Squeezing Price Squeeze Under EC Antitrust Law

26 Pages Posted: 27 Sep 2009 Last revised: 4 Nov 2009

Gianluca Faella

Cleary Gottlieb Steen & Hamilton; University of Siena; University of Naples Federico II; LUISS Guido Carli University

Roberto Pardolesi

Libera UniversitĂ  degli Studi Sociali (LUISS) Guido Carli

Date Written: September 26, 2009

Abstract

Price squeeze abuses lie at the crossroad between different forms of potentially anticompetitive conduct, as well as between antitrust law and regulation. The main question that has arisen in the academic debate and actual practice is whether a combination of a lawful wholesale price and a non-predatory retail price can be characterized as exclusionary conduct based on the analysis of the margin between the two prices. In the paper, we argue that there is no need for a separate price squeeze theory under antitrust law. Assuming that the costs of supplying an input to rivals and to internal downstream divisions do not differ, a price squeeze capable of excluding equally efficient competitors may arise only from upstream discrimination (discriminatory price squeeze) or downstream predation (predatory price squeeze). However, when the downstream division of the dominant firm is not a separate legal entity, distinguishing discriminatory and predatory price squeezes may turn out to be impossible, as internal transfer charges are absent in many concrete settings of vertical integration. In these cases, an analytical framework for the assessment of price squeeze cases can be useful, provided that it is intended as an operational tool aimed at detecting anticompetitive conduct of a discriminatory or predatory nature, which is not directly observable. Instead of mimicking regulatory tools and criteria, the analytical framework for the assessment of price squeeze cases should be construed in accordance with basic principles of competition law and traditional doctrines of antitrust liability. This approach strongly supports the application of principles on refusal to deal to price squeeze cases and the use of the equally efficient competitor test to ascertain whether a given pricing policy is anticompetitive.

Keywords: Antitrust, Unilateral conduct, Monopolization, Abuse of dominance, Price Squeeze, Margin Squeeze, linkLine, Deutsche Telekom

JEL Classification: K21, L12, L41

Suggested Citation

Faella, Gianluca and Pardolesi, Roberto, Squeezing Price Squeeze Under EC Antitrust Law (September 26, 2009). Available at SSRN: https://ssrn.com/abstract=1478937 or http://dx.doi.org/10.2139/ssrn.1478937

Gianluca Faella (Contact Author)

Cleary Gottlieb Steen & Hamilton ( email )

Rome
Italy
00390669522690 (Phone)

University of Siena ( email )

Siena, SIena
Italy

University of Naples Federico II ( email )

via Cinthia, 4
Naples, Caserta 80126
Italy

LUISS Guido Carli University ( email )

Siena, SIena
Italy

Roberto Pardolesi

Libera UniversitĂ  degli Studi Sociali (LUISS) Guido Carli ( email )

00162 Rome, Roma
Italy

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