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2018 | OriginalPaper | Buchkapitel

Abuse of Dominance by Firms Charging Excessive or Unfair Prices: An Assessment

verfasst von : Frederic Jenny

Erschienen in: Excessive Pricing and Competition Law Enforcement

Verlag: Springer International Publishing

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Abstract

This chapter surveys a controversial but topical aspect of competition law: i.e. the prohibition of excessive or unfair prices. In the first part, we examine the diversity of competition laws across the world when it comes to exploitative abuses of dominance and look at the case law on this issue in a number of jurisdictions. We review and discuss the validity of the main reasons which have been put forward in the academic literature in favour of or against the use of competition law to fight abusively high prices. We then analyse in detail the EU Commission and court jurisprudence as well as national jurisprudences in some member states to get a view of how the EU courts and competition authorities define the terms “excessive” and “unfair”, what tests are used or recommended by courts to make such an assessment and how these tests have been implemented. In the third part, we present a methodological criticism of the legal tests which have been proposed for establishing the “excessiveness” or the “unfairness” of prices arguing that they are neither justified economically nor likely to provide dominant firms with the requisite level of legal predictability. We then turn to the economic literature to examine the main circumstances in which competition authorities should, according to the economists, refrain from using competition law to fight high prices. Finally, we examine a number of recent cases in the EU to assess whether the cases which have been dealt with by competition authorities conform to the economist’s recommendations. We conclude that, except in exceptional circumstances, competition authorities should use their enforcement or advocacy powers to eliminate the obstacles to competition which lead to supra-competitive prices rather than using competition law to make high prices illegal.

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Vorheriges Kapitel Introduction

Nächstes Kapitel Another Look at the Economics of the UK CMA’s Phenytoin Case

This contribution, however, does not address the question of whether competition authorities can and should impose FRAND obligations on the owners of standard-essential patent (SEP). Indeed the problems raised by the interface between intellectual property rights and competition law are specific in the sense that they try to resolve a conflict between the desire to limit competition in order to promote innovation and the goal of promoting competition on markets. Also it does not deal with the cases where a high price charged by a monopoly can have an exclusionary effect as it is concerned exclusively with the treatment of exploitative pricing practices of dominant positions or monopolies.

1 Berkey Photo, Inc. v Eastman Kodak Co., 603 F.2d 263, 297 (2d Cir. 1979).

Blue Cross and Blue Shield United of Wisconsin v. Marshfield Clinic, 65 F.3d 1406, 1413 (7th Cir. 1995), citing National Reporting Co. v. Alderson Reporting Co., 763 F.2d 1020, 1023–24 (8th Cir. 1985); U.S. v. Aluminum Co. of America, 148 F.2d 416, 430 (2d Cir. 1945); Ball Memorial Hospital, Inc. v. Mutual Hospital Ins., Inc., 784 F.2d at 1325, 1339 (7th Cir. 1986); Berkey Photo, 603 F.2d at 296–98 (2nd Cir. 1979).

Verizon Communications, Inc. v Law Offices of Curtis V. Trinko, 124 S. Ct. 872, 875, 879 (2004).

See “FTC Rejects Proposed Settlement in Staples/Office Depot Merger,” Press Release, available at http://www.ftc.gov/opa/1997/04/stapdep.shtm

US Contribution to the 2011 OECD Competition Committee roundtable on excessive prices, paragraph 3 and 4.

European Union: Article 102 and Excessive Prices, Contribution to the 2011 OECD Competition Committee roundtable on excessive prices, paragraph 2.

See, e.g. the ECJ decisions in Sierna v. Eda [1971] ECR 69; Case 26/75 General Motors.

v. Commission [1975] ECR 1367; Case 27/76 United Brands v. Commission [1978] ECR 207; Case 30/87 Corinne Bodson v. Pompes Funebres [1998] ECR 2479; Case 110/99 Lucazeau v. SACEM [1989] ECR 2811; see also Commission Decisions: COMP/C-1/36.915 British Post Office v. Deutsche Post AG [2001] OJ L331/40, COMP/A 36.568/D3 Scandlines Sverige AB v. Port of Helsingborg [Jul 23, 2004].

(1) EC Comm. Dec. IV/28.851, 19 December 1974, General Motors Continental OJ 1975 L2 l/14 and ECJ, 13 November 1975, General Motors v. Commission, case 26/75, ECR 1975 p. 01367;

(2) EC Comm. Dec. 76/353/EEC, 17 December 1975 Chiquita, OJ 1976 L95/1 and ECJ, 14 February 1978, United Brands Company and United Brands Continental BV v. Commission, case 27/76, ECR 1978 p. 00207; EC Comm. Dec. 84/379/EEC, 2 July 1984,

(3) British Leyland Public Limited, OJ 1984, L207/11 and ECJ, 11 November 1986, British Leyland Public Limited Company v. Commission, case 226/84, ECR 1986 p.03263

(4) EC Comm. Dec. 2001/463/EC and ECJ, 16 July 2009, Der Grüne Punkt–Duales System Deutschland GmbH v. Commission, case C-385/07P, ECR 2009 p. I-06155)

XXVIIth Commission Report on Competition Policy (1997), para. 77.

Contribution from the European Union to the OECD Competition Committee discussion on Excessive pricing, “Article 102 and excessive pricing”, paragraph 3.

Communication from the Commission—Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings (2009/C 45/02).

Case 26/75 General Motors v Commission [1975] ECR 1367, [1976] 1 CMLR 95.

Note that Massimo Motta and Alexandre de Streel in “Excessive Pricing in Competition Law: Never say Never?” (in The pros and cons of high prices, Konkurrensverket Swedish Competition Authority, 2007) argue that the court did not impose a cumulative two-step test but a one-step. They argue that the test imposed by the Court is not necessarily cumulative and both parts of the test aimed to prove the same thing: that a price is above its competitive level in spite of the (clear) wording of paragraph 252 of the ECJ United Brands judgment. They argue that the Court is very pragmatic in its standard of proof requiring a price cost analysis when feasible but also suggests relying on other indicators to prove excessive prices. A number of commentators disagree with this view and find that there is an inconsistent application of its test by the Court which in the United Brands case made a clear distinction between the test for the excessiveness of the price and the test for the unfairness of the price.

Case COMP/A.36.568/D3—Scandlines Sverige AB v Port of Helsingborg.

See, for example, the Joined Opinion of Mr. Advocate General Jacobs on Lucazeau and Tournier cases, “[t]here is a consensus in the observations made to the Court in these cases that the test laid down in Case 27/76 United Brands v Commission [1978] ECR 207 for determining whether a price is excessive in relation to the economic value of the benefit conferred is inapplicable in the present context … It is pointed out that it is inappropriate in the present context to proceed on the basis of a comparison between the costs of production and the selling price because it is impossible to determine the cost of the creation of a work of the imagination such as a musical work” (para 53).

Lucazeau and others v. SACEM case, and others, 110/88 [1989] ECR-2811 at §25.

Corinne Bodson v. SA Pompes funèbres des régions libérées, 30/87 [1988] ECR-2479.

Case COMP/A.36.568/D3—Scandlines Sverige AB v Port of Helsingborg.

See Communication from the Commission published pursuant to Article 27(4) of the Council Regulation EC N° 1/2003 in case AT.39816 Upstream gas supplies in central and eastern Europe 2017/C 81/09 OJEU 16.3.2017.

Antitrust: Commission sends Statement of Objections to Gazprom—Factsheet Brussels, 22 April 2015.

Attheraces v British Horseracing Board [2007] EWCA Civ 38, February 2nd 2007, para 217.

See Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee setting out the EU approach to Standards essential Patents, 29 November 2017.

Case No: HP-2014-000005, Unwired Planet International/ Huawei Technologies LLC [2017] EWHC 711 (Pat).

BGH [Federal Court of Justice], decision of 16. 12. 1976, KVR 2/76—Valium; BGH [Federal Court of Justice], WuW/E 1445 ff., 1454 Valium II.

German contribution to the OECD Competition Committee Roundtable on excessive prices part 2.

A similar mechanism, putting the burden of proof that large deviations from prices charged by similar firms in other contexts are either non-existent or justified was mentioned by the ECJ in its Sacem II decision when it stated: “25 When an undertaking holding a dominant position imposes scales of fees for its services which are appreciably higher than those charged in other Member States and where a comparison of the fee levels has been made on a consistent basis, that difference must be regarded as indicative of an abuse of a dominant position. In such a case it is for the undertaking in question to justify the difference by reference to objective dissimilarities between the situation in the Member State concerned and the situation prevailing in all the other Member States.”

For example, in 2013, the average net revenue of the water suppliers in Germany’s 38 largest cities varied between 1.40 and 2.60 euros/m³. According to the Bundeskartellamt, these significant differences can be explained partly by the different conditions of supply, such as e.g. density of supply or differences in altitude in the supply areas. However, in individual cases an efficient control of water fees by the authority is necessary to prevent suppliers from abusing their monopoly position to the detriment of consumers.

See press releases of 24.02.2014 and 05.06.2012 Berlin, 09.05.2012 Mainz and 19.10.2015 Wuppertal.

The report is available at [http://plus.google.com/share?url=http%3A%2F%2Fwww.bundeskartellamt.de%2FSharedDocs%2FMeldung%2FEN%2FPressemitteilungen%2F2016%2F30_06_2016_Wasserbericcht.html%3Fnn%3D3591568&t=Homepage++Bundeskartellamt%26%23039%3Bs+report+on+public+drinking+water+supply+in+German+cities+%0ALarge+price+differences++lack+of+transparency].

A 2013 amendment to the ARC excluded water charges levied by a public law entity from abuse control under competition law. As a result such charges were only subject to the supervision of municipal authorities exercised by the individual Länder, which is based on less stringent criteria than those which apply to abuse control under the ARC. This gave municipal water suppliers the possibility to switch from water prices to charges if they wished to avoid price abuse control. Some companies against which the competition authority had opened proceedings had switched to charges in the past. Andreas Mundt, President of the Bundeskartellamt, said, “In recent years the Bundeskartellamt and individual competition authorities of the Länder have successfully conducted proceedings against water suppliers which charged excessive prices. It is regrettable that in 2013 the legislator decided to exclude water charges levied by municipal suppliers from competition law control. The resulting division of control does not make economic sense. It is certainly of no difference to the consumer whether he pays excessive prices or excessive charges for his drinking water.”

NMa (2004), “Besluit van de directeur-generaal van de Nederlandse Mededingingsautoriteit als bedoeld in artikel 62 van de Mededingingswet, nummer 2910/63”, April 28th.

See “CD Pharma has abuse its dominant position by increasing their price by 2000%”, Press release, Danish Competition and Consumer Authority, 31 January 2018.

Resolution of 12 February 2008, Expte. 626/, Canarias de Explosivos. and Judgment of the Supreme Court of 29 May 2013.

It has been argued that, unlike at the European level, the Spanish test is an “as if” test, inspired by the Ordoliberal concept of competition law, which requires firms to behave as if they did not have market power. See, for example, Antonio Robles, Exploitative prices in European Competition Law, ASCOLA Conference –Tokyo, May 2015.

1 Belko, dated 6.4.2001 and numbered 01-17/150-39.

Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263,294 (2nd. Cir., 1979).

Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP.

For example, according to the authors, the software and pharmaceutical industries.

For example, according to the authors, the biotechnology sector.

Opinion of Advocate General Wahl, delivered on 6 April 2017, Case C 177/16 Biedrība ‘Autortiesību un komunicēšanās konsultāciju aģentūra—Latvijas Autoru apvienība’ v Konkurences padome.

On appeal, that approach was also endorsed by the UK Competition Appeal Tribunal; see the judgment of 15 January 2002 in Napp Pharmaceutical Holdings Limited and Subsidiaries v Director General of Fair Trading [2002] CAT 1, paragraphs 56 to 69 and 390 to 405.

See the OECD Report, p. 12.

Judgment of the Court (Second Chamber) 14 September 2017, Case C 177/16, Autortiesību un komunicēšanās konsultāciju aģentūra/Latvijas Autoru apvienība v Konkurences padome.

Autorité de la concurrence, Décision n° 12-D-25 du 18 décembre 2012 relative à des pratiques mises en œuvre dans le secteur du transport ferroviaire de marchandises.

Case C‑52/07.

See US contribution to the OECD debate on excessive prices: “Historically, when legislative bodies in the U.S. have chosen regulation over competition, they have established regulatory agencies or commissions staffed with employees that develop substantial expertise in the industry. This expertise includes a deep understanding of the regulated firm’s cost structure, which is important for determining the prices that encourage continued investment and provide maximum benefits to consumers. Although regulatory agencies face some of the same difficulties determining prices that antitrust authorities would face if they enforce rules prohibiting excessive pricing, regulators are in a better position to do this because of their specialized expertise.”

For example, in the UK, the CMA’s prioritization principles are (i) expected impact on consumer welfare and the expected additional economic impact on efficiency, productivity and the wider economy; (ii) strategic significance—in the sense that it ties in with its strategy and objectives and the possible impact on other lines of work is considered; (iii) likelihood of a successful outcome; and (iv) resource implications, namely, whether the human and financial resource requirements of the work are proportionate to the benefits it is likely to yield.

Market Studies Good Practice Handbook Prepared by ICN Advocacy Working Group, April 2012.

The study is available on the Competition Bureau’s website at www.competitionbureau.gc.ca/epic/site/cb-bc.nsf/en/02495e.html

See the Lithuanian contribution to the 2011 OECD contribution to the roundtable on excessive prices.

This discussion is based on the background paper of the Secretariat prepared for the OECD Competition Committee Roundtable on the Relationship between Regulators and Competition Authorities, 1998.

Allen, B., & Hellwig, M. (1986). Price-setting firms and the oligopolistic foundations of perfect competition. The American Economic Review, 76(2), 387–392.

Dufwenberga, M., & Gneezyb, U. (2000). Price competition and market concentration: An experimental study. International Journal of Industrial Organization, 18, 7–22.CrossRef

European Commission. (1998). XXVIIth Report on competition policy (1997) (p. 26). Brussels: European Commission.

Evans, D. S., & Padilla, J. A. (2004, September). Excessive prices: Using economics to define administrable legal rules (CEMFI working paper no. 0416).

Evans, D. S., & Padilla, J. A. (2005). Excessive prices: Using economics to define administrable legal rules. Journal of Competition Law and Economics, 1(1), 97–122.CrossRef

Ezrachi, A., & Gilo, D. (2008). Are excessive prices really self-correcting? Journal of Competition Law and Economics, 5(2), 249–268.CrossRef

Gal, M. (2013). Abuse of dominance- exploitative abuses (Chapter 9). In L. Lianos & D. Geradin (Eds.), Handbook on European competition law (pp. 385–422). Cheltenham: Edward Elgar.CrossRef

Geradin, D. (2007, October). The necessary limits to the control of ‘excessive’ prices by competition authorities—A view from Europe. TILEC discussion paper.

Giannino, M. (2012, June 9). Enforcement of excessive price competition provisions in the airport sector: An overview. SSRN paper.

Hubert, P., & Combet, M.-L. (2011, February). Exploitative abuse: The end of the paradox? Doctrines l Concurrences Review N° 1-2011, pp. 44–51.

Maier-Rigaud, F. (2011). Excessive prices. Background paper by the Secretariat for Competition Committee the Round Table on Excessive Prices, DAF/COMP(2011)18.

Mena-Labarthe, C. (2016, March). Market investigations as a new tool for competition agencies: The Mexican experience. CPI Antitrust Chronicle.

Motta, M., & de Streel, A. (2007). Excessive pricing in competition law: Never say never? In The pros and cons of high prices. Kalmar: Konkurrensverket Swedish Competition Authority.

Niels, G. (2014). Excessive prices: An overview of EU and national case law (Concurrences, e-Competitions Bulletin Excessive prices N° 62463). Accessed January 21, 2014, from www.concurrences.com

OECD. (2006). Competition committee best practice roundtable: Evidentiary issues in proving dominance, p 42.

Röller, L.-H. (2007). Exploitative abuses (ESMT business brief, no. BB-107-002). ESMT European School of Management and Technology.

Röller, L.-H. (2008). Exploitative abuses. In M. Ehlermann (Ed.), European competition law annual 2007: A reformed approach to Article 82 (pp. 525–532). Oxford: Hart Publishing.

Whish, R. (2003). Competition law (5th ed.pp. 688–689). New York: LexisNexis.

Titel: Abuse of Dominance by Firms Charging Excessive or Unfair Prices: An Assessment
verfasst von: Frederic Jenny
Verlag: Springer International Publishing
Buch: Excessive Pricing and Competition Law Enforcement
Print ISBN: 978-3-319-92830-2

Electronic ISBN: 978-3-319-92831-9

Copyright-Jahr: 2018
DOI: https://doi.org/10.1007/978-3-319-92831-9_2