Paris

Exploitative abuses: What are the new risks for companies?

Law & Economics workshop organised by Concurrences Review in partnership with Cleary Gottlieb Steen & Hamilton and Analysis Group.

Emmanuel Combe

There are three types of abuse of a dominant position: (i) exclusionary abuse, which consists in preventing a competitor from entering or excluding it from the market, (ii) exploitative abuse, which consists in taking advantage of a dominant position in order, for example, to charge excessive prices, and (iii) discriminatory abuse, which consists in placing a similarly situated trading partner at a disadvantage. This intellectual categorisation is partly contained in Article 102 of the Treaty, with the notion of "unfair pricing" for example.

However, the line between abuse of exclusion and abuse of exploitation is not always watertight in practice, since one of the effects of abuse of exclusion is to allow the company to charge excessive prices, i.e. abuse of exploitation. Moreover, abuse of exploitation may be one of the forms of abuse of exclusion, as in the case of the margin squeeze, for example.

Excessive prices are the main form of exploitative abuse. Others include degradation of product quality, discriminatory treatment of customers, or the "extortion" of customers’ personal data without their explicit consent. The notion of excessive pricing can be problematic from an economic point of view because of the normative dimension related to the "excessive" nature of the price. In economics, it is only possible to characterize a price that is high in relation to a cost level or an irrational price (which is often excessively low, i.e. below variable cost), but not an "excessive" price that has a moral dimension. Moreover, it is paradoxical to reproach a firm, once it has acquired its dominant position on the merits, for reaping the full benefits, for example in the form of a high price. In his Opinion in the AKKA/LAA case, Advocate General Nils Wahl also pointed out that monopoly prices, charged for a short period (i.e. transitional), are the reward for entrepreneurship.

Photos © Léo-Paul Ridet

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Speakers

  • French Competition Authority (Paris)
  • Cleary Gottlieb Steen & Hamilton (Paris)
  • Analysis Group (Paris)