Abusive Pricing: ECJ Clarifies Rules On Selective Discounts And Below-Cost Selling
The judgment of the ECJ in Post Danmark, which was issued on 27 March 2012, has clarified the rules on selective discounts and below-cost selling under the competition law prohibition of an abuse of a dominant position. Post Danmark was dominant on the Danish market for unaddressed mail (direct mail of brochures, guides, newspapers, etc.), with just one major competitor, Forbruger-Kontakt. Post Danmark had made a low offer for its services to one of Forbruger-Kontakt's customers (Coop group) which did not allow Post Danmark to cover its average total costs of providing the service to the Coop, but did allow it to cover its average incremental costs (the average increase or decrease in costs as a result of one more or one less unit of output). The ECJ was asked to consider whether this type of pricing was an exclusionary abuse by Post Danmark, even if it was established that the prices were not set at that level for the purpose of driving a competitor out of the market.
Price discrimination does not equal exclusionary abuse
The ECJ concluded that offering low prices to certain customers is not an exclusionary abuse merely because the prices are between fixed and incremental costs. It found that in order to assess anti-competitive effects in such a situation, the national court should consider "whether that pricing policy, without objective justification, produces an actual or likely exclusionary effect, to the detriment of competition and, thereby, of consumers' interests".
In general terms, the ECJ concluded that price discrimination "cannot of itself suggest that there exists an exclusionary abuse", whatever form the discrimination takes. As a consequence, it would appear...
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