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EUROPEAN COMMISSION DG Competition - page 43 / 113





43 / 113

Recoupment requires substantial market power 97. Such exclusionary strategy can normally only be effective and profitable if a company has already substantial market power on the market in question. In order for predation to be abusive under Article 82 the exclusion should be instrumental in protecting or strengthening the predator’s dominant position and thereby allow the predator to return to or obtain high prices afterwards. In a competitive market with many competitors the exclusion of some of them will in general not lead to a sufficient weakening of competition so as to allow the predator to recoup the ‘investment’. Also in a market with only a few but strong competitors such an exclusionary strategy is unlikely to succeed. Predatory pricing is a risky strategy because the self-inflicted losses may not be regained if the predator makes a mistake about market conditions, for instance, if the prey is more resilient than expected, if mainly competitors benefit from the exclusion or if entry or re-entry occurs at a later stage. In other words, predation can be said to be to a certain extent self-deterring. However, predation is certainly not impossible, for instance, in case of multiple markets where reputation effects are important and in case the dominant company is less dependent on external financing than (potential) entrants.

Collectively dominant companies unlikely to be able to predate 98. Companies that are collectively dominant are less likely to be able to predate because it may be difficult for the dominant companies to distinguish predation against an outside competitor from price competition between the collective dominant companies and because they usually lack a (legal) mechanism to share the financial burden of the predatory action.

Predation may discipline competitors without eliminating them 99. Predation of actual competitors may work not only through elimination of these competitors from the market but also through disciplining these competitors. One of the risks for the dominant company of eliminating a competitor is that its assets may be sold at a low price and stay in the market, creating a new low cost entrant. Even though the dominant company may

be best placed to acquire the assets, it may prefer disciplining the competitor without eliminating it, that is making the competitor stop competing vigorously and to have the latter follow the

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