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When Are Excessive Prices Unfair?

Author

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  • Pinar Akman

    (Centre for Competition Policy, University of East Anglia)

  • Luke Garrod

    (Centre for Competition Policy, University of East Anglia)

Abstract

A dominant firm can abuse its position by charging unfair prices under EU competition law. Among other things, this prohibition has been used to prohibit excessive prices that are 'too high'. This abuse has remained underdeveloped conceptually and in practice at the EU level, so there is ambiguity regarding what constitutes an excessive and therefore unfair price. We consider whether the principle of dual entitlement 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 of excessive pricing and develop a procedure that defines a price as 'unfair' in terms of this principle. We also show that the case law highlights that European Competition Law enforcers have implicitly followed similar steps as the ones developed here in their attempts to define 'unfair prices'. The procedure could be used explicitly to improve the ex ante legal certainty of the test of 'unfair pricing', which in turn may lead to a more effective prohibition if it is used appropriately with suitable remedies.

Suggested Citation

  • Pinar Akman & Luke Garrod, 2010. "When Are Excessive Prices Unfair?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2010-04, Centre for Competition Policy, University of East Anglia, Norwich, UK..
  • Handle: RePEc:uea:ueaccp:2010_04
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    References listed on IDEAS

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    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. 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.
    3. 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.
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    Cited by:

    1. 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.
    2. 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

    Keywords

    Unfair pricing prohibition; abuse of dominant position; exploitative abuse; excessive pricing; principle of dual entitlement;
    All these keywords.

    JEL classification:

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

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