Recoupment of losses by the dominant undertaking, which allegedly have used predatory pricing and legality of actions

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    Abstract

    One of the most important principles of the European Community (EC) law is the prohibition of the abuse of a dominant position based on Article 82 of the EC Treaty. Predatory pricing is one of the forms of the abuse of a dominant position. It is likely that the world financial and economic crisis will lead to an increase in competition among the undertakings. The fact that some dominant undertakings seeking to sustain or increase their market share might decide to engage in predatory pricing and that no comprehensive research on predatory pricing has been carried out by legal scholars in Lithuania and the European Union up to date, underlines the relevance of this study. To decide whether dominant undertaking has become a “predator”, it is necessary to evaluate several issues, such as the ability of the dominant undertaking to recoup its losses incurred during the alleged application of predatory pricing strategy. The judicial institutions of the European Union pay little attention to this issue and might recognize that predatory pricing took place even without the evidence on the possibility for the undertaking to recoup its predatory losses. This study analyses the recovery of predatory losses by the dominant undertaking and the importance of such recovery in determining whether or not the dominant undertaking engaged in predatory pricing. The judicial institutions of the European Union should recognize that dominantundertaking engages in predatory pricing only when it is able to offset the predatory losses. If the recovery of losses is recognized as a necessary element in the analysis of predatory pricing, competition regulatory authorities should assess whether the actions of dominant undertakings harm consumers. When the recovery of predatory losses is not considered, the antitrust laws will be applied too strictly. As a result, dominant undertakings are likely to set higher than optimal prices, which harms consumers.
    Original languageEnglish
    Pages (from-to)289-303
    JournalJurisprudencija: mokslo darbai
    Volume120
    Issue number2
    Publication statusPublished - 2010

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    Keywords

    • Predatory pricing
    • Recovery of losses
    • Average variable costs

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