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Margin Squeeze: An Above-Cost Predatory Pricing Approach

Author

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  • Germain Gaudin
  • Despoina Mantzari

Abstract

We provide a new legal perspective for the antitrust analysis of margin squeeze conducts. Building on recent economic analysis, we explain why margin squeeze conducts should solely be evaluated under adjusted predatory pricing standards. The adjustment corresponds to an increase in the cost benchmark used in the predatory pricing test by including opportunity costs due to missed upstream sales. This can reduce both the risks of false positives and false negatives in margin squeeze cases. We justify this approach by explaining why classic arguments against above-cost predatory pricing typically do not hold in vertical structures where margin squeezes take place and by presenting case law evidence supporting this adjustment. Our approach can help to reconcile the divergent U.S. and EU antitrust stances on margin squeeze.

Suggested Citation

  • Germain Gaudin & Despoina Mantzari, 2016. "Margin Squeeze: An Above-Cost Predatory Pricing Approach," Journal of Competition Law and Economics, Oxford University Press, vol. 12(1), pages 151-179.
    • Handle: RePEc:oup:jcomle:v:12:y:2016:i:1:p:151-179.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhv042
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    Cited by:

    1. Christoph Kleineberg & Thomas Wein, 2017. "Verdrängungspreise an Tankstellen?," Working Paper Series in Economics 375, University of Lüneburg, Institute of Economics.
    2. Céline Bonnet & Jan Philip Schain, 2020. "An Empirical Analysis Of Mergers: Efficiency Gains And Impact On Consumer Prices," Journal of Competition Law and Economics, Oxford University Press, vol. 16(1), pages 1-35.
    3. Krämer, Jan & Schnurr, Daniel, 2018. "Margin squeeze regulation and infrastructure competition," Information Economics and Policy, Elsevier, vol. 45(C), pages 30-46.
    4. Zhijun Chen, 2021. "Price Squeezes as an Exploitative Abuse," Monash Economics Working Papers 2021-05, Monash University, Department of Economics.
    5. Valentiny, Pál & Antal-Pomázi, Krisztina, 2023. "Versenyközgazdászok [Competition economists]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 647-671.

    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation

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