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The Abusive Nature of Price Squeezes in the EU

Abstract

This article explores the abusive nature of price squeezes by investigating why a dominant undertaking subject to a price-squeeze liability cannot be allowed to benefit from its competitive advantages from vertical integration. As a result, a price-squeeze liability seems to oblige a dominant undertaking to subsidize non-vertically-integrated competitors. This goes against the general proposition that competition law protects only competition rather than (inefficient) competitors. An examination of six price-squeeze cases within the context of EU competition law reveals that price squeezing cannot be fully explained by other closely related concepts, such as excessive pricing, predatory pricing and the refusal to deal. Accordingly, this article develops a new theory for the abusive nature of price squeezes. Price squeezing, as this theory tries to establish, aims to maintain competition on a regulated market where a sector-specific regulator imposes both a duty to deal and a price regulation upon the dominant undertaking concerned.

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Notes

  1. 1.

    See the comparison on price squeezing between the EU and the USA in Nguyen (2010); Hay and McMahon (2012); and Rudaz (2010).

  2. 2.

    Jones and Sufrin (2011); and Whish (2009).

  3. 3.

    See e.g. Hovenkamp and Hovenkamp (2009); Carlton (2008); and Crocioni and Veljanovski (2003).

  4. 4.

    See e.g. Bouckaert and Verboven (2004); Colley and Burnside (2006); and Hou (2011a).

  5. 5.

    Edwards (2011).

  6. 6.

    Case National Carbonising, 1976 OJ L 35/6.

  7. 7.

    Ibid.

  8. 8.

    Case 6–7/73, Ipara.stituto Chemioterapico Italiano S.p.A. and Commercial Solvents Corporation v. Commission, [1974] ECR 223, para. 25.

  9. 9.

    National Carbonising, supra note 6.

  10. 10.

    Geradin and O’Donoghue (2005).

  11. 11.

    Case IV/30.178, Napier Brown - British Sugar, 1988 OJ L 284/41.

  12. 12.

    Ibid., para. 66.

  13. 13.

    Case C-311/84, Centre belge d’études de marché - Télémarketing (CBEM) v. SA Compagnie luxembourgeoise de télédiffusion (CLT) and Information publicité Benelux (IPB), [1985] ECR 3261, para. 26.

  14. 14.

    Case C-7/97, Oscar Bronner v. Mediaprint, [1998] ECR I-7791, para. 43.

  15. 15.

    Ibid., para. 44.

  16. 16.

    Commission decision in Napier Brown – British Sugar, supra note 11, para. 56.

  17. 17.

    Ibid., para. 33.

  18. 18.

    Ibid., para. 78.

  19. 19.

    Ibid., paras. 43 and 45.

  20. 20.

    Bouckaert and Verboven, supra note 4.

  21. 21.

    Commission decision in Napier Brown – British Sugar, supra note 11, para. 43.

  22. 22.

    Ibid., paras. 34 and 35.

  23. 23.

    Joined Cases T-202/98, T-204/98 and T-207/98, Tate & Lyle and others v. Commission, [2001] ECR II-2035, para. 39. See also the appeal to the ECJ: Case C-359/01 P, British Sugar v. Commission, [2004] ECR I-4933.

  24. 24.

    See further discussion in “3.3 Price Squeezing as a Refusal to Deal”, below.

  25. 25.

    GC judgment in Tate & Lyle, supra note 23, para. 32.

  26. 26.

    Ibid., paras. 44 and 45.

  27. 27.

    See Case T-5/97, Industrie des Poudres Sphériques SA v. Commission, [2000] ECR II-3755.

  28. 28.

    Ibid., para. 179.

  29. 29.

    Ibid.

  30. 30.

    Case 27/76, United Brands Company and United Brands Continentaal BV v. Commission, [1978] ECR 207, para. 250.

  31. 31.

    Hou (2011b).

  32. 32.

    IPS, supra note 27, paras. 157–168.

  33. 33.

    Ibid., paras. 181–183.

  34. 34.

    Ibid., para. 181.

  35. 35.

    Ibid., para. 172.

  36. 36.

    Ibid., para. 184.

  37. 37.

    Joined Cases COMP/C-1/37.451, 37.578, 37.579, Deutsche Telekom AG, 2003 OJ L 263/9.

  38. 38.

    Case T-271/03, Deutsche Telekom v. Commission, [2008] ECR II-477.

  39. 39.

    Case C-280/08 P, Deutsche Telekom v. Commission, [2010] ECR I-9555. AG Mazák delivered his opinion on 22 April 2010.

  40. 40.

    Commission decision in Deutsche Telekom, supra note 37, para. 54.

  41. 41.

    Ibid., para. 57.

  42. 42.

    GC judgment in Deutsche Telekom, supra note 38, para. 85.

  43. 43.

    Ibid., para. 89.

  44. 44.

    Ibid., para. 107.

  45. 45.

    Ibid., para. 119.

  46. 46.

    Ibid., para. 120.

  47. 47.

    AG opinion in Deutsche Telekom, supra note 39, para. 13.

  48. 48.

    Ibid., para. 15.

  49. 49.

    ECJ judgment in Deutsche Telekom, supra note 39, para. 91.

  50. 50.

    Ibid., para. 80.

  51. 51.

    Ibid., para. 84.

  52. 52.

    GC judgment in Tate & Lyle, supra note 23.

  53. 53.

    Commission decision in Deutsche Telekom, supra note 37, para. 104.

  54. 54.

    Ibid., para. 107.

  55. 55.

    GC judgment in Deutsche Telekom, supra note 38, para. 188.

  56. 56.

    Ibid., para. 194.

  57. 57.

    Case C-62/86, AkzoChemie v. Commission, [1991] ECR I-3359.

  58. 58.

    GC judgment in Deutsche Telekom, supra note 38, para. 189.

  59. 59.

    AG opinion in Deutsche Telekom, supra note 39, para. 49.

  60. 60.

    ECJ judgment in Deutsche Telekom, supra note 39, paras. 201 and 202.

  61. 61.

    Commission decision in Deutsche Telekom, supra note 37, paras. 125 and 128.

  62. 62.

    ECJ judgment in Deutsche Telekom, supra note 39, para. 202.

  63. 63.

    Commission decision in Deutsche Telekom, supra note 37, para. 180.

  64. 64.

    GC judgment in Deutsche Telekom, supra note 38, para. 235.

  65. 65.

    ECJ judgment in Deutsche Telekom, supra note 39, para. 250. See also AG opinion in Deutsche Telekom, supra note 39, para. 64.

  66. 66.

    GC judgment in Deutsche Telekom, supra note 38, para. 237; ECJ judgment in Deutsche Telekom, supra note 39, para. 255; and AG opinion in Deutsche Telekom, supra note 39, para. 64.

  67. 67.

    Case C-52/09, TeliaSonera Sverige, [2011] ECR I-527. AG Mazák delivered his opinion on 2 September 2010.

  68. 68.

    ECJ judgment in TeliaSonera, supra note 67, para. 6.

  69. 69.

    Ibid., para. 34.

  70. 70.

    Ibid., para. 32.

  71. 71.

    Ibid., para. 41.

  72. 72.

    Commission Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings (hereinafter: the Guidance), 2009 OJ C 45/7, para. 80.

  73. 73.

    AG opinion in TeliaSonera, supra note 67, para. 18.

  74. 74.

    Ibid., para. 20.

  75. 75.

    Ibid., para. 23.

  76. 76.

    ECJ judgment in TeliaSonera, supra note 67, para. 69.

  77. 77.

    Ibid., paras. 73–74.

  78. 78.

    Ibid., paras. 75–76.

  79. 79.

    Ibid., para. 72.

  80. 80.

    Case COMP/38.784, Wanadoo España v. Telefónica, 4 July 2007 (unreported).

  81. 81.

    Case T-336/07, Telefónica and Telefónica de España v. Commission, judgment of 29 March 2012 (unreported).

  82. 82.

    Case C-295/12 P, Telefónica and Telefónica de España v. Commission (pending).

  83. 83.

    Commission decision in Telefónica, supra note 80, paras. 279–280.

  84. 84.

    Ibid., para. 287.

  85. 85.

    GC judgment in Telefónica, supra note 81, paras. 180–182.

  86. 86.

    Ibid., para. 187.

  87. 87.

    Ibid., para. 190.

  88. 88.

    Ibid., para. 192.

  89. 89.

    Ibid., para. 191.

  90. 90.

    Ibid., para. 271.

  91. 91.

    Ibid., para. 275; and Commission decision in Telefónica, supra note 80, paras. 547–555.

  92. 92.

    IPS, supra note 27, para. 179.

  93. 93.

    See e.g. Case C-30/87, Corinne Bodson v. SA Pompes funèbres des régions libérées, [1988] ECR 2479; Case COMP/C-1/36.915, Deutsche Post AG, 2001 OJ L331/40; Case C-159/08 P, Isabella Scippacercola and Ioannis Terezakis v. Commission, [2009] ECR I-46.

  94. 94.

    IPS, supra note 27, para. 179.

  95. 95.

    See e.g. Areeda and Turner (1975); Joskow and Klevorick (1979); and Whish, supra note 2, at 729–732.

  96. 96.

    ECJ judgment in TeliaSonera, supra note 67, para. 89.

  97. 97.

    GC judgment in Telefónica, supra note 81, para. 189.

  98. 98.

    Geradin and O’Donoghue, supra note 10, at 367.

  99. 99.

    See e.g. Case C-333/94 P, Tetra Pak v. Commission, [1996] ECR I-5951. Tetra Pak possibly subsidized its loss on its non-aseptic products with the profit from its aseptic products.

  100. 100.

    Colley and Burnside, supra note 4.

  101. 101.

    Ibid., at 186.

  102. 102.

    Case AKZO, supra note 57. When a dominant undertaking charges prices above its average total costs, it is not guilty of predation. When it sells the product concerned below average variable costs, it is presumed to act abusively. When the price falls between the average total costs and average variable costs, the dominant undertaking infringes Art. 102 TFEU only where the price is applied as part of a plan to eliminate a competitor.

  103. 103.

    Case COMP/38.233, Wanadoo Interactive, Commission decision of 16 July 2003 (unreported).

  104. 104.

    Case T-340/03, France Télécom v. Commission, [2007] ECR II-107.

  105. 105.

    Case C-202/07 P, France Télécom v. Commission, [2009] ECR I-2369.

  106. 106.

    Ibid., paras. 36–60.

  107. 107.

    Art. 12(2) of Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) of the Treaty establishing the European Community, 2001 OJ C 368.

  108. 108.

    Art. 5(4) of Council Regulation (EC) No. 139/2004, 2004 OJ L 024.

  109. 109.

    Monti (2001).

  110. 110.

    ECJ judgment in Deutsche Telekom, supra note 39, para. 252.

  111. 111.

    Ibid., para. 255.

  112. 112.

    Sidak (2008); and Geradin and O’Donoghue, supra note 10.

  113. 113.

    The Guidance, supra note 72, para. 82.

  114. 114.

    Carlton, supra note 3.

  115. 115.

    Heimler (2010).

  116. 116.

    Sidak, supra note 112, at 308.

  117. 117.

    Ibid.

  118. 118.

    GC judgment in Tate & Lyle, supra note 23.

  119. 119.

    ECJ judgment in TeliaSonera, supra note 67, para. 70.

  120. 120.

    AG opinion, in TeliaSonera, supra note 67, para. 46.

  121. 121.

    Ibid., para. 58.

  122. 122.

    Carlton, supra note 3.

  123. 123.

    If those competitors are less efficient, then it makes no sense to prohibit price squeezing since competition law only protects efficient undertakings.

  124. 124.

    See also N. Dunne, “Margin squeeze: theory, practice, policy – Part 2”, 33 ECLR (2) 68 (2012).

  125. 125.

    Sidak, supra note 112.

  126. 126.

    GC judgment in Tate & Lyle, supra note 23.

  127. 127.

    Case SE/2004/0083: Wholesale broadband access in Sweden, Commission decision of 20 August 2004.

  128. 128.

    AG opinion in TeliaSonera, supra note 67, para. 18.

  129. 129.

    Commission decision in Telefónica, supra note 80, para. 287.

  130. 130.

    GC judgment in Telefónica, supra note 81, paras. 180–182.

  131. 131.

    AG opinion in TeliaSonera, supra note 67, para. 16.

  132. 132.

    Ibid.

  133. 133.

    Hovenkamp and Hovenkamp, supra note 3.

  134. 134.

    Cave (2006).

  135. 135.

    Directive 2002/21, 2002 OJ L108/33, amended by Directive 2009/140, 2009 OJ L337/37, Art. 14.2.

  136. 136.

    Economides (2005).

  137. 137.

    Geradin and O’Donoghue, supra note 10, at 395.

  138. 138.

    Sidak, supra note 112.

  139. 139.

    See different approaches to price regulation in Hou (2012).

  140. 140.

    Armstrong (2001).

  141. 141.

    European Regulators Group, “Revised ERG Common Position on the approach to appropriate remedies in the ECNS regulatory framework”, ERG (06) 33 (2006), 101.

  142. 142.

    Commission decision in Telefónica, supra note 80, para. 114.

  143. 143.

    Hou, supra note 31, at 231.

  144. 144.

    See more discussion on price caps in Geradin and Kerf (2003); and also Beesley and Littlechild (1989).

  145. 145.

    Geradin and Kerf, supra note 144, at 26–27 and 28–31.

  146. 146.

    European Regulators Group, supra note 141, at 101.

  147. 147.

    GC judgment in Telefónica, supra note 81, paras. 361–362.

  148. 148.

    Kroes (2009).

  149. 149.

    Commission decision in Deutsche Telekom, supra note 37, para. 17.

  150. 150.

    Ibid., para. 16.

  151. 151.

    Ibid., para. 30.

  152. 152.

    Commission decision in Telefónica, supra note 80, para. 114.

  153. 153.

    Ibid., paras. 111–112.

  154. 154.

    See the discussion about the Napier Brown/British Sugar case in Part 2.2.

  155. 155.

    SE/2004/0083, supra note 127.

  156. 156.

    Larouche (2006).

  157. 157.

    De Streel (2008).

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Acknowledgments

The author acknowledges the financial support of MOE (China Ministry of Education) Project of Humanities and Social Sciences (Project No. 12YJC820037). He also appreciates the feedback from the faculty of KoGuan Law School, particularly Prof. Wei Shen, when an early draft of this paper was presented in the faculty workshop, as well as the anonymous reviewers’ comments.

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Hou, L. The Abusive Nature of Price Squeezes in the EU. IIC 45, 43–74 (2014). https://doi.org/10.1007/s40319-013-0145-z

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Keywords

  • Price squeeze
  • Abuse of dominant position
  • Sector-specific regulation
  • EU law