The commission Guidance, and Attorney General Fenelly acknowledge this and it seems appropriate to conclude on the words of Robert H. Bork where he states:“This is a serious matter, for it means that the law now perceives threats to competition where none exists, and it follows that the law is destroying valuable business arrangements for no reason”.To export a reference to this article please select a referencing stye below:If you are the original writer of this essay and no longer wish to have your work published on the UKDiss.com website then please:Copyright © 2003 - 2020 - LawTeacher is a trading name of All Answers Ltd, a company registered in England and Wales.

Predatory pricing in the European Union Law Concept of Predatory pricing provided by the “Glossary of terms used in EU competition policy” (Antitrust and control of concentrations, published in 2002): A (deliberate) strategy, usually by a dominant firm, of driving competi-tors out of the market by setting prices below production costs. Also referred to as “undercutting,” predatory pricing refers to a strategy undertaken by a company intended to drive competition out of business by offering its goods or services at a price far below the market rate. Evidently the approach to such strategies is very narrow and the courts are reluctant to allow such behaviour in a new economy market.The Areeda-Turner Test received widespread criticism by economists for it’s failure to incorporate limit pricing. Although the Federal Trade Commission (“FTC”) takes claims of predatory pricing seriously, and examines them closely, such claims are rarely found to be valid. As stated by Jones and Sufrin “The longer the time period, the more costs that become variable”.AKZO was the first EU case in which predatory pricing was discussed. Throughout this essay the treatment of Predatory Pricing will occur through the existing case law.“Predatory Pricing is the practice whereby an undertaking prices its product so low that competitors cannot live with the price and are driven from the market”. Jones and Sufrin state this to be “a form of strategic entry deterrence aimed at potential entrants rather than existing competitors”. While it would be suitable where the alternatives were economically unsuitable or more widely anti- competitive, it would not apply where prices were below Average Alternative Costs (AAC). The reasons why are wide reaching, namely there is not mention of limit pricing, nor is there any definitive method to define how costs are calculated.AKZO, the first community case on this concept, in itself was fallible, in that it also applied a costs based test which was not clearly defined, as to how to understand what is fixed and what is variable.The consequences of these tests created is that the basis of Predatory Pricing as a concept is fallible. Limit Pricing.

While the defence may have failed in that case, it did succeed partially in France Telecom, where the CFI stated:“It must be pointed out first of all that the Commission is in no way disputing the right of an operator to align it’s prices on those previously charged by a competitor”.This defence was recognised in the Discussion Paper, where it was identified that a dominant undertaking had the right to minimise it’s losses as a result of their competitor’s actions.The application of this defence, however, is limited. An appeal was subsequently raised by ECS, citing predatory pricing as an abuse of dominant position. The lack of clarity in case law creates variant approaches from the relevant authorities. The test stated“a price lower than reasonably anticipated short -run marginal cost is predatory, whilst a price equal to or higher than reasonably anticipated short- run marginal cost is not predatory”. Government officials in Wisconsin and Germany accused the retailer of pricing goods below cost with an intent to drive competitors out of the market.

AKZO demonstrates this point as there was no express declaration in regards to removal of competition.Cases such as Tetra Pak II and France Telecom have reaffirmed and applied the test laid down in AKZO and consequently it can be argued that the case law on this area as a result of AKZO is resultantly misguided and incorrect.The issue as to whether an undertaking can be guilty of predatory pricing where the dominance is on a different market was the centre of Tetra Pak II.In Tetra Pak there were two separate markets, one was for aseptic cartons, and the other was non- aseptic cartons. This appeal was thrown out, with the courts stating that;“Moreover, prices below average total costs, that is to say, plus variable costs, but above average variable costs, must be regarded as abusive if they are determined as part of a plan for eliminating a competitor”.This judgement provided new definition for predatory pricing. Therefore, various rules and economic tests have been established to identify predatory pricing. The second being disruption of distribution patterns and finally the misuse of government processes. In Irish Sugar, the defence of “meeting” competition, in order to maintain their market position, was used. In September, Wal-Mart was hit with three separate charges of predatory pricing.
Registered office: Venture House, Cross Street, Arnold, Nottingham, Nottinghamshire, NG5 7PJ. It is yet to be seen how this aspect of Predatory pricing will develop, or even how the courts will approach such a theory, because as of yet there is no case law relating to this issue.This is the defining case on selective price cutting. This may require the use of unethical manufacturing or production practices in order to obtain products at prices far below the competition.Such a plan would also require the company’s short-term losses to be made up for by charging much higher prices over a long period of time once the competitors have gone out of business or left the market. It is for this reason that intention is difficult to ascertain, because undertakings, if they have negative intentions, are likely to hide them. Instances of a large firm using low prices to drive smaller competitors out of the market in hopes of raising prices after they leave are rare. Also referred to as “undercutting,” predatory pricing refers to a strategy undertaken by a company intended to drive competition out of business by offering its goods or services at a price far below the market rate. AKZO were fined ECU 10 million and were also ordered to terminate the infringement.AKZO appealed, stating that since there prices were not below Average Variable Costs (AVC) and that consequently, citing, the Areeda- Turner Test, that there was no abuse. This aspect requires further definition as to what will constitute “special circumstances”, so as to create clarity and certainty for undertakings and the relevant authorities.In Deutsche Post an alternative was created.

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