Paris

Predatory pricing after judgment "Fret ferrovaire"

Law & Economics workshop organized by Concurrences in partnership with Gide Loyrette Nouel and Charles River Associates.

Frédéric Jenny (Chairman of the Competition Committee of the OCDE
Professeur d’économie, Co-Director CEDE, ESSEC )

The issue of "predatory pricing" arose in the 1990s and 2000s, in particular because of the opening up to competition of a number of sectors such as telecoms, the postal sector, air transport and the rail sector.

The aim is to penalise the behaviour of undertakings with market power which voluntarily incur losses in relation to what would maximise their profits in order to foreclose actual or potential competitors from the market a n d to be able to raise their prices once the foreclosure has taken place.

It is important to distinguish between practices that eliminate a competitor and those that eliminate competition, which are the only ones covered by competition law. This distinction explains why the predatory pricing test focuses on whether the firm has charged lower prices than a firm that is as efficient as it is. Moreover, since the AKZO judgment, if the price charged is above average avoidable cost but below long-run average marginal cost (an approximation of long-run average cost) the demonstration of predation requires the establishment of an exclusionary plan.

Photos © Tony Trichanh.

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Speakers