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The Competition Policy Framework For Excessive Pricing

Author

Listed:
  • SCURT Ciprian

    (Doctoral School of Economic Sciences, University of Oradea, Oradea, Romania)

Abstract

The paper introduces the concept of excessive pricing within the framework of the competition policy. Charging high prices by an undertaking is a natural freedom in the context of a market economy. Still, a company that detains an important market power has a special economic and social responsibility to ensure that its conduct does not distort competition or negatively affect the consumers’ welfare on that market. A company in such a position is deemed to poses a dominant position on the market. Specifically, in regard with the notion of excessive pricing, a dominant undertaking should not make use of the opportunities arising out of its special market power in such a way as to gain trading profits which it would not have benefit if there had been sufficiently competition. The paper briefly analyzes the method used when establishing dominance, as well as various forms of abuse of a dominant position on the market, finally focusing on the evaluation of excessive prices. Relevant excessive pricing cases are presented, covering 45 years of European experience, since 1975 to the present day. In regard with the evolution of the methodology for analyzing potential excessive prices by the competition authorities, the cost/tariff comparison as part of the United Brands test is a cornerstone in the European jurisprudence. The notion of ‘economic value’ is for the first time used in 1978 and criteria set in the United Brands case provide for a 2 steps approach to the assessment of excessive prices. Other ways of assessing excessive pricing are dealt with, as the European Court of Justice observed that economic theorists have not failed to think up several methods to deal with the issue. Yardstick competition and the elimination of the excessive costs from the evaluation are examples of such alternative methodologies used when analyzing excessive prices. The paper concludes with the presentation of the recent European Commission investigation into excessive pricing in the pharmaceutical sector, and proposes the idea that monopoly companies’ tariffs might be easier to evaluate in the context of excessive pricing.

Suggested Citation

  • SCURT Ciprian, 2020. "The Competition Policy Framework For Excessive Pricing," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 381-389, December.
  • Handle: RePEc:ora:journl:v:1:y:2020:i:2:p:381-389
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    File URL: http://anale.steconomiceuoradea.ro/volume/2020/n2/035.pdf
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    References listed on IDEAS

    as
    1. Papadopoulos,Anestis S., 2010. "The International Dimension of EU Competition Law and Policy," Cambridge Books, Cambridge University Press, number 9780521196468, October.
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    More about this item

    Keywords

    abuse of dominant position; competition policy; excessive prices;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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