DISCUSS HOW THE PREDATORY PRICING BY THE

DOMINANT ENTERPRISE CAN BE ASSESSED.

COMPETITION LAW

PROJECT SUBMISSION

Submitted by-

Sushovan Choudhury

PRN: 16010224009 BATCH: 2016-21 GROUP: A

of Symbiosis Law School, NOIDA

Symbiosis International (Deemed University)

In August, 2019

Under the guidance of

Dr. Vijay Kumar Aggarwal

Symbiosis Law School, NOIDA

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 CERTIFICATE
This Research Project based 'Predatory Pricing', submitted by the undersigned to
Symbiosis Law School, NOIDA, Symbiosis International (Deemed University), Pune for
the course ‘Competition Law’ as part of Internal Assessment is based on an imaginary
situation which has no relation to any person living or dead. The research work has not
been submitted elsewhere for award of any degree or any other purpose whatsoever.
The contents of the project are original and not plagiarised. The material borrowed from
other sources and incorporated in the project has been duly acknowledged.

I have also taken due care that the contents of my project are not similar or same as
another learner‘s project for the aforesaid course.

I understand that I could be held responsible and accountable for plagiarism, if any,
even if detected later.

___________

Name of the Learner: Sushovan Choudhury

PRN: 16010224009

Batch: 2016-21

Division: A

Group: A

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 INDEX

INTRODUCTION ............................................................................................. 4
FACTORS DETERMINING PREDATORY PRICING .................................................. 6
DOMINANCE: .............................................................................................. 6
BARRIERS TO ENTRY AND RE-ENTRY: ............................................................ 6
EXCESS CAPACITY: ..................................................................................... 7
NON-PRICE PREDATION: .............................................................................. 7
OTHER FACTORS:........................................................................................ 8
IDENTIFICATION OF PREDATORY PRICING ........................................................ 8
Price-Cost Tests..................................................................................... 8
The Two-Tier Test:................................................................................. 9
Test for Predatory Intention .................................................................... 9
Above Cost Pricing Test: ......................................................................... 9
Possibility of Recoupment ..................................................................... 10
COST MEASURES ADOPTED IN INDIAN COMPETITION LAW ............................... 10
FEASIBILITY OF PREDATORY PRICING ............................................................ 11
COMPARISON OF THE LAW IN DIFFERENT JURISDICTIONS WITH REFERENCE TO SOME CASES
................................................................................................................. 13
Certain cases: ............................................................................................. 15
AKZO v. Commission [1991] ....................................................................... 15
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. ................................ 15
Tetra Pak International SA v. Commission .................................................... 16
Deutsch Post AG [2001] ............................................................................. 16
Matsushita v. Zenith Radio Corp. ................................................................. 16
CONCLUSION AND SUGGESTIONS ................................................................. 17
BIBLIOGRAPHY ............................................................................................ 18

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INTRODUCTION

Predatory Pricing refers to the situation where a dominant firm reduces its price to below
cost level for a period of time during which it will be able to eliminate or contain a
competitive force.1 Following that, and once the predatory firm deems it safe enough; it
will raise its price to a level above the competitive price level in order to recoup the
losses made during the reduction period.2 It is the dominant company in such a market
which is likely to have both the inclination and the resources to finance such strategy
and such pricing can be equally ‘unfair’ to competitors.3

Predatory pricing is in practice often difficult to distinguish from normal price

competition. The lowering of prices, the directly visible part of predation, is also an
essential element of competition. By lowering its price or improving the quality of its
product a company competes on the market. This competition that benefits consumers
and that a competition authority wants to defend and protect. Pricing is not predatory
merely because a company is lowering its price.4

The concern with predatory pricing is that firms might strategically cut prices to
unprofitable levels in the short term in order to eliminate or discipline rivals and then
raise long run prices to supra-competitive levels, inflicting a net long-term injury on
consumers. 5 The problem is that such harmful predatory pricing is often hard to
distinguish from desirable competitive price cutting, so that attempts to condemn the
former may mistakenly condemn and deter the latter.6

Rebates and similar practices are an essential component of the competitive process,
and that the law should not deter a dominant firm from passing on its efficiency to
customers in the form of lower prices. The law on predatory pricing has to tread a fine

1
Maher M. Dabbah; EC and UK Competition Law:- Commentary, Cases and Materials, Cambridge University Press, pp319.
2
Id. At pp319.
3
Joanna Goyder and Albertina Albors- Llorens, Goyder’s EC Competition Law, Oxford University Press, pp319.
4
Doris Hildebrand, The Role of Economic Analysis in the EC Competition Rules, Kluwer Law International, pp373-375.
5
Einer Elhauge and Damien Geradin, Competition Law and Economics, Hart Publishing, pp314.
6
Id. At pp315.
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line between not condemning competitive responses on the part of dominant firms on
the one hand and prohibiting unreasonable exclusionary conduct on the other.7

Pricing is also not predatory just because the lower price means incurring losses or
foregoing profits in the short run. An investment in temporarily lower prices may for
instance be required to enter a market or to make more customers familiar with the
product.8

Now the question that arises is why would a company practice predatory
pricing?

The answer is simply to create a monopoly market and be the price maker. Another
reason for firms to do predatory pricing may be because it is a better alternative to
mergers. The McGee-Posner Debate compares the pros and cons of mergers and
predatory pricing in which Posner held that predatory pricing is better as it is difficult to
be identified and also lower in cost.9 Generally predatory pricing is taken as an ‘unfair’
practice because it is an Entry Barrier that hinders fair competition and many
undertakings may employ unethical means to cut down on costs. Also, it harms
consumers in the long run. This is, without a doubt, an anti-competitive practice and
hence illegal. To understand the full implication of the concept of predatory pricing, let
us first understand the two terms dominant and abusive.

A dominant company refers to a company holding a chunk of the share of the relevant
market. As to how much should the market share be, is a debatable question. Dominant
position is a position of strength, enjoyed by an enterprise, in the relevant market, in
India, which enables it to:

 Operate independently of competitive forces prevailing in the relevant market; or

 Affect its competitors or consumers or the relevant market, in its favour.10

As far as the term abuse is concerned, it is very obvious that in every market there will
be a small number of dominant players and some smaller players. The small players,

7
Doris Hildebrand, The Role of Economic Analysis in the EC Competition Rules, Kluwer International Volume 39, pp 373-374.
8
ibid.
9
Richard Posner (2001), Antitrust Law: An Economic Perspective, 2 nd edition, University of Chicago Press, pp185.
10
Explanation to Sec. 4(2) of the Indian Competition Act.
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individually, do not have the power to affect the market conditions as such. But the
dominant players, simply by virtue of the holding in the market, can influence the
market to a considerable extent. Now, when a dominant player uses its power to
influence the market to benefit itself in some way other than through fair competition, it
is known as an abuse of the dominance. That is, when a company takes unfair
advantage of its dominant position to hinder competition, it is an abuse. Section 4(1) of
the Indian Competition Act states that no enterprise shall abuse its dominant position.

Thus the major elements involved in the determination of predatory behaviour are:

 Establishment of dominant position of the enterprise in the relevant market.

 Pricing below cost for the relevant product in the relevant market by the dominant
enterprise.11
 Intention to reduce competition or eliminate competitors.

FACTORS DETERMINING PREDATORY PRICING

DOMINANCE:
Since large capital reserves are needed to sustain the losses during the below cost
selling period, hence only a dominant firm would be able to practice predatory pricing. 12
The dominance of a company can be analyzed with regard to the relevant product and
geographic market by examining the potential demand and substitutability of the
products or services. The economic strength of the predator may derive from its position
in other markets.13

BARRIERS TO ENTRY AND RE-ENTRY:

Successful predatory pricing requires certain level of entry barriers to the market.
Otherwise other potential rivals would immediately re-enter the market once the
predator raises its prices and by adding their output to that of the predator drive the

11
‘Cost’ for this purpose has been defined in the Competition Commission of India (Determination of Cost of Production)
Regulations, 2009 as notified by the Commission.
12
W. Kip Viscusi, Joseph E. Harrington, JR John M. Vernoni, Economics of Regulation and Anti-trust, MIT Press, pp316.
13
H. Hovenkamp, Federal Antitrust Policy, Thomson/West, 2005, chap 8.
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prices back to competitive level.14 Entry barriers exist when a new market entrant faces
cost that the incumbent firm need not bear or no longer faces, i.e., fixed cost
investments etc. The entrant on the other hand must incur such costs and hence faces
the risk of under-pricing by an incumbent with sunk costs, the latter acting as a barrier
to entry, giving the incumbent the power to raise prices above the competition level. 15
Re-entry barriers on the other hand exist when a firm that has left a market bears
significant costs in seeing to reopen its business. In the absence of re-entry barriers the
firm which has been forced to exit the market because it was unable to sustain the
artificially low prices dictated by the predator could enter the market again once prices
are raised to monopoly level, thus being able to undermine the predators pricing
policy.16

EXCESS CAPACITY:
Excess capacity is a pre-requisite for predatory pricing. The predator must be able to
absorb all the new demand created by its price cuts, and in the case of predation against
existing rivals, the predator must be able to absorb the rival’s sales. If it cannot do both
these, demand will exceed predator’s output and prices will have to rise, which will take
the pressure off the rivals and allow them to survive.17

NON-PRICE PREDATION:
Non price predation includes excessive product differentiation, predatory advertisement
and investment, predatory product innovation. The main aim of these non price
predatory pricing is to raise the costs of the rival firms. If cost increase can be imposed
on the rivals, the predatory firm can profit immediately, even if the rivals remain in
business, this is because its margin will increase proportionately with rising price levels.
Another scenario is even if the prices remain constant, the predatory firm gains market
share as rival restricts output.18

14
Brodley et al, Predatory Pricing.
15
Eugene Buttigieg, EC Competition Law, Wolters Kluwer Law and Business, pp419.
16
ibid
17
W. Kip Viscusi, Joseph E. Harrington, JR John M. Vernoni, Economics of Regulation and Anti-trust, MIT Press, pp314.
18
Richard Lindberg, The Ambiguity of Predatory Pricing: Strategy as a Clarifier, Research Paper, pp37
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OTHER FACTORS:
Examining market share trends during the period of predation is important for
recoupment analysis. If the shares did not change during that period, then recoupment
would have to appear to be implausible. 19 Low price elasticity of demand facilitates
recoupment as demand will decline relatively less when the firm raises the market
price.20 If a predator enjoys greater brand royalty, the less costly a predatory pricing
shall be for the firm. 21 The more efficient the incumbent is to its rivals, the less
expensive it will be to conduct a predatory pricing campaign.

Predatory pricing is often considered to be feasible only where firms operate in

multimarket. It is argued that if the firm operates in only one market it is more rationale
for it to absorb the new entrant (by merger or takeover) or to accommodate it, rather
than incur greater losses by undercutting it.22 Losses suffered by the firm operating in a
multi market can be recouped by the profits from the other market in which the firm
operates. A firm may be a multimarket in geographical rather than a product sense, so
that reputation for predation in one market may deter entrants elsewhere.23

IDENTIFICATION OF PREDATORY PRICING

The various tests most commonly employed for identifying predatory pricing are as
follows:

 Price-Cost Tests (PCT): Price-Cost Tests are most commonly used tools to
identify Predatory Pricing, and is used across all jurisdictions, in some form or the

19
John R. Lott Jr., Are Predatory Commitments Credible? Who Should the Courts Believe?, Chicago: University of Chicago Press,
1999. pp105
20
Journal article by Greg Le Blanc; Rand Journal of Competition Law, Signalling Strength: Limit Pricing and Predatory Pricing, Vol.
23, 1992.
21
Aaron S. Edlin, “Predatory Pricing” Research Handbook on Economics of Antitrust, Ed. Einer Elhauge, Edward Elgar, 2010.
22
Doris Hildebrand, The Role of Economic Analysis in the EC Competition Rules, Kluwer Law International, pp367.
23
Alison Jones and Brenda Sufin, EC Competition Law: Text, Cases and Materials, Oxford University Press, pp445.
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 other. These tests examine whether the company or firm is incurring some losses
for legitimate reasons or just for Predatory Pricing. These tests look into the
detailed accounts of the firms and compare their costs and their prices to reach
the conclusion. The Price-Cost Tests may be of various types; the most important
among them being the Areeda-Turner test that if the sell price is below the
Short Run Average Variable Cost or the marginal cost, it is a case of predatory
pricing.24 The Greer’s test25 held that the scope of the Areeda-Turner test was
too wide and that it should be coupled with a test of intention and is another Price-
Cost Test. There are numerous other Price-Cost Tests but all of them basically aim
at the same thing.
 The Two-Tier Test: The Two-Tier Test of Joskow and Klevorick26 consists of two-
tiers as the name suggests. The first is the structural test to examine the type of
the relevant market. For example, if the market is a very competitive one with
fairly low entry barriers, then chances of a successful predatory pricing is almost
nil. The second tier is a behavioural test which examines the behaviour of one
particular enterprise in relation with the market to ascertain if there is an abuse of
dominance or not.
 Test for Predatory Intention: The Test for Predatory Intention is yet another
test which has been accepted in many jurisdictions in many cases. In India, below
cost testing is also accompanied by proving intent, which is necessary in proving
any alleged predatory conduct. According to the Act, below-cost pricing “with a
view to reduce competition or eliminate the competitors” shall amount as abuse of
dominance. In the price abuse cases, exclusionary intent is very important as is
given by the AKZO27 rule in the EC Competition Law.
 Above Cost Pricing Test: The Above-Cost Pricing Test is not a complete test but
it says that even though the prices are not below cost for that enterprise, it may
still be Predatory Pricing. However, it brings an idea different from most other
prevalent tests, by its very premise. It applies to alleged predators that are selling

24
Areeda and Turner (1975), Predatory Pricing and Related Practices under Section 2 of the Sherman Act, Harvard Law Review,
pp685-688.
25
Douglas F. Greer, (1979), A Critique of Areeda and Turner’s Standard for Predatory Practices, Antitrust Bulletin, (24), pp235.
26
Paul L. Joskow and Alvin K. Levorick, (1979), A Framework for Analysing Predatory Pricing, Yale Law Journal 89(2), pp245-258.
27
Case C-62/86, AKZO Chemie BV v. Commission (1991)ECR I-3359
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 at a price above the costs, and not below but are still predating. To give an
example, there may be a very dominant and large enterprise which by virtue of its
large scale of production has very low cost of production in comparison to the cost
incurred by other enterprises and hence may have a predatory effect in the long
run.
 Possibility of Recoupment: The Possibility of Recoupment Test as the name
implies, says that there should be a possibility for the enterprise to recover its
losses of the initial phase of the plan at some point of time. In Brooke Group Ltd.
V. Brown and Williamson Tobacco Corp 28 , the Courts held that to hold an
enterprise guilty of predatory pricing, it must be shown that there is reasonable
possibility of recoupment. Others: Williamson Output Increase Rule 29 , Baumol
Price Reversal Rule30, Rule of Reason Approach are tests which never really
gained valediction and popularity. Another test is the no-rule test which says that
there is no hard and fast rule to determine predatory pricing.

COST MEASURES ADOPTED IN INDIAN COMPETITION LAW

The Indian competition law has adopted Average Variable Cost as the appropriate
measure of cost, which is by and large the measure of cost adopted in all
jurisdictions. There is a presumption in most cases that where the enterprise sets its
sale price below its Average Variable Cost, it has engaged in a predatory pricing
practice. However, prices falling between the ATC and AVC are also subject to
inquiry, but in such case specific intent would have to be shown. Prices set above the
ATC are unlikely to be challenged. The CCI also has proposed certain regulations with
respect to determining cost in cases of multi-product enterprises31, Joint products and
By-products32, transfer pricing33, and captive consumption34. Once a predatory price

28
509 U.S. 209 (1993)90
29
Oliver E. Williamson(1979), Commentary: Williamson on Predatory Pricing II, The Yale Law Journal, 88 (6), pp1183-1200
30
Baumol (1979), Quasi-Permanence of Price Reductions: A Policy for Prevention of Predatory Pricing, 88, The Yale Law Journal.
31
Regulation 5.
32
Regulation 6.
33
Regulation 7.
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 allegation is established, the enterprise would be said to have abused its dominant
position. Where after inquiry, the CCI finds that an enterprise in a dominant position
is in contravention of the provisions of Section 4, it may pass any of the orders
specified under Section 27 of the Act and may further under Section 28 of the Act
direct the division of an enterprise enjoying a dominant position to ensure that such
an enterprise does not abuse its dominant position.

FEASIBILITY OF PREDATORY PRICING

While there is much discussion and debates going on for decades about the nitty-
gritty details of predatory pricing, many are of the opinion that it is not a real
concept, that is, nothing like it can ever exist. The major criticisms against the
theory of PP may be –

 The first and the most obvious reason as to why this entire concept is often
criticised is that, the competitors who had left the market during the predation
phase may pop-up again in the recoupment phase.
 Also, the competitors may be stronger than what the predator expected them
to be stronger than what the predator expected them to be and may take
longer time to leave the market than expected, hence prolonging the phase of
predation, leading to such losses as cannot be recouped or as would turn the
predator itself bankrupt.
 Moreover, just because a firm is bankrupt at one point of time does not really
guarantee that they will forever be so. To give an example, The Washington
Post went bankrupt in 1933 for some reasons. But its work force and goodwill
remained. Not only that, its publisher Eugene Meyer acquired everything at a
much lower price than before and eventually, went on to climb the ladder of
success again.

34
Regulation 8.
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  Alternatively, even if the preyed-upon firms went bankrupt, other firms could
purchase their facilities and compete with the alleged predator 35 . Such
acquisitions of those bankrupt firms will be at a very low price and hence the
acquiring firm may offer very low prices too, so much so, that it may even be
able to offer lesser price than the predator.
 Practically speaking, it is foolish to expect that all the competing firms would
just one by one turn bankrupt and leave the market without even trying to
employ any counter-strategy. One such counter-strategy may be mergers
amongst them.
 Another very interesting probability may be that the consumers may stock up
on the product or service during the predatory phase lured by the excessive
low pricing, or anticipating a price-rise after some time. If that is the case,
then whenever the predator will increase the prices, the demand will fall as the
consumers will already have a surplus. If the predating enterprise tries to
address this difficulty by limiting supply, then also it will not succeed as then
the competitors who had left the market will come in to supply further
quantities.

Then the question arises that if the predatory pricing is an arbitrary concept,
why is this still being litigated upon?

It has been estimated that the average cost to a major corporation of litigating a
predation case is $30 million.36

Predatory pricing is often a weapon used not by a dominant firm, but in fact, against a
dominant firm for smaller enterprises just to undermine the reputation, increase costs
by attaching the cost of litigation. At times such cases may also be able to restrain the
dominant firm from actually offering very low-prices. But this is anything but
maintaining competition, rather it stifles competition. Filing an antitrust lawsuit is a
common alternative to competing by cutting prices or improving product quality, or

35
The Myth of Predatory Pricing, Thomas J. DiLorenzo
Thomas J. DiLorenzo holds the Scott L. Probasco, Jr., Chair of Free Enterprise at the University of Tennessee at Chattanooga.
36
Frank Easterbrook (1981), Predatory Strategies and Counterstrategies, University of Chicago Law Review, 48, pp334.
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both 37 . Legal restrictions on price cutting, in the name of combating “predation”, are
inevitably protectionist and anti-consumer38.

Some of the enterprises against whom Predatory Pricing allegations have been brought
are Microsoft Security Products, Walmart, France Telecom/Wanadoo, amazon.com etc.

COMPARISON OF THE LAW IN DIFFERENT JURISDICTIONS

WITH REFERENCE TO SOME CASES

U.S.: in the case of Brooke Group v. Brown &Williamson Tobacco, 1993, it was observed
by the U.S. Supreme Court that predatory pricing is an irrational practice and the laws
designed to prevent it only inhibit competition. Hence it can be said that the U.S. Courts
are reluctant to tag any practice of lowering of the selling price as a case of predatory
pricing.

Section 2 of the Sherman Act states: “Every person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other person or persons, to monopolize
any part of the trade or commerce among the several States, or with foreign nations,
shall be deemed guilty of a felony, and...”. This section addresses the actions of single
firms that monopolize or attempt to monopolize as well as the conspiracies and
combinations that attempt to monopolize.39

E.U.: the relevant law on this point under the E.U. law is found under Article 82 of the
Treaty of the European Communities. The AKZO 40 case established that pricing below
average total cost is predatory and it was also accepted in the case of Michelin v.
Commission41 that a dominant undertaking has responsibility not to allow its conduct to
impair competition. But it is also to be noted that in the United Brands 42 case, it was

37
The Myth of Predatory Pricing, Thomas J. DiLorenzo
Thomas J. DiLorenzo holds the Scott L. Probasco, Jr., Chair of Free Enterprise at the University of Tennessee at Chattanooga.
38
Harold Demsetz (1982), Barriers to Entry, American Economic Review 72 pp52-56.
39
Spectrum Sports Inc. V. McQuillan 506 US 447 (1992)
40
Case C-62/86 AZCO Chemie BV v. Commission [1991]ECR I-3359
41
Case 322/81 Michelin v. Commission [1983] ECR 3461
42
Case 27/76 United Brands v. Commission [1978] ECR 207.
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held that the dominant undertaking is entitled to take reasonable steps to protect its
commercial interests too. Hence, they take a rule of reason approach and weigh the
various parameters to reach a decision on predatory pricing.

INDIA: Predatory Pricing is defined by the Act as the sale of goods or provision of
services, at a price which is below the cost, as may be determined by regulations, of
production of goods or provision of services, with a view to reduce competition or
eliminate the competitors.43

India has adopted AVC as the standard to measure price predation 44. The Commission
also has the discretion of adopting any other cost standard (such as avoidable cost, long
run incremental cost, or market value), if it considers doing so fit.45

In the MCX case in India46, MCX alleged that NSE was practicing predatory pricing in the
form of waiver of transcription fee, admission fee and data feed fee. The DG found NSE
indeed was abusing its dominance. NSE countered on two grounds- that there was no
concrete evidence to show the intent to do such an act that such low pricing was a
promotional policy for the nascent market and hence not predatory. NSE also claimed
that they were offering the zero pricing policy as its costs were zero.

The CCI found NSE to be abusing its dominant position because that particular segment
of the market was no longer in the nascent stage; rather it was in its infant stage. Also
the DG’s findings regarding the costs showed that it was not zero.

However, it is interesting to note that the CCI did not consider the pricing to be
‘predatory’ in the strict sense of the term. Instead it was considered to be ‘Unfair’ 47 and
possible only by virtue of its deep pockets 48 and could not be sustained by its
competitors.

43
Section 4, Explanation, The Competition Act, 2002.
44
Regulation 3, The Competition Commission of India (Determination of Cost of Production Regulations)
45
ibid
46
Case No. 13/2009, MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd., (23 July, 2011).
47
As per Section 4 of the Competition Act, 2002, predatory pricing is a subset of ‘unfair’ pricing. However, unlike ‘predatory pricing’
which is defined in the explanation to Section 4, the term ‘unfair pricing’ has not been defined in the Act, and needs to be determined
as per the facts and circumstances of each case.
48
Supra 46.
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The Commission further commented that “if even zero pricing by dominant player
cannot be interpreted as unfair, while its competitor is slowly bleeding to death, then
this Commission would never be able to prevent any form of unfair pricing including
predatory pricing in future”49.

Certain cases:
AKZO v. Commission [1991]50
In AKZO case the commission did not prescribe any specific price rules linked to costs
rather it concentrated on the objectives of a dominant company obtained from the
evidence obtained by the commission. 51 The commission decision finding predation
focused on AKZO’s threats and its eliminatory intent. It stated in its judgment that, in
applying the Hoffmann-La-Roche principles to AKZO pricing , it was to be presumed that
prices charged that were lower than AVC alone were intended to eliminate competitors
since they would be necessarily loss making. 52 Also even prices above AVC but below
ATC are considered to be predatory if it was a plan to deliberately eliminate a
competitor.53

Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.54

In this case the US Supreme Court held that below –cost prices can be predatory in
nature only if the dominant undertaking had a reasonable prospect of subsequently
recouping its deliberately incurred losses.55If it did not, the market itself would punish
the price cutters; there would be no need for any intervention. 56It laid out a clear two-
tier policy for judging predatory pricing.57

49
Supra 46.
50
Supra 40.
51
Joanna Goyder and Albertina Albors-Llorens, Goyder’s, pp320.
52
Richard Whish, Competition Law, Oxford Publication, pp731-732.
53
ibid
54
Case No. 333/94 [1996] ECR I-5941.
55
Eugene Buttigieg, pp178-179.
56
In holding that recoupment is an essential element of the test for predatory pricing the Supreme Court (at pp226) observed that
‘cutting prices in order to increase business often is the very essence of competition’.
57
W. Kip Viscusi, Joseph E., Harrington, JR John M, Verconi, pp304.
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Tetra Pak International SA v. Commission58
This is a case where the dominance and abuse are on different markets. In this case the
commission held that Tetra Pak had abused its dominant position on the aseptic market
by its conduct on the non-aseptic market which was designed to obtain a competitive
advantage on the non-aseptic market.59

Deutsch Post AG [2001]60

In Deutsch Post the commission applied an incremental cost standard, instead of the
AKZO AVC threshold, when it dealt with a statutory monopolist which was also active on
a competitive market. The Deutsch post hinders competition by cross subsidizing
commercial parcel services through the reserved letter post services.61

Matsushita v. Zenith Radio Corp.62

Under this case the Supreme Court has rejected the claims made by Zenith Radio Corp.
the Court held that the firms charged with predation does not possess a lot of market
power and there is no possibility of recoupment of loss.

58
Case No. 333/94 [1996] ECR I-5941.
59
Alison Jones and Brenda Sufin, pp456-457.
60
OJ L 125/27, [2001]5 CMLR 99.
61
Supra 59.
62
475 U.S. 574 (1986).
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CONCLUSION AND SUGGESTIONS

Predatory Pricing is a very perplexing and puzzling topic for the anti-trust communities
of many countries. Critics of predatory pricing argue that it is not a rational strategy to
be pursued by the firms. The problem is that it is very hard to distinguish predatory
pricing from other desirable competitive price cutting. The antitrust laws should
adequately curb the predatory pricing without overly deterring competitive price cutting.
Antitrust courts should make use of the economic evidences in detecting predatory
pricing. Also, economic evidences are now able to show the rationality of predatory
pricing like the possibility of recoupment which is an essential element in determining
the rationality of predatory strategy of a firm.
It is also necessary for the anti-trust authorities to make sure that the market structure
supports the prospects of predatory pricing. This requires a complex analysis of the
markets where anticompetitive effects have occurred or are probable. This includes
defining the dominance of the predatory firm, the barriers to entry, and the market
power of the competitors.
After the entire research it can be concluded saying that predatory pricing is a very
complex mix of situations, intentions and accounts. It is impossible to adhere to any one
or more of the practices tests as a conclusive test to prove predatory pricing. In fact all
the tests employed are merely indicative.
It is true that parts of the existing theory is practical but the entire theory of predatory
pricing including the predation, bankruptcy of all other firms, obtaining complete
monopoly over relevant market, no re-entry of any of the previous firms or entry of new
firms in the recoupment phase and finally recoupment of all losses is nothing less than a
fantasy.
But having said so, it cannot be denied saying that certain elements of predatory pricing
are seen in the market and have its harmful impacts. So even though the theory is
applied in parts, in its entirety, it is nothing more than a falsity.

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BIBLIOGRAPHY

 Maher M Dabbah; EC and UK Competition Law, Commentary, Cases and Materials;

Cambridge University Press.
 Joanna Goyder and Albertina Albors; Llorens, Goyder’s EC Competition Law;
Oxford University Press.
 Doris Hildebrand; The Role of Economic Analysis in the EC Competition Rules;
Kluwer Law International.
 Indian Competition Act,2002
 Richard Posner (2001); Antitrust Law: An Economic Perspective; 2 nd edn;
University of Chicago Press.
 W. Kip Viscusi, Joseph E. Harrington, JR John, M. Vernoni; Economics of
Regulation and Antitrust; MIT Press.
 The Myth of Predatory Pricing; Thomas J. DiLorenzo.
 Frank Easterbrook (1981); Predatory Strategies and Counterstrategies; University
of Chicago Law Review.
 The Sherman Act.
 Richard Whish; Competition Law; Oxford Publication.
 Eugene Buttigieg; EC Competition Law; Wolters Kluwer Law and Business.
 Richard Lindberg; The Ambiguity of Predatory Pricing: Strategy as a Clarifier.
 Areeda and Turner (1975); Predatory Pricing and Related Practices.
 Journal article by Greg Le Blanc; Rand Journal of Competition Law; Signalling
Strength; Limit Pricing and Predatory Pricing.

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