Antitrust & Competition Policy Blog

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

Tuesday, October 16, 2018

The MORE ECONOMIC APPROACH TO PREDATORY PRICING

Michael Funk, and Christian Jaag offer The MORE ECONOMIC APPROACH TO PREDATORY PRICING  .

ABSTRACT: The “more economic approach” was introduced to antitrust to achieve a more effect-based and theoretically grounded enforcement. However, related to predatory pricing it resulted in systematic over- and under-enforcement: Economic theory does not require dominance for predation to be a rational (and harmful) strategy, although an ex ante dominant firm would often refrain from predation. Hence, within the current legal framework which requires dominance for antitrust to apply, a more effect-based and theoretically grounded antitrust enforcement cannot pursue harmful predation. Therefore, we suggest separating predatory pricing from exclusionary abuse of a dominant firm, both legally and analytically. Instead, predatory pricing should be analyzed along the same logic as a merger. In particular, we argue that three elements from merger control should be adopted: in the absence of dominance, market share and/or turnover thresholds may serve as a de minimis rule; recoupment should be analyzed similar to the competitive effect of a merger between the predator and its prey; and a stronger efficiency defense should be established.

https://lawprofessors.typepad.com/antitrustprof_blog/2018/10/the-more-economic-approach-to-predatory-pricing-.html

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