OECD work on Excessive Pricing (2011), looking also at price gouging

The OECD has ever written anything on competition law and price gouging. It has, however, asked Prof. Frank Maier-Rigaud to write a paper exceeding 80 pages on Excessive Pricing in 2011 (see here). Despite its title, the paper seeks to provide a framework for all exploitative practices. This is well beyond my focus today, so I will review those sections of the paper relevant for sudden price increases and exploitative practices following sudden shocks. The first and second sections discuss ideas of fair prices and economic value, and whether intervention against excessive pricing is justified. The idea of a just, fair or natural price, and with it the concept of economic value and rudimentary equilibrium notions, can be traced back to ancient Greece. They have occupied political philosophers and economists for well over 2000 years. Despite this longstanding debate, the fundamental question of the appropriate benchmark for assessing whether prices are unfair, unjust or excessive remains unresolved to this day….

Viktoria Robertson on ‘Excessive Data Collection: Privacy Considerations and Abuse of Dominance in the Era of Big Data’ (2020) Common Market Law Review 57 161

It is debatable whether EU competition law already contains – or could and should potentially develop – antitrust theories of harm that apply to third-party tracking of personal user data on the web. Focusing on data gathering, this paper – available here – assesses two scenarios under which EU competition law may deem the vast amounts of data gathered by certain digital platforms excessive: excessive data “prices” and unfair data policies. In both cases, the competition law assessment is autonomous from other areas of the law: while a breach of data protection rules is not automatically a breach of competition law, a company adhering to data protection rules may still violate competition laws. The paper finds that EU competition law already possesses the necessary tools to address excessive data collection, while data protection rules provide much-needed context for this type of exploitative abuse. Section II discusses data gathering through third-party tracking. Tracking occurs both on the web and in applications (apps) for electronic…

Friso Bostoen ‘Online Platforms and Pricing: Adapting abuse of dominance assessments to the economic reality of free products’ (2019) Computer Law and Security Review 35 263

What sets platforms apart is their possibility to effectively cross-subsidise between the different user groups that are party to a transaction. Platforms often treat one side as a profit centre and the other as a loss leader, or, at best, as financially neutral. As a result, platforms must choose not only a price level, but also a price structure for their service. Given this,  the present article, available here, explores how potentially abusive behaviour involving free products (both goods and services) can be assessed under competition law. Section II looks at different dimensions of offering free goods and services. Free online offerings have become ubiquitous. This reflects lower costs brought about by the existing digital infrastructure (e.g. processing power, bandwidth, storage). However, companies still want to make a profit. In practice, offering services for free has the potential to attract the critical mass of customers that will allow a company to maximise its profits across its various products. There are three…

Sean Ennis ‘Price Abuses: An overview of EU and national case law’ (2019) Concurrences

Pricing abuses can be viewed as a hybrid between regulation and competition law enforcement, since they raise questions of principle over when pricing that takes advantage of market power should be prevented by competition law action, by regulation or simply left unchallenged. In many cases – e.g. in predation, margin squeeze, rebates and excessive pricing cases – companies may have practical difficulties in assessing ex ante whether their pricing policies are illegally low (in the case of predation and rebates), illegally high (in excessive pricing cases) or some combination of both (in margin squeeze). This has the potential to influence those companies’ incentives significantly, an effect compounded by lack of predictability as to when such cases will be brought. As such, it is important to have a clear view of what types of cases have been brought recently. This is the object of this paper, available here, which reviews recent instances of price abuses in Europe. Section 2 looks at…

John Ratliff ‘Unilateral conduct in the energy sector: An overview of EU and national case law’ (2019) Concurrences Special Issue Energy & Dominance

This paper, available here, provides an overview of European Commission (“EC”) and European national competition authorities’ (“NCAs”) practice as regards the application of competition rules to unilateral conduct in the energy sector. It covers more than 120 cases, including national court judgments and investigations up to June 2019. While the article divides the various practices into 19 different sections, I will do so as follows: In the introduction, the author summarises European and national approaches, as well as recent developments. The 2007 EU Energy Sector Inquiry prompted much enforcement of Art. 102 TFEU in the energy sector. Most of enforcement concerned traditional foreclosure practices in relation to infrastructure capacity, access to the infrastructure, capacity hoarding and withholding of generation capacity. Other cases have dealt with new types of abuse, such as strategic underinvestment and market manipulation, and there have also been cases on excessive pricing. Energy markets remain a priority for the European Commission. Recent developments include closing investigations against…

Marco Botta and Klaus Wiedemann ‘EU Competition Law Enforcement vis-à-vis Exploitative Conducts in the Data Economy’ Max Planck Institute for Innovation & Competition Research Paper No. 18-08

This long paper (90 pages), which can be found here, seeks to understand how traditional principles of EU law – particularly those related to exploitative abuses and respective remedies – apply to new business models that mainly rely on processing large amounts of users’ data. The analysis does not extend to the US because, following Trinko, the authors consider that antitrust law there does not extend to exploitative practices, even if the FTC has powers under the Sherman Act to pursue such practices under consumer and unfair practices law. I am afraid the review is rather long, because this paper’s contents are the equivalent of multiple articles. The paper is structured as follows: Section 2 provides an overview of European case law vis-à-vis exploitative abuses. Art. 102 TFEU lists a number of exploitative abuses. Nevertheless, the European Commission has long focused on investigating exclusionary, rather than exploitative abuses. While this has led to limited case law on exploitative abuses, the authors identify…

Jorge Padilla and John Davies ‘Another look at the economics of the UK CMA’s Phenytoin case’ in Excessive Pricing and Competition Law Enforcement (ed. Yannis Katsoulacos and Frédéric Jenny, 2018, Springer)

In this book chapter, the authors criticise the CMA for relying on the same evidence of a gap between prices and costs in its assessment of each of market definition, dominance and abuse. When coupled with the absence of analysis of comparator prices – which, the authors argue, the CMA replaced with a failed search for justifications for a price-cost gap when finding that the price was ‘unfair in itself’ – this could serve as a precedent for a fragile and unreliable approach to assessing excessive pricing. The paper is structured as follows: Section 2 describes the framework for assessing excessive pricing under European law (and its British equivalent). The paper builds on United Brands‘ two-step test, and particularly the requirement that am excessive price must exceed the “economic value” of the product to such an extent that the price bears “no reasonable relation” with that value. The legal test set out by the ECJ is as follows. First, the test…

Robert O’Donoghue ‘The Political Economy of Excessive Pricing in the Pharmaceutical Sector in the EU: A Question of Democracy?’ (2018) CPI Antitrust Chronicle

This paper, which can be found here, argues that antitrust enforcement against excessive pricing by medicines runs against democratic choices reflected in the dense and intricate regulatory network that applies to the pharmaceutical sector. The paper is structured as follows: The paper begins with a quick overview of excessive pricing cases in the EU. There have only been a handful of excessive pricing cases in the EU. The rare cases that have been brought have fallen into rather specific categories: (i) cases involving copyright management societies in the EU, with de jure or de facto unregulated monopoly positions in each national territory; (ii) parallel trade or market integration cases, where the excessive price was a tool to discourage or prevent parallel trade; and (iii) cases where the main issue was exclusionary conduct, and the further concerns about pricing were really the corollary of other abusive practices. In fact, under EU law there has never been a truly standalone finding of excessive…

Margherita Colangelo and Claudia Desogus ‘Antitrust Scrutiny of Excessive Prices in the Pharmaceutical Sector: A Comparative Study of the Italian and UK Experiences’ (2018) World Competition 41(2) 225

This article, which can be found here,  pursues a comparative analysis of the recent case law on excessive pricing in the pharmaceutical sector, examining in particular the Italian and UK experience. The paper is structured as follows: Section 2 begins with a brief review of the existing literature on excessive prices in the EU. This section reviews the arguments for and against competition authorities intervening when prices are too high. On the one hand, it is argued that high prices should not be the subject of competition law intervention because such intervention may affect innovation incentives and dynamic efficiency; because high prices will attract competitors and, hence, will tend to self-correct; because there are high probabilities and costs of mistaken intervention; and because this is a task that should be left to specialised regulators. On the other hand, it is argued that correcting high prices directly increases consumer welfare, which is the goal of competition law; that high prices are not…

Harry First ‘Excessive Drug Pricing as an Antitrust Violation’ (forthcoming on the Antitrust Law Journal)

In the US, there have been antitrust enforcement efforts against various pharmaceutical practices that elevate price above the competitive level, such as reverse payments (or pay-for-delay), product hopping, and collusion among generic drug manufacturers. However, the conventional wisdom is that U.S. antitrust laws do not forbid high prices simpliciter. This paper argues that the conventional wisdom may be mistaken: Section 1 engages in a general discussion of the problem of high prices and provides two examples of a non-antitrust approach to this problem. The standard antitrust/welfare economics paradigm condemns high prices at least on the grounds of resource misallocation and deadweight welfare loss. Many scholars go beyond deadweight welfare loss concerns, condemning monopoly pricing because of the redistribution of the consumer surplus from consumers to producers, but some are indifferent to this redistribution. There is an additional argument that can be made against high prices, but it is one to which antitrust is often indifferent: high prices can be seen…