Price Discrimination Under Article 82 (2) (C) Ec: Clearing Up the Ambiguities
29 Pages Posted: 29 Mar 2008
Date Written: July 6, 2005
Price discrimination is an ambiguous concept: its welfare effects on consumers are generally uncertain and the contours of its legality are unclear. This paper aims to clear up the ambiguities surrounding the enforcement of Article 82(2)(c) of the EC Treaty, which holds that dominant companies "applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage" commit an abusive practice. Its central finding is that price discrimination ought not to be considered as an autonomous or distinct type of abuse, next to the well-established categories of exploitative and exclusionary practices. From an empirical point of view, first of all, it is striking that price discrimination has hardly ever been construed as the only basis to hold abusive a practice entered into by a dominant company. Second, the cases where discrimination has played a prominent role have mainly involved discrimination based on nationality or aimed at partitioning the common market. Yet discrimination based on nationality has intrinsically been the fact of State-related companies favoring national interests, i.e., situations that are typically dealt with on the basis of the internal market provisions of the EC Treaty. Cases of "discrimination aimed at partitioning the common market", on the other hand, have involved at their core contractual devices preventing arbitrage, which could be dealt with by the rules on vertical agreements under Article 81 EC. Aside from those two peculiar categories, the wording of Article 82(2)(c) EC, the notion of abusive practice and economic theory suggest that discrimination should be considered in relation to its "secondary line" effects, i.e., on competition among the dominant discriminating firm's trading parties on a downstream market (mainly). Yet, again, it appears that the only situations where a dominant company could or would have an interest in harming competition on a downstream market would involve either excessive prices or a constructive refusal to deal by a vertically integrated entity to exclude a downstream rival, i.e., a clear exclusionary strategy. Thus, discrimination does not appear, on its own, to amount to an autonomous source of harm to competition and, from an economic perspective, should not be considered so. Likewise, applying Article 82(2)(c) EC to "primary line" situations, i.e., where the anti-competitive effects are deemed to affect competitors of the dominant company, appears also ill-conceived and carries the risk of creating double standards (notably in relation to predation) and of leading to unjustified prohibitions. To reach the above conclusions (as developed in section IV), the paper undertakes an analysis of: (i) the economics of price discrimination (section II); and (ii) the legal approaches to price discrimination as developed in various national regulations and in the practice and case law of the European Commission and the European courts (section III).
Keywords: Price discrimination, discriminatory practices, abuse of dominant position, Article 82
JEL Classification: L40, L41
Suggested Citation: Suggested Citation