Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Friday, April 23, 2010

When are Excessive Prices Unfair?

Posted by D. Daniel Sokol

Pinar Akman, University of East Anglia - Centre for Competition Policy, University of East Anglia - Norwich Law School and Luke Garrod, University of East Anglia - ESRC Centre for Competition Policy and School of Economics ask When are Excessive Prices Unfair?

ABSTRACT: EU competition law prohibits the abuse of a dominant position. An example of abuse is the charging of unfair prices. This prohibition in Article 102TFEU has been used to sanction excessive prices that are ‘too high’. According to the ECJ in United Brands, a price is abusive if (i) the price-cost margin is excessive and (ii) the price is unfair compared to other prices. However, there is little guidance to determine whether a price is excessive and/or unfair. We consider whether the principle of dual entitlement, which is consistent with most people’s perceptions of when prices are unfair relative to others, can be used to define explicitly what constitutes an unfair price in terms of the second stage of the United Brands test. We show that in general this principle is in line with the goals of an effective prohibition of excessive pricing and develop a procedure that defines a price as unfair in terms of this principle. We also show that European competition law enforcers in their attempts to define prices as unfair relative to others have followed similar arguments as the procedure developed here. Therefore, this procedure could go some way to resolve one of a number of problems regarding the prohibition of excessive prices.

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