AAC Benchmark 108. The AAC benchmark is the appropriate and practical answer to the question about avoidable losses. If a dominant company charges a price below AAC this means that the price it is charging for (that particular part of) its output is not covering the costs that could have been avoided by not producing that (particular part of its) output. Often the AAC benchmark will be the same as the AVC benchmark as in many cases only variable costs can be avoided. However, if the dominant company, for instance, had to expand capacity in order to be able to predate,
then also the fixed or sunk investments made for this extra capacity will have to be taken into account and will filter into the AAC benchmark. In the latter case AAC will, for good reasons, exceed AVC.
If price below AAC 109. If the price charged by the dominant company is below AAC this means that the dominant company incurred a loss that it could have avoided. It is, at least in the short run, not minimising its losses. This is sufficient to presume that the dominant company made this sacrifice in order to exclude the targeted competitor. This is however a rebuttable presumption; there may be exceptional circumstances under which a price below AAC is justified (see below under possible defences: objective justifications and efficiencies). This presumption is reflected in the case law. In AKZO the ECJ held: “A dominant undertaking has no interest in applying such prices except that of eliminating competitors so as to enable it subsequently to raise its price by taking advantage of its monopolistic position, since each sale generates a loss…”.68
Presumption avoids need to prove that intent or effect, but may be justified
110. The presumption that below AAC the pricing of a dominant company can be assessed as predatory implies that once the Commission has established that the price charged was below AAC it does not need to further justify its decision with elements concerning the actual or likely exclusion of the prey, the predatory intent of the dominant company, its
Case 62/86 AKZO cited in footnote 33, paragraph 71. In this case the Court actually referred to the AVC benchmark, stating that prices below AVC must be regarded abusive. However, as explained above, in most cases the AVC benchmark will coincide with the AAC benchmark.