Lessons for Future Excessive Pricing Cases From Economics and the Court of Appeal Judgment In Pfizer/Flynn†

I consider the lessons that can be drawn from economics and the recent Court of Appeal (CoA) judgment in Pfizer/Flynn for future excessive pricing cases under TFEU Article 102. In future, defendants will ask their economic experts to develop reliable evidence under both limbs of the United Brands test. The required economic analysis will involve developing a suitable price benchmark, describing what prices would have been under ‘normal and sufficiently competitive’ conditions. The benchmark can be based on various types of evidence including cost-plus and/or comparator evidence. The CoA highlights that the cellophane fallacy is a legitimate concern for competition agencies. They also accept the Competition Appeal Tribunal (CAT’)s conclusion that ‘some’ economic value might be relevant beyond the Competition and Markets Authority (CMA’)s cost-plus benchmark—without being prescriptive about whether or indeed how a competition agency should further take it into account. I provide a suggestion for doing so. Finally, I note that economists consider that competitive markets can result in economically efficient market outcomes but these can be consistent with high degrees of inequality. As a result, a competitive benchmark in excessive pricing cases will necessarily involve Article 102 only taking fairness into account to a limited extent.