Excessive Pricing

Belma Özüpek

Student thesis: Master thesis

Abstract

This thesis deals with the topic of excessive pricing, regulated by article 102 (a) TFEU. Excessive pricing can be very briefly described as a company charging the consumers exorbitantly high prices by exploiting its established market power. The aim of the thesis is to clarify the legal guidelines on excessive pricing and analyze it from the perspective of economic efficiency. The lately set forth partial legal guidelines by the European Court of Justice (hereafter ECJ) will also be made use of as a further insight into this issue. According to the ECJ, a price is described as unreasonably high; if it bears no rational relation to the economic value of the service. In order to assess the “fairness” of the price, one has to look at the gap between the sales price of an item/service and the cost associated. If the gap is found to be seemingly unreasonably high, the price should be assessed for fairness either independently on its own or relative to the pricing of the competition. The EU Commission has further developed this analysis approach by including factors which also relate to the demand-side. In general, one can conclude that excessive pricing occurs often due to companies being granted exclusive rights, which is why EU must take it into consideration while dealing with excessive pricing. Looking from the economics perspective, the juridical methods ECJ is using for identifying excessive pricing exhibits certain problems. Below, these methods are further analayzed using economics theory and can thereby concluded that they are either somehwhat economically ineffective or are at the very least not entirely objective. It can clearly be said that they further add to the already present lack of clarity around excessive pricing in the field of economics; as first of all economic theory does not provide a clear definition of a “reasonable price” and furthermore as there are a wide spectrum of factors which have to be taken into account. Thus individual criterion cannot be applied in isolation from other factors, as such the methods are therefore not sufficient to apply in practice. These limitations of juridical methodology, thus leads ECJ end up in mis judgements or wrongfully acquitting companies, which can end up disrupting the market. In order to expand these topics further, the thesis begins with a chapter providing an overview of the methodology and theory that will be used to illustrate the problem formulation. It will be followed by a chapter identifying the legal rulings in the area. With a final chapter elaborating further on the corresponding economic approach. The findings will then be presented as a comprehensive conclusion.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2015
Number of pages91