When are Excessive Prices Unfair?

Abstract

A dominant firm can abuse its position by charging unfair prices under EU competition law. Among other things, this prohibition has been used to prohibit excessive prices that are ‘too high’. This abuse has remained underdeveloped conceptually and in practice at the EU level, so there is ambiguity regarding what constitutes an excessive and therefore unfair price. We consider whether the principle of dual entitlement can be used to define explicitly what constitutes an ‘unfair price’ in terms of the second stage of the United Brands test. We show that in general this principle is in line with the goals of an effective prohibition of excessive pricing and develop a procedure that defines a price as ‘unfair’ in terms of this principle. We also show that the case law highlights that European Competition Law enforcers have implicitly followed similar steps as the ones developed here in their attempts to define ‘unfair prices’. The procedure could be used explicitly to improve the ex ante legal certainty of the test of ‘unfair pricing’, which in turn may lead to a more effective prohibition if it is used appropriately with suitable remedies.

Keywords: Unfair pricing prohibition, abuse of dominant position, exploitative abuse, excessive pricing, principle of dual entitlement

JEL Classification: K21, L40