Tilburg Law and Economics Center

TILEC Work in Progress: Giorgio Monti - Excessive pricing: Competition Law in Shared Regulatory Space

Date: Time: 10:45 Location: M 1003

This paper examines the application of competition law to control excessive prices and considers the relationship between the application of competition law and other sector-specific regulatory techniques to regulate prices to inquire what the role of competition law intervention might be.

10:45-11:45, M 1003

Among the abuses of dominance prohibited under Article 102 TFEU is the imposition of unfair selling prices. The mainstream reactions to this prohibition range from denying that excessive pricing constitutes an antitrust offence to attempts to interpret this prohibition so narrowly as to whittle it out of existence.  Two recent judgments have embraced the spirit of these responses. Both Advocate General Wahl in AKKA/LAA  and the Competition Appeals Tribunal in Flynn take the view that '[c]ases of pure unfair pricing are rare in competition law. Authorities find them difficult to bring and are, rightly, wary of casting themselves in the role of price regulators.'  Both judgments serve to make the application Article 102 TFEU to excessive pricing more difficult. These judgments are discussed further below.

However, this paper is not yet another contribution to the discussion about how to devise an appropriate test for excessive pricing. These recent judicial pronouncements fit within a broader pattern whereby EU competition law is transformed to follow the edicts of 'mainstream economics', in particular those that emanate from a particularly restrictive variant of antitrust enforcement (the so-called Chicago School) that entered the scene in the 1960s, against which many have tried to object largely without success.  In this context, it is remarkable that in interpreting EU Law, AG Wahl should make reference to a judgment of the US Supreme Court, Verizon v Trinko, a judgment so conservative that even some in the US have distanced themselves from it. But the surprise at the favourable reference to this case is also for two other reasons. First because US antitrust law does not prohibit excessive pricing (we qualify this below) but also because in a judgment restating this, Justice Scalia took the view that 'charging. monopoly prices. is an important element of the free-market system.'  Since the express prohibition of excessive pricing in Article 102 suggests a diametrically opposite attitude to the one expressed here, it is hard to see why one should see Trinko as a helpful discussion for the purposes of EU Law, but it reveals the trend to assimilate much of the thinking (ideology?) that underpins Scalia's thinking into EU antitrust even when, as here, it runs against the statutory text.

The point in this paper is to challenge the restrictive vision embraced by the courts not by lamenting the degeneration of EU competition law, but by showing that instances when competition agencies raise concerns about excessive prices are less rare than assumed, not any more difficult to bring than other kinds of antitrust action, and do not necessarily require the agency to act as a price regulator.  Rather, cases of excessive prices are instances where the application of competition law responds to, or helps to shape, the regulatory framework. Understood in this manner, excessive pricing cases are strategic actions designed to stimulate other regulatory responses. Therefore, the attempt by the recent judgments to rein in the scope of the excessive pricing appears to ignore this function of antitrust law enforcement.

In parts 3 and 4 of the paper we consider, perhaps controversially, excessive pricing considerations found in Article 101 cases. If we focus on the Commission's enforcement practice since the coming to force of Regulation 1/2003 and exclude cartel cases, we find that the Commission has focused on two types of practices where the key issue is the price level: reverse payment settlements and interchange fees. Other than these there has only been one other decision which has no direct price component. Sections 5 and 6 we examine instances where national competition authorities (NCAs) are investigating excessive pricing using Article 102: collecting societies and pharmaceutical products.
In all these four examples the nexus between antitrust and regulation plays out differently but some common themes emerge, which we discuss in the final section. Section 7 has a quick look at the requirements to establish excessive pricing as they have evolved with the recent spate of cases to indicate how these limitations are hard to square both as a matter of internal logic and also with the spirit of antitrust law enforcement outlined here.

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