Unfair and Predatory Pricing Under Article 82 EC : From Cost-Price Comparisons to the Search for Strategic Standards

The analysis of unfair (excessive) pricing and predatory pricing under Article 82 EC isusually based on some form of cost-price comparison. This approach has intuitive appeal,is easily incorporated into economic models and has considerable precedential weight.However, cost-price comparisons have significant weaknesses. Economic theory providesno clear guidance as to which cost measure should be taken as a benchmark: in practicethese comparisons seem more scientific than they actually are and too much reliance onsuch tests can cause the real competition issues to be overlooked.This chapter presents three main arguments. First, although cost-price comparisons areoften asserted by the European Commission and the Community Courts (as well ascommentators) to be the basis for deciding pricing abuses, they are seldom determinativein actual cases. Secondly, this is to be welcomed: cost analysis should play a minor roleunder Article 82 EC. Instead, a more rigorous treatment of strategic factors would yield abetter understanding of the purpose and effect of conduct, even if some legal uncertaintyis likely. Thirdly, the current trend towards a ‘more economic approach' to the analysis ofArticle 82 EC ought not lead to the abandonment of legal analysis, where this is moresuited to determining the relevant question, nor should it support the adoption of a singletype of economic analysis as ‘received wisdom'