The Diverging Approach to Price Squeezes in the United States and Europe

Journal of Competition Law & Economics, 2012

Cornell Legal Studies Research Paper No. 12-07

26 Pages Posted: 2 Feb 2012 Last revised: 8 Mar 2012

George Alan Hay

Cornell University - Law School

Kathryn McMahon

University of Warwick - School of Law

Date Written: February 1, 2012

Abstract

Notwithstanding assertions of greater harmonization and convergence between United States and European Union competition law, recent case law has identified significant differences in their approaches to the regulation of a price or margin squeeze. In the US after linkLine the likelihood of a successful claim has been significantly diminished, particularly if there has been no prior course of voluntary dealing and no downstream predatory pricing. In contrast, in a series of decisions in liberalized telecommunications markets, the EU Courts in applying an “as efficient competitor test” have focused on the preservation of competitive rivalry as “equality of opportunity.” This significantly broadens the potential liability for a margin squeeze in the EU and reconstitutes EU competition law as a form of de facto regulation in liberalized markets. Faced with the uncertainty of this standard, the dominant firm has an incentive to avoid liability by raising its retail prices, to the detriment of consumers. This article evaluates this divergence in approach to the regulation of a price or margin squeeze in the US and EU and traces these approaches to differing conceptions of dominant firm regulation which in turn have informed different understandings of the regulation of a “refusal to supply” and the intersection of competition law with sector-specific regulation.

Keywords: European Union, Courts, harmonization, competition law, telecommunications, markets, margin, regulation

Suggested Citation

Hay, George Alan and McMahon, Kathryn, The Diverging Approach to Price Squeezes in the United States and Europe (February 1, 2012). Journal of Competition Law & Economics, 2012; Cornell Legal Studies Research Paper No. 12-07. Available at SSRN: https://ssrn.com/abstract=1997384

George Alan Hay (Contact Author)

Cornell University - Law School ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States

Kathryn McMahon

University of Warwick - School of Law ( email )

Gibbet Hill Road
Coventry CV4 7AL, CV4 7AL
United Kingdom
024765 28399 (Phone)
024765 24105 (Fax)

HOME PAGE: http://www2.warwick.ac.uk/fac/soc/law/staff/academic/mcmahon

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