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EUROPEAN COMMISSION DG Competition - page 57 / 113





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Defences even if below relevant cost benchmark 130. In a case where a presumption of predatory pricing is established, the dominant company

may rebut that finding by justifying its pricing behaviour even if the price is below the relevant cost benchmark.

If Domco minimizing its losses in short run 131. A first justification could be that although the price is below the relevant cost benchmark and although there is a likely exclusionary effect, the dominant company is actually minimising its losses in the short run. Such justification is, for the reasons explained above, unlikely for pricing below the AAC benchmark, although in exceptional cases there may even be a reason which could justify temporary prices below AAC. This could for instance be the case where there is an issue of re-start up costs or strong learning effects.82 Above the AAC benchmark the company may show that its low price is actually a short run loss minimising response to changed conditions in the market, such as resulting from a dramatic fall in demand leading to excess capacity. This could also be the case where there is a need to sell off perishable inventory or phased out or obsolete products or where the costs of storage have become prohibitive.83

New Entry 132. A change in market conditions could also be provoked by entry by a rival. In case the rival is asking a price lower than the dominant company, the dominant company may invoke

the meeting competition defence, to the extent that this is the response that minimises its short run losses. A dominant company can not use the meeting competition argument to justify responding to entry with a predatory price where it incurs deliberate losses to prevent, frustrate

or slow down entry by a rival. Therefore, in case the pricing abuse concerns pricing below AAC



More accurately, in case of learning effects the price may be below AAC if calculated using historical cost data of the period during which the learning effects are achieved, but could be above AAC if the calculation is based on a longer period including the period after the learning effects have had their cost reducing effect. Sometimes a certain pricing behaviour may be justified for more than one reason. For instance, the need to sell off perishable inventory or phased out or obsolete products at a loss making price may just as well indicate that there will be no (lasting) exclusionary effect on rivals. In such cases it may also have to be taken into account that certain costs that would under normal circumstances be considered variable costs may have become fixed costs at the time of sale.

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