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When Are Excessive Prices Unfair?

Author

Listed:
  • Pinar Akman
  • Luke Garrod
Abstract
A dominant firm can abuse its position by charging unfair prices under EU competition law. According to the Court of Justice of the European Union in United Brands, a price is abusive if (1) the price-cost margin is excessive and (2) the price is unfair compared with other prices. However, there is little guidance to determine whether a price-cost margin is excessive and, if so, when the price is unfair. We consider whether the “principle of dual entitlement”, which is consistent with most people's perceptions of when prices are unfair relative to others, can be used to define explicitly what constitutes an unfair price in terms of the second stage of the United Brands test. We show that in general, this principle is in line with the goals of an effective prohibition on unfairly high pricing, and we develop a procedure that defines a price as unfair in terms of this principle. We also show that European competition law enforcers, in their attempts to define prices as unfair relative to other prices, have followed arguments similar to the procedure developed here. Therefore, this procedure could go some way to resolve one of a number of problems regarding the prohibition on unfairly high pricing.

Suggested Citation

  • Pinar Akman & Luke Garrod, 2011. "When Are Excessive Prices Unfair?," Journal of Competition Law and Economics, Oxford University Press, vol. 7(2), pages 403-426.
    • Handle: RePEc:oup:jcomle:v:7:y:2011:i:2:p:403-426.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhq024
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    References listed on IDEAS

    as
    1. David S. Evans & A. Jorge Padilla, 2005. "Excessive Prices: Using Economics to Define Administrable Legal Rules," Journal of Competition Law and Economics, Oxford University Press, vol. 1(1), pages 97-122.
    2. Rotemberg, Julio J., 2005. "Customer anger at price increases, changes in the frequency of price adjustment and monetary policy," Journal of Monetary Economics, Elsevier, vol. 52(4), pages 829-852, May.
    3. Vaidyanathan, Rajiv & Aggarwal, Praveen, 2003. "Who is the fairest of them all? An attributional approach to price fairness perceptions," Journal of Business Research, Elsevier, vol. 56(6), pages 453-463, June.
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    Cited by:

    1. Esther L. Kim & Jason Tang, 2024. "Tackling no-shows in fine dining: insights into cancellation policies and consumer awareness campaigns," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 23(5), pages 423-434, October.
    2. Svetlana Avdasheva & Dina Korneeva, 2017. "Why Enforcement against Excessive Pricing in the Russian Federation is not Sufficiently Successful?," Public administration issues, Higher School of Economics, issue 5, pages 117-133.
    3. Willem H. Boshoff, 2021. "South African competition policy on excessive pricing and its relation to price gouging during the COVID‐19 disaster period," South African Journal of Economics, Economic Society of South Africa, vol. 89(1), pages 112-140, March.

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    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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