Excessive Pricing: The Flaws of ‘Tea Party’ Competition Policy

Posted by D. Daniel Sokol

Nicolas Petit (University of Liege) addresses Excessive Pricing: The Flaws of ‘Tea Party’ Competition Policy.

ABSTRACT: Since the adoption of the Guidance Communication in 2009, the Commission has kept exploitative abuses—and in particular excessive pricing cases—in a state of artificial hibernation, and focused on exclusionary cases as a matter of enforcement priority. The Commission's small antitrust policy against exploitative abuses is predicated on ‘ Tea Party’ competition economics: in the long term, high prices are presumed to deliver efficient outcomes, and competition enforcers risk doing more harm than good in trying to improve market outcomes.

Tea Party competition gurus are, however, wrong on three counts. First, they are wrong on the theory. Contrary to the ominous suspicion that competition agencies fiddle with excessive pricing laws to tax dominant firms' profits and achieve distributional transfers, there is a sound conceptual basis to justify the control of dominant firms' excessive prices.