When are excessive prices unfair?

2014-05-29T14:15:20Z (GMT) by Pinar Akman Luke Garrod
A dominant firm can abuse its position by charging unfair prices under EU competition law. According to the ECJ in United Brands, a price is abusive if (i) the price-cost margin is excessive and (ii) the price is unfair compared to other prices. However, there is little guidance to determine whether a price-cost margin is excessive and if so, when the price is unfair. We consider whether the principle of dual entitlement, which is consistent with most people’s perceptions of when prices are unfair relative to others, 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 unfairly high pricing and we develop a procedure that defines a price as unfair in terms of this principle. We also show that European competition law enforcers in their attempts to define prices as unfair relative to other prices have followed arguments similar to the procedure developed here. Therefore, this procedure could go some way to resolve one of a number of problems regarding the prohibition of unfairly high pricing.