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EUROPEAN COMMISSION DG Competition - page 29 / 113





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average of the costs that vary directly with the output of the company. Average avoidable cost is the average of the costs that could have been avoided if the company had not produced a discrete amount of (extra) output, in this case usually the amount allegedly subject to abusive conduct. Long-run average incremental cost is the average of all the (variable and fixed) costs that a company incurs to produce a particular product. Average total cost is the average of all the variable and fixed costs.

Multi-product Companies 65. In case of multi-product companies it may be difficult to calculate ATC because of certain common costs, which are fixed costs that are necessary for the production of more than one product and where it is difficult to allocate these costs to the different products. Where necessary to apply a cost benchmark based on ATC, the Commission will allocate common costs in proportion to the turnover achieved by the different products unless other cost allocation methods are for good reasons standard in the sector in question or in case the abuse biases the allocation based on turnover. Whereas ATC takes account of all variable and fixed costs, LAIC takes account of only the product-specific variable and fixed costs. The LAIC will thus usually fall below ATC because it does not take into account (non-attributable) common costs. The LAIC will usually be above AAC because LAIC takes into account all product specific fixed costs, including product-specific fixed costs made before the period of abusive pricing, whereas

AAC only takes product specific fixed costs into account that are made in order to foreclose. The AAC will be higher than AVC to the extent that the company does make product specific fixed costs to behave abusively, otherwise AAC and AVC are the same by taking into account the variable costs only. Finally, MC, because it concerns the additional cost made to produce one

extra unit of output and does not concern an average, can be lower or higher than all the other

cost benchmarks, depending on the actual output and capacity constraints of the company in question.

Principles for Price Based Abuses 66. For price-based alleged abuses, principles are provided to evaluate whether a competitor, which is as efficient as the dominant company, can compete against the price

schedule or rebate system of the dominant company. The question is asked whether the dominant

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