Friday, April 3, 2009
The Darker Side of the Moon: Assessment of Excessive Pricing and Proposal for a Post-Entry Price-Cut Benchmark
Posted by D. Daniel Sokol
Ariel Ezrachi of University of Oxford's Faculty of Law and David Gilo of Tel Aviv University Law School address The Darker Side of the Moon: Assessment of Excessive Pricing and Proposal for a Post-Entry Price-Cut Benchmark.
ABSTRACT: This paper explores the main grounds commonly used to justify non-intervention in antitrust cases of alleged excessive pricing. In doing so it questions the weight attributed to some of these grounds. While acknowledging the difficulties at stake, the discussion focuses on one of the grounds for non-intervention - the complexity of evaluating whether a price is excessive. It examines the practical challenges in establishing excessiveness and puts forward a proposal for a post-entry price-cut benchmark which may facilitate the finding of excessive pricing. The benchmark is based on the evaluation of the difference between the price a dominant firm had charged before entry of new firms onto its market, and the price that prevailed after such entry. In discussing the proposal, we highlight the advantages and disadvantages of such a benchmark. We explain why competition agencies have refrained from using this benchmark and consider how such a benchmark could be used by private litigants in national courts.