The Prohibition of Excessive Pricing: Inherent Difficulties, Potential Mistakes, and Conditions for Application

76 Pages Posted: 18 Feb 2021 Last revised: 10 Mar 2021

See all articles by Michal Gal

Michal Gal

University of Haifa - Faculty of Law

Yossi Spiegel

Tel Aviv University, Coller School of Management; Centre for Economic Policy Research (CEPR); ZEW – Leibniz Centre for European Economic Research

Date Written: February 1, 2021

Abstract

The excessive pricing prohibition is recognized in many jurisdictions. In this article we use theoretical and practical considerations as well as experience from the implementation of the prohibition to shed light on its inherent difficulties, potential mistakes, and conditions for application. We begin by discussing five foundational principles that should affect the enforcement of the prohibition: (i) consumer welfare does not depend solely on price; (ii) incentives of firms to invest and innovate are crucial for consumer welfare; (iii) the prohibition increases the amount of uncertainty that firms face and impedes the efficient operation of markets; (iv) the competitive price is a valid benchmark only when perfect competition can exist; (v) currently the prohibition can be applied even if the monopolist gained its position by engaging in competition on the merit. We then apply these foundational principles to the prohibition. We also explore the fairness perceptions of consumers and the lessons learned from other types of price regulation. In the third part of the paper we analyze the inherent practical difficulties in applying the prohibition. We conclude with suggestions on the conditions under which the prohibition should be applied to ensure that its application enhances welfare. We also briefly summarize all EU and British excessive pricing cases to date. [The paper is written in Hebrew; we are also working on an English version of the paper].

Keywords: excessive pricing, unfair price, monopoly, dominance, antitrust, competition law, dynamic efficiency

Suggested Citation

Gal, Michal and Spiegel, Yossi, The Prohibition of Excessive Pricing: Inherent Difficulties, Potential Mistakes, and Conditions for Application (February 1, 2021). Available at SSRN: https://ssrn.com/abstract=3777069 or http://dx.doi.org/10.2139/ssrn.3777069

Michal Gal (Contact Author)

University of Haifa - Faculty of Law ( email )

Mount Carmel
Haifa, 31905
Israel

HOME PAGE: http://weblaw.haifa.ac.il/en/faculty/gal/pages/home.aspx

Yossi Spiegel

Tel Aviv University, Coller School of Management ( email )

Ramat Aviv, Tel Aviv, 69978
Israel
972-3-640-9063 (Phone)
972-3-640-7739 (Fax)

HOME PAGE: http://www.tau.ac.il/~spiegel

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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