Grobuoniškos kainodaros teisinai aspektai es anglų k
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Grobuoniškos kainodaros teisinai aspektai es anglų k

1. Introduction

Predatory pricing one of the oldest conspiracy methods that competing large

businesses may inflict. The law that started regulating this malign form of

competition is dating back to 19th century nevertheless it is still complex

and controversial. After all, competing on price is the core essence of

competition and firms should not be deterred passing the efficiency – that

they have achieved – on to the price of a product. The law on predatory

pricing is enforced on the very thin ice where underneath is sheer

competition and above is abusing practice and it is important not to break

in. A firm has to raise itself an anxious question if it is dominant and

then to face a dilemma where both a price rise and a price cut might be

considered to be abusive. The dominant firm might simply argue that it is

competing – as it should do – whereas the complainant will argue that it

has departed from beneficial competition and is guilty of abusive

behavior[1].1.2 Elimination

In this assignment I have concentrated on EC law dealing with abuse of a

dominant position in relation to predatory pricing. I made some referances

to UK law as it gives some helphul guidelines in the enforcment of EC law.

Even more, some helpful insight on this issue I found in the practise of US

antitrus authorities (e.g. as for today, the rule of ’recoupment’ has not

been aplied yet by ECJ but its incidense is not a distant future).1.3 Method

All kinds of sources used in this assignment, such as official EU official

publications, literature and articles on this topic, will be evaluated in

terms of relevance and validity. The size of this paper does not allow me

to go into deep analysis, but hopefully I will provide myself with helpful

insights into this subject.1.4 Formulation of the problem

In order to show to what extent a dominant undertaking may engage in

predatory pricing practice it is important to define what is considered by

predatory pricing.

To the extent that single market integration has lifted previous legal and

institutional restrictions to entry into a national market, the dominant

firms in that market have no other choice but rely on strategic behaviour;

one of this kind is predatory behaviour towards existing and potential

competitors. It has been aimed at new entrants and firms already operating

in the markets. This usually takes two forms[2].

Firstly, there can be restriction of access to a complimentary asset by a

dominant firm. This asset can be characterised by essential importance in

reaching the end customer, and most importantly – cannot be duplicated –

either because it is in scarce supply or it has a form of statutory or

monopoly. The monopolist controlling an essential complementary asset

naturally will have an incentive to prevent the access of competing firms

by introducing disadvantageous terms. This may be expressed by refusal to

supply an asset, setting supranormal charges, use of vertical restrains

(e.g. exclusive dealing agreements)

Secondly, and of the most importance to this paper, there can be

exclusionary pricing. That is, a dominant firm may preclude the entry of

rivals into the given market directly through its pricing behaviour, by

setting prices for its products in the market below the level of economic

rationality so it is not worth for a rival to compete. This can be done by

introducing non-linear pricing structures such as selective discounts and

fidelity rebates (which reward customers in exchange for not purchasing

from rivals). The other form includes predatory pricing, where the dominant

firm adopts an aggressive prising strategy as a response to entry. Even

more, the dominant firm may implicitly imply of its predatory intents to

potential rival. Due to the constrain of limits to this paper, I

investigate only predatory price-cutting (selling at a loss). Other prising

practices as selective price-cutting to retain customers (but not at loss)

and vertical margin squeezing are excluded.2 Predatory price-cutting

Thus, the idea of predatory prising is simple enough: that a dominant firm

that has been charging for its products supra-competitively reduced prices

to a loss making level when faced with competition from an existing

competitor or a new entrant on the market and then having disciplined the

competitors the dominant firm raises its prices again, accumulating

supranormal profits until the next wave of attacks[3].2.1 Justifications for predatory pricing

In principle, any competing firm may seek to meet possible competition

through conduct which is meant to signal unequivocally that entry would be

met with aggressive retaliation, or that its advantage is such that the

rival would not be able to compete effectively, were it to enter. Mainly

these signals are expressed in pricing behaviour in the market. The

important economic issue is when and under what circumstances these

strategies may be deemed justifiable and pro competitive. Unlike

investment in capacity, R&D or advertising, which may provide the

competitive advantage, pricing is a strategic weapon. This weapon is useful

of its rapid application whereas other means might require considerable

amount of time.
Pricing strategy is one of the most viable instruments that

undertakings have in their disposition and they should not be deprived of

possibility of inflicting it, even if it is predatory.2.3 Proving of predatory pricing

The main problem with predation is that this strategy may be detected by

competition authorities. And sometimes it might be legal and sometimes

illegal. If firms could be sure that predatory pricing was always detected

and proved illegal, then such strategy would never be used. However, the

proving of predatory pricing is quite complicated and there is no single

satisfactory test or technique that a firm is predating.

The best-known test is the Areeda-Turner rule, were by prices which are

below a firm’s average variable cost (‘AVC’) are deemed to be predatory. In

fact, there are situations in which pricing below marginal cost is

legitimate, and therefore this test may not be considered safe. To solve

this problem, from 1993 the US Supreme Court has established the recoupment

test[4] that relegated the Areeda-Turner test to ancillary role. But as we

can see the EU competition authorities have declined to adopt the Areeda-

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