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EUROPEAN COMMISSION DG Competition - page 42 / 113





42 / 113

Definition of Predatory Pricing 93. For the purposes of Article 82 predatory pricing can be defined as the practice where a dominant company lowers its price and thereby deliberately incurs losses or foregoes profits in the short run so as to enable it to eliminate or discipline one or more rivals or to prevent entry by one or more potential rivals thereby hindering the maintenance or the degree of competition still existing in the market or the growth of that competition.

Hard to distinguish normal price competition 94. Predatory pricing is in practice often difficult to distinguish from normal price competition. The lowering of prices, the directly visible part of predation, is also an essential element of competition. By lowering its price and/or improving the quality of its products a company competes on the market. This is competition that benefits consumers and that a competition authority wants to defend and protect. Pricing is not predatory merely because a company is lowering its price.

Incurring losses or forgoing profits in short term may not be predatory 95. Pricing is also not predatory just because the lower price means incurring losses or foregoing profits in the short run. An investment in temporarily lower prices may for instance be required to enter a market or to make more customers familiar with the product.

Recoupment 96. The predatory nature of charging lower prices to all or certain customers is found in the predator making a sacrifice by deliberately incurring short run losses with the intention to eliminate or discipline rivals or prevent their entry. The company will make this sacrifice when it considers that it is likely to be able to recoup the losses or lost profits at a later stage after its actions have had the foreclosure effect.65 The exclusion should thus allow the predator to return to, maintain or obtain high prices afterwards. Although consumers may have benefited from the

lower predatory prices in the short term, in the longer term they will be worse off due to weakened competition resulting in higher prices, reduced quality and less choice.


Throughout this section exclusionary or foreclosure effect is used as the short form for the effect of eliminating or disciplining rivals or preventing their entry.

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