Excessive Pricing in EU a Compliance Manual: How Can Undertakings Make Sure to Set Their Prices in Compliance With EU Competition Law?

Abstract

According to European competition law article 102 (a) TFEU, undertakings, who holds a dominant position in a market, is prohibited of abusing this position by charging excessive selling prices of its products. Excessive precedents at EU level have been limited in number to date. The European Court of Justice introduced at two-staged test in the United Brandsruling, for determining whether a price is reasonably related to the "economic value" of the product supplied. It is uncertain how dominant undertakings can be compliant with Article 102 (a) TFEU, as the current test imposes several practical issues. Therefore, this thesis seeks to clarify and expand the current test from a legal and industrial economic view, to make the test more applicable. The excessive pricing test outlined in this thesis, can be used as a guideline for dominant undertakings to examine if their price level is in accordance with article 102(a) TFEU. The test includes six limbs that an undertaking needs to go through, to establish whether its prices are excessive or not. The overall conclusions of the six limbs are; (1) that the EUCommission has a bigger incentive to intervene in markets with high and long-lasting barriers of entry; (2) that an undertaking’s profit margin shall be calculated based on the undertaking’s average total costs; (3) that the assessment of the economic value of the product supplied, should include non-cost related factors; (4) that undertakings can use different methods to compare its prices such as (i) price comparison across markets, (ii) comparisons with competitors or geographic price comparisons and (iii) comparisons of the undertaking’s prices over time; (5) that it is necessary to make an overall assessment by the dominant undertaking's conduct; and (6) it is difficult if not impossible for a dominant firm to justify its prices by objective conditions. By the means of a comparative analysis this thesis emphasizes the necessity of the dominant undertakings to be aware of their price levels to satisfy the aim of the European competition policy; to protect the consumer welfare, as high prices directly harm the consumers. Furthermore, undertakings that are active in both EU and USA needs to keep in mind that they, contrary to in the EU, can set prices as they wish in USA. In conclusion the provision of article 102(a) TFEU has an impact on the undertakings’ incentives to innovate.