Predatory Pricing Report

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EU Generally[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

§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.

Czech Republic

§11(1)(e)prohibits "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.

Estonia

No prohibition on predatory pricing found.

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 . . ."

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, but "it is foreseeable that the same principles set forth in EC law to prohibit predatory price cutting by a dominant undertaking may be applied."[3]

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.[4]

Netherlands

No prohibition on predatory pricing found. Moreover, Dutch law does not forbid resale at a loss.[5]

Poland

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

Slovak Republic

The Slovak Republic forbids abusive acts by a dominant firm seeking to exclude competition.[6] The Antimonopoly Office of the Slovak Republic (their enforcement agency) has used this provision to prosecute temporary predatory pricing of fuels,[7] but the decision was never given effect, as the defendant discontinued its pricing scheme.

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

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.)[8]

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

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).[9]

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

Spain

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

  1. General Electric Espana[10] - GE's local affiliate was fined Pta 15 million (~90,000 euros)
  2. Arbora/Ausonia[11]

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.[12]

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

Belgium

Articles 40-41 of The Commercial Practices Act of July 14, 1991 forbid reselling products at a loss.[13]

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

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:[14]

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.

Denmark

The Danish Monopolies and Restrictive Practices Supervision Act of 1955 forbids predatory pricing.[15]

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.[16]

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, Vol. 1, 384.
  4. ↑ Dace Silava-Tomsone, Getting the Deal Through – Dominance 2006, http://www.lt-v.lv/pdf/Latvia_dace.pdf, 4.
  5. ↑ Competition Law in the EU, Vol. 1, 445.
  6. ↑ 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))
  7. ↑ 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)
  8. ↑ Competition Law in the EU (p. I-190)
  9. ↑ Competition Law in the EU (p. I-326)
  10. ↑ TDC Dec. 295/91, or December 30, 1991
  11. ↑ TDC Dec. 291/90, January 7, 1992
  12. ↑ http://www.computerworlduk.com/management/government-law/legislation/news/index.cfm?newsid=3865
  13. ↑ Competition Law in the EU (p. I-518)
  14. ↑ Competition Law in the EU (p. II-63)
  15. ↑ Organization for Economic Cooperation and Development report, http://www.oecd.org/dataoecd/7/54/2375661.pdf (p. 33)
  16. ↑ Competition Law in the EU (p. II-363-64)
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