Monday, April 2, 2012
Posted by D. Daniel Sokol
George Hay, Cornell University - School of Law and Kathryn McMahon, University of Warwick - School of Law discuss The Diverging Approach to Price Squeezes in the United States and Europe.
ABSTRACT: Notwithstanding assertions of greater harmonization and convergence between United States and European Union competition law, recent case law has identified significant differences in their approaches to the regulation of a price or margin squeeze. In the US after linkLine the likelihood of a successful claim has been significantly diminished, particularly if there has been no prior course of voluntary dealing and no downstream predatory pricing. In contrast, in a series of decisions in liberalized telecommunications markets, the EU Courts in applying an “as efficient competitor test” have focused on the preservation of competitive rivalry as “equality of opportunity.” This significantly broadens the potential liability for a margin squeeze in the EU and reconstitutes EU competition law as a form of de facto regulation in liberalized markets. Faced with the uncertainty of this standard, the dominant firm has an incentive to avoid liability by raising its retail prices, to the detriment of consumers. This article evaluates this divergence in approach to the regulation of a price or margin squeeze in the US and EU and traces these approaches to differing conceptions of dominant firm regulation which in turn have informed different understandings of the regulation of a “refusal to supply” and the intersection of competition law with sector-specific regulation.