever fines on companies found guilty of colluding to fix prices. Five elevator manufacturers were fined a total of a992 million (approximately $1.4 billion) for operating a cartel that con- trolled prices in Germany, Belgium, Luxembourg and the Netherlands. ThuysenKrupp received the heaviest fine, of more than a479 million since it was judged to be a “repeat offender” by the Commission. Otis was fined a225 million, Schindler a144 million, Kone a142 million, and Mitsubishi’s Dutch subsidiary a1.8 million.1 The elevator case came just one month after another case involving gas insulated switch- gear projects in which the Commission imposed fines totally a750 million on 11 companies for their parts in a price-fixing cartel. In this case, the largest fine of a396.5 million was imposed on Siemens, Germany. This case is particularly interesting because it was broken open largely as a result of the Commission’s leniency policy. Under that policy, the first firm in a conspiracy to confess and “fink” on its co-conspirators gets a much reduced penalty. In fact, the finking firm in the switch-gear case, ABB Switzerland, was granted full immu- nity and paid no penalties in return for its confession and provision of information to the authorities. That reflects a considerable savings from the a215 million it would otherwise have had to pay as a repeat offender. Action to curb the activities of cartels has been equally active in the United States.2 The Department of Justice has recently imposed a total of more than $732 million on companies operating a cartel to control the pricing of dynamic random access memory (DRAM).
    [Show full text]
  • Guidelines for the Analysis of Cases of Exclusionary Abuse of Dominance
    GUIDELINES FOR THE ANALYSIS OF CASES OF EXCLUSIONARY ABUSE OF DOMINANCE Buenos Aires, Mayo de 2019 Disclaimer: These guidelines have been translated into English to help their reading by non-Spanish speaking people. The only official version of the Argentine Guidelines for the Analysis of Cases of Exclusionary Abuse of Dominance, however, is the Spanish version. 1 CONTENTS I. INTRODUCTION 3 II. EXISTENCE OF A DOMINANT POSITION 4 III. ABUSE OF DOMINANC​E 7 III.1. Factors to take into account for the existence of exclusionary abuses of dominance 8 III.2. Efficiencies 9 IV. SPECIFIC FORMS OF ABUSE 10 IV.1. Refusal to supply and margin squeeze 10 IV.2. Tying and bundling 13 IV.3. Predatory pricing 15 IV.4. Vertical restraints 16 IV.4.1.Resale price maintenance 17 IV.4.2. Exclusivity 18 IV.4.3.Conditional discounts 20 2 I. INTRODUCTION The aim of this document is to provide guidelines regarding practices that constitute infringements of Act No. 27,442 of Defense of Competition (LDC, for its Spanish acronym) and to contribute to predictability in decision-making, notwithstanding its application on a case-by-case basis and the use of complementary criteria that may be developed in the future. In this sense, the guidelines set forth in this document do not constitute an opinion regarding specific cases under investigation. A typical classification of the conducts that infringe the LDC differentiates unilateral from coordinated conducts. This document refers only to the first type, in particular, to possible abuses of a dominant position by a single firm or legal entity.
    [Show full text]
  • A Structured Outline for the Analysis of Horizontal Agreements
    A STRUCTURED OUTLINE FOR THE ANALYSIS OF HORIZONTAL AGREEMENTS by Thomas B. Leary* The antitrust principles applied to “horizontal” arrangements are difficult to summarize. The principles have evolved over an extended period of time and have been shaped by decisions that are often hard to reconcile. I do not claim that the structure outlined below is the only way to read cases or frame issues, but it is one that I believe is consistent with the most recent precedent and learning. I. Introduction An agreement between actual or potential competitors to restrain their rivalry in some respect is commonly called a “horizontal restraint.” This kind of agreement should be distinguished from so-called “vertical” restraints that govern the interface between supplier and customers (who may also be competitors in another capacity). The distinction is fundamental because horizontal and vertical restraints are analyzed in different ways.1 The most significant difference is that horizontal restraints are more likely to be deemed illegal per se and vertical restraints are more likely to be subject to the “rule of reason.” * Commissioner, Federal Trade Commission. This revision of a paper first presented a year ago has been prepared for distribution at The Conference Board 2004 Antitrust Conference (Mar. 3-4, 2004). I have benefitted from discussions with FTC Chairman Timothy Muris, General Counsel William Kovacic, and attorney advisors Thomas Klotz, Lisa Kopchik and Holly Vedova in the preparation of this outline, but it does not necessarily reflect their views or the views of anyone else in the Commission. 1 See, e.g., discussion in ABA SECTION OF ANTITRUST LAW, ANTITRUST LAW DEVELOPMENTS 79-82 (5th ed.
    [Show full text]
  • Report on Predatory Pricing
    Report on Predatory Pricing Prepared by The Unilateral Conduct Working Group th Presented at the 7 Annual Conference of the ICN Kyoto, April 2008 TABLE OF CONTENTS Executive Summary.......................................................................................................... 3 I. LEGAL BASIS AND ENFORCEMENT................................................................ 5 1. General v. Specific Provisions................................................................................ 5 2. Civil v. Criminal Enforcement................................................................................ 6 3. Overview of Agency and Private Enforcement ...................................................... 7 A. Agency enforcement ........................................................................................... 7 B. Private cases challenging predatory pricing ....................................................... 8 II. CRITERIA FOR ABUSE OF DOMINANCE/MONOPOLIZATION BASED ON PREDATORY PRICING.......................................................................................... 9 1. Use of Cost Measures or Benchmarks to Demonstrate Loss or Sacrifice .............. 9 A. Cost measures employed................................................................................. 9 B. Agencies do not necessarily use the same cost measure in every case......... 12 C. Presumptions and safe harbors.......................................................................... 13 D. Use of price and cost data ................................................................................
    [Show full text]
  • The European Antitrust Review 2013
    The European Antitrust Review 2013 Published by Global Competition Review in association with Anastasios Antoniou LLC Art De Lex Law Firm Asters bpv Braun Partners bpv Hügel Rechtsanwälte Buntscheck Rechtsanwaltsgesellschaft mbH DLA Piper Italy DLA Piper Spain SL Dryllerakis & Associates Eisenberger & Herzog ELIG Attorneys at Law Epstein, Chomsky, Osnat & Co Gide Loyrette Nouel AARPI Herbert Smith LLP Homburger K & L Gates Karanovic´ & Nikolic´ Kastell Advokatbyrå AB Kavcˇicˇ, Rogl & Bracˇun Kirkland & Ellis International LLP Krogerus Attorneys Ltd Lademann & Associates GmbH Economists and Competition Consultants Latham & Watkins Macfarlanes LLP Monaco & Associati Motieka & Audzevicˇius Popovici Nitu & Asociatii SJ Berwin Steptoe & Johnson LLP Sullivan & Cromwell LLP Szabó Kelemen & Partners Attorneys Taylor Wessing Vasil Kisil & Partners Vogel & Vogel Wikborg Rein www.globalcompetitionreview.com EU: MONOPOLISATION Post Danmark: predatory pricing in the European Union Howard Rosenblatt, Héctor Armengod and Andreas Scordamaglia-Tousis Latham & Watkins Introduction that a dominant firm can only be interested in applying such low In last year’s edition, we wrote that unilateral pricing behaviour – in prices to eliminate competitors and gain a dominant position which that case, conditional discounts – requires a careful approach to will allow it to exercise market power.6 As the Court explained in enforcement. While under-enforcement could undermine competi- France Télécom, the relevant measure of costs are those of the domi- tion, over-enforcement could deter companies from charging low nant firm, even if they are not below costs incurred by competitors.7 prices – both outcomes that are bad for consumers. The stakes are Nevertheless, this presumption could theoretically be rebutted with equally high in alleged predatory pricing.
    [Show full text]