LAW & ECONOMICS: MARGIN SQUEEZE- VERTICALLY INTEGRATED FIRMS - FORMER PUBLIC MONOPOLIES - MARGINS OF NON - INTEGRATED COMPETITORS - UPSTREAM PRICES - DOWNSTREAM PRICES - EXCESSIVE PRICING - PREDATORY PRICING - REFUSAL TO SUPPLY - BUNDLING - DISCRIMINATION - CONSISTENCY OF THE TREATMENT OF ABUSES - POST-CHICAGO THEORIES OF HARM - PROCOMPETITIVE PRACTICES - ACCOUNTING-BASED SQUEEZE TESTS

Some economics of margin squeeze

I. A recent and complex concept 1. A side-effect of deregulation 1. According to the Court of First Instance, a margin squeeze arises when a vertically integrated firm sells an upstream good to non-integrated downstream rivals at a price which cannot leave “an efficient competitor”1 “a sufficient profit margin [...] to remain competitive”2 in the downstream market, given the price set by the integrated firm for its own downstream product. In such a situation, non-integrated downstream rivals are “squeezed” between the integrated firm's upstream and downstream prices. 2. There has been a recent flurry of margin squeeze cases at the Community and national levels in the aftermath of the deregulation of former state monopolies in sectors such as energy, telecommunications, and water.3 Lively

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David Spector, Some economics of margin squeeze, February 2008, Concurrences Review N° 1-2008, Art. N° 15302, pp. 21-26

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