Predatory Pricing Report: Difference between revisions

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| The enforcement agency has investigated an alleged abuse of predatory pricing, but found it did not constitute an abuse and was instead, "intense competition."<ref>http://www.oecd.org/dataoecd/63/50/37028481.pdf, 12</ref>




Revision as of 17:42, 13 July 2007

Summary Table

Country Predatory Pricing Prohibition Comment
EU Generally[1] 1 Article 82 (formerly Article 86) of the EC Treaty prohibits predatory pricing. The Commission began prosecuting predatory pricing in 1985, in the AKZO case.[2] This case led to the establishment of a two-pronged test for predatory pricing. A firm was guilty of the offense if it either:
  1. Sets the price at below average variable cost. This amounts to a per se assumption of abusive behavior.
  2. Sets the price at below average total cost, but above average variable cost. This is also assumed to be predatory, but requires a specific plan by the firm to eliminate competitors.
Austria 1 §31(1)(5) of the Federal Act of 19 October 1988 on Cartels and other Restrictive Trade Practices prohibits the sale of goods below cost price when it cannot be justified on material grounds.
Belgium 1 Articles 40-41 of The Commercial Practices Act of July 14, 1991 forbid reselling products at a loss.[3]
Cyprus 0 No prohibition on predatory pricing found.
Czech Republic 1 §11(1)(e) of the Consolidated Act on the Protection of Competition prohibits by a Dominant firm "consistent offer and sale of goods for unfairly low prices, which results or may result in distortion of competition." [4]
Denmark 1 The Danish Monopolies and Restrictive Practices Supervision Act of 1955 forbids predatory pricing.[5]
Estonia 0 No prohibition on predatory pricing found.
Finland 1 Article 7(4) of the Act on Competition Restrictions (480/1992) makes, "a pricing practice which is unreasonable or obviously aimed at restricting competition" an abuse of a dominant position.[6]
France 1 French Competition Act (Ordinance no. 86-1243 of December 1, 1986 (amended July 9, 1999)

"Article 10-1: Price offers or price practices with respect to consumer sales prices that are abusively low in relation to the costs of production, transformation, and marketing are prohibited, since these offers or practices have as their purpose, or may have as their effect, to eliminate from a market or to prevent access to a market by an enterprise or one of its products."

(Note: This Article has been used only rarely by enforcement agencies.) [7]


Germany 1 Section 20(4) of Act Against Restraints of Competition states that dominant firms cannot use their market power to hinder competitors in an "unfair manner," which occurs when a firm "offers goods or services not merely occasionally below its cost price . . . ."Cite error: Closing </ref> missing for <ref> tag


Hungary 1 Article 21(h) of Act LVII of 1996 on the Prohibition of Unfair and Restrictive Market Practices as amended, effective November 1, 2005 makes it prohibited to "set extremely low prices which are not based on greater efficiency in comparison with that of competitors and which are likely to drive out competitors from the relevant market or to hinder their market entry[.]"


Ireland 0 The enforcement agency has investigated an alleged abuse of predatory pricing, but found it did not constitute an abuse and was instead, "intense competition."[8]


Italy 0 Italy has no prohibition on predatory pricing. However, "it is foreseeable that the same principles set forth in EC law to prohibit predatory price cutting by a dominant undertaking may be applied."[9]


Latvia 0 Latvia has no explicit prohibition on predatory pricing. However, "[p]redatory pricing by definition as a practice aimed at hindrance, restriction or distortion of competition would qualify as an abuse of dominant position.[10]


Luxembourg 1 Below cost selling of goods and services is prohibited under the Act on Commercial Practices, Unfair Competition and Comparative Advertising (July 2002).[11]


Malta 1 Article 9(2)(b) of Chapter 379 Competition Act of Malta forbids "charg[ing] prices which are below the average variable cost price of a product in order to drive rival competitors out of the market[.]"
Netherlands 0 Dutch law does not forbid resale at a loss, either. [12]


Poland 1 Article 8(2)(1) of The Act on Protection of Competition and Consumers prohibits "direct or indirect imposition of unfair prices, including predatory prices or prices glaringly low."[13]


Portugal 1 Decree-Law 370/93 of October 29, 1993 (as amended by Decree-Law 140/98) forbids selling goods at a price below the actual price of purchase (plus taxes and transportation costs).[14]


Slovak Republic 1 The Slovak Republic forbids abusive acts by a dominant firm seeking to exclude competition.[15] The Antimonopoly Office of the Slovak Republic (their enforcement agency) has used this provision to prosecute temporary predatory pricing of fuels,[16] but the decision was never given effect, as the defendant discontinued its pricing scheme.


Slovenia 0 No predatory pricing provision found. Office for Protection of Competition received one complaint of predatory pricing against Produkcija Plus d.o.o. - RTV Slovenia d.o.o. on 2/20/01. However, the complaint was dismissed (Office did not rule on the merits).[17]


Spain 1 There are two cases where the courts have issued fines for predatory pricing:

1. General Electric Espana[20] - GE's local affiliate was fined Pta 15 million (~90,000 euros)[18]

2. Arbora/Ausonia[19]

Predatory pricing, presumably, is covered by common law because there is no mention of it in the Spanish competition laws.

Note: More recently, Telefónica, a Spanish firm, was fined by £102.6m (€152m) by the EU competition agency.[20]


Sweden 0 No predatory pricing provision found.
United Kingdom 1 Chapter II of the Fair Trading Act of 1973 prohibits predatory pricing. The OFT has published the following guidelines to assess whether pricing schemes are predatory:[21]
Price below average variable cost Predation can be assumed
Price below average variable cost but below average total cost Evidence on costs may indicate predation but evidence required of intention to eliminate a competitor before predation could be found
Price above average total costs Evidence on costs does not indicate predation

The Competition Act of 1980 is also at the disposal of the Director General of the Office of Free Trade (OFT) for the prohibition of predatory pricing.


EU Generally[22]

Article 82 (formerly Article 86) of the EC Treaty prohibits predatory pricing. The Commission began prosecuting predatory pricing in 1985, in the AKZO case.[23] This case led to the establishment of a two-pronged test for predatory pricing. A firm was guilty of the offense if it either:

  1. Sets the price at below average variable cost. This amounts to a per se assumption of abusive behavior.
  2. Sets the price at below average total cost, but above average variable cost. This is also assumed to be predatory, but requires a specific plan by the firm to eliminate competitors.

Austria

§31(1)(5) of the Federal Act of 19 October 1988 on Cartels and other Restrictive Trade Practices prohibits the sale of goods below cost price when it cannot be justified on material grounds.

Belgium

Articles 40-41 of The Commercial Practices Act of July 14, 1991 forbid reselling products at a loss.[24]

--JWSchneider 16:36, 9 July 2007 (EDT)

Czech Republic

§11(1)(e)prohibits by a Dominant firm "consistent offer and sale of goods for unfairly low prices, which results or may result in distortion of competition."

Cyprus

No prohibition on predatory pricing found.

Denmark

The Danish Monopolies and Restrictive Practices Supervision Act of 1955 forbids predatory pricing.[25]

Estonia

No prohibition on predatory pricing found.

Finland

Article 7(4) of the Act on Competition Restrictions (480/1992) makes, "a pricing practice which is unreasonable or obviously aimed at restricting competition" an abuse of a dominant position.[26]

France

French Competition Act (Ordinance no. 86-1243 of December 1, 1986 (amended July 9, 1999)

"Article 10-1: Price offers or price practices with respect to consumer sales prices that are abusively low in relation to the costs of production, transformation, and marketing are prohibited, since these offers or practices have as their purpose, or may have as their effect, to eliminate from a market or to prevent access to a market by an enterprise or one of its products."

(Note: This Article has been used only rarely by enforcement agencies.)[27]

--JWSchneider 16:04, 9 July 2007 (EDT)

Germany

Section 20 (4) states that dominant firms cannot use their market power to hunder competitors in an "unfair manner," which occurs when a firm "offers goods or services not merely occasionally below its cost price . . ."

Greece

Courts have interpreted predatory pricing as an abuse of a dominant position. [28]

Hungary

21(h) of Act LVII of 1996 on the Prohibition of Unfair and Restrictive Market Practices as amended, effective November 1, 2005 makes it prohibited to "set extremely low prices which are not based on greater efficiency in comparison with that of competitors and which are likely to drive out competitors from the relevant market or to hinder their market entry[.]"

Ireland

No prohibition on predatory pricing found.

Italy

Italy has no prohibition on predatory pricing. However, "it is foreseeable that the same principles set forth in EC law to prohibit predatory price cutting by a dominant undertaking may be applied."[29]

Latvia

Latvia has no explicit prohibition on predatory pricing. However, "[p]redatory pricing by definition as a practice aimed at hindrance, restriction or distortion of competition would qualify as an abuse of dominant position.[30]

Luxembourg

Below cost selling of goods and services is prohibited under the Act on Commercial Practices, Unfair Competition and Comparative Advertising (July 2002).[31]

Malta

Article 9(2)(b) of Chapter 379 Competition Act of Malta forbids "charg[ing] prices which are below the average variable cost price of a product in order to drive rival competitors out of the market[.]"

Netherlands

No prohibition on predatory pricing found. Moreover, Dutch law does not forbid resale at a loss.[32]

Poland

Article 8(2)(1) prohibits "direct or indirect imposition of unfair prices, including predatory prices or prices glaringly low."

Portugal

Decree-Law 370/93 of October 29, 1993 (as amended by Decree-Law 140/98) forbids selling goods at a price below the actual price of purchase (plus taxes and transportation costs).[33]

--JWSchneider 16:10, 9 July 2007 (EDT)

Slovak Republic

The Slovak Republic forbids abusive acts by a dominant firm seeking to exclude competition.[34] The Antimonopoly Office of the Slovak Republic (their enforcement agency) has used this provision to prosecute temporary predatory pricing of fuels,[35] but the decision was never given effect, as the defendant discontinued its pricing scheme.

--JWSchneider 13:07, 9 July 2007 (EDT)

Spain

There are two cases where the courts have issued fines for predatory pricing:

  1. General Electric Espana[36] - GE's local affiliate was fined Pta 15 million (~90,000 euros)
  2. Arbora/Ausonia[37]

Predatory pricing, presumably, is covered by common law because there is no mention of it in the Spanish competition laws.

Note: More recently, Telefónica, a Spanish firm, was fined by £102.6m (€152m) by the EU competition agency.[38]

--JWSchneider 16:30, 9 July 2007 (EDT)

Sweden

No prohibition on predatory pricing found.

United Kingdom

Chapter II of the Fair Trading Act of 1973 prohibits predatory pricing. The OFT has published the following guidelines to assess whether pricing schemes are predatory:[39]

Price below average variable cost Predation can be assumed
Price below average variable cost but below average total cost Evidence on costs may indicate predation but evidence required of intention to eliminate a competitor before predation could be found
Price above average total costs Evidence on costs does not indicate predation

The Competition Act of 1980 is also at the disposal of the Director General of the Office of Free Trade (OFT) for the prohibition of predatory pricing.

References

  1. ↑ Information for this section has been gleaned from The EC law of Competition (eds. Jonathan Faull and Ali Nikpay)
  2. ↑ AKZO [1985] OJ L374/1.
  3. ↑ Competition Law in the EU (p. I-518)
  4. ↑ http://www.unctad.org/en/docs/c2clp50_en.pdf
  5. ↑ Organization for Economic Cooperation and Development report, http://www.oecd.org/dataoecd/7/54/2375661.pdf (p. 33)
  6. ↑ Competition Law in the EU (p. II-363-64)
  7. ↑ Competition Law in the EU (p. I-190)
  8. ↑ http://www.oecd.org/dataoecd/63/50/37028481.pdf, 12
  9. ↑ Competition Law in the EU, Vol. 1, 384.
  10. ↑ Dace Silava-Tomsone, Getting the Deal Through – Dominance 2006, http://www.lt-v.lv/pdf/Latvia_dace.pdf
  11. ↑ http://www.entemp.ie/publications/commerce/2005/groceriesorder/chapter9.pdf
  12. ↑ Competition Law in the EU, Vol. 1, 445.
  13. ↑ http://www.konsument.gov.pl/files/ccp_act.pdf
  14. ↑ Competition Law in the EU (p. I-326)
  15. ↑ 136/2001 Coll. ACT of 27 February 2001 on Protection of Competition and on Amendments and Supplements to Act of the Slovak National Council No. 347/1990 Coll. (Article 8(2)(e))
  16. ↑ Decision No. 2001/DZ/P/2/283 issued by Chairman of the Office on September 26, 2001 (http://www.antimon.gov.sk/eng/article.aspx?c=395&a=2139
  17. ↑ http://www.uvk.gov.si/fileadmin/uvk.gov.si/pageuploads/Enforcement_Record_2001.pdf
  18. ↑ TDC Dec. 295/91, or December 30, 1991
  19. ↑ TDC Dec. 291/90, January 7, 1992
  20. ↑ http://www.computerworlduk.com/management/government-law/legislation/news/index.cfm?newsid=3865
  21. ↑ Competition Law in the EU (p. II-63)
  22. ↑ Information for this section has been gleaned from The EC law of Competition (eds. Jonathan Faull and Ali Nikpay)
  23. ↑ AKZO [1985] OJ L374/1.
  24. ↑ Competition Law in the EU (p. I-518)
  25. ↑ Organization for Economic Cooperation and Development report, http://www.oecd.org/dataoecd/7/54/2375661.pdf (p. 33)
  26. ↑ Competition Law in the EU (p. II-363-64)
  27. ↑ Competition Law in the EU (p. I-190)
  28. ↑ Competition Law in the EU, p. 605 (citing Competition Commission Decisions 232/95 P.Lambropoulos&Co. Priv. Partn.; 264/95 Protoporia Publications Litd.
  29. ↑ Competition Law in the EU, Vol. 1, 384.
  30. ↑ Dace Silava-Tomsone, Getting the Deal Through – Dominance 2006, http://www.lt-v.lv/pdf/Latvia_dace.pdf, 4.
  31. ↑ http://www.entemp.ie/publications/commerce/2005/groceriesorder/chapter9.pdf, 142
  32. ↑ Competition Law in the EU, Vol. 1, 445.
  33. ↑ Competition Law in the EU (p. I-326)
  34. ↑ 136/2001 Coll. ACT of 27 February 2001 on Protection of Competition and on Amendments and Supplements to Act of the Slovak National Council No. 347/1990 Coll. (Article 8(2)(e))
  35. ↑ Decision No. 2001/DZ/P/2/283 issued by Chairman of the Office on September 26, 2001 (http://www.antimon.gov.sk/eng/article.aspx?c=395&a=2139)
  36. ↑ TDC Dec. 295/91, or December 30, 1991
  37. ↑ TDC Dec. 291/90, January 7, 1992
  38. ↑ http://www.computerworlduk.com/management/government-law/legislation/news/index.cfm?newsid=3865
  39. ↑ Competition Law in the EU (p. II-63)
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