Margin Squeeze: An Above-Cost Predatory Pricing Approach

Germain Gaudin, Despoina Mantzari

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

We provide a new legal perspective for the antitrust analysis of margin squeeze conducts. Building on recent economic analysis, we explain why margin squeeze conducts should solely be evaluated under adjusted predatory pricing standards. The adjustment corresponds to an increase in the cost benchmark used in the predatory pricing test by including opportunity costs due to missed upstream sales. This can reduce both the risks of false positives and false negatives in margin squeeze cases. We justify this approach by explaining why classic arguments against above-cost predatory pricing typically do not hold in vertical structures where margin squeezes take place and by presenting case law evidence supporting this adjustment. Our approach can help to reconcile the divergent U.S. and EU antitrust stances on margin squeeze.
Original languageEnglish
JournalJournal of Competition Law & Economics
Volume12
Issue number1
Pages (from-to)151–179
Number of pages29
ISSN1744-6414
DOIs
Publication statusPublished - 2016
Externally publishedYes

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