Price competition constitutes the most essential form of competition, as different prices for similar products promote the interchangeability of goods. In a competitive market, the price depends on the demand for the product. If there is little demand, the company will have to lower the price it can charge in order to compete with its rivals. Consumers who have choice are more likely to buy the product, which they think, is of good value. Therefore, to stay in the market, companies must seek to produce at minimum costs and to sell the product at a price, which includes a reasonable profit. The function of price competition is to keep prices down to the lowest and to encourage the movement of goods between the Member States .
If a good product is sold at an inflated price, consumers might purchase a less appropriate product, which may not satisfy them. Thus price fixing, both horizontal and vertical, is the most obvious infringement of competition law .
While horizontal agreements can eliminate inter-brand competition, price fixing between rivals, which also bind distributors (horizontal/vertical agreement) can restrict inter-brand as well as intra-brand competition. Mere vertical agreements, applied by suppliers individually, can cause horizontal effect as well, because it removes competition between distributors.
Competition can easily be restricted from a position of dominance. In order to drive smaller companies out of the market or to prevent others from entering, a dominant undertaking can abuse its economic power and charge prices which other firms cannot compete with.
The first Common Law country which had to deal with the issue of pricing, were the United States after the introduction of the Sherman Act 1890. In US v. Addyston Pipe and Steel Co. , the Supreme Court held pricing to be illegal per se under sec. 1 of the Sherman Act 1895 . An explanation for this holding can be found in Trenton Potteries : ′The power to fix prices […] involves power to control the market and to fix arbitrary and unreasonable prices.′
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Inhaltsverzeichnis (Table of Contents)
- Introduction
- Pricing Prohibited under Article 81
- Horizontal Price Fixing
- Definition
- The Commission's Attitude towards Horizontal Price Fixing
- Vertical Price Fixing
- Definition
- The Commission's Attitude towards Vertical Price Fixing
- Market Sharing
- Definition
- The Commission's Attitude towards Market Sharing
- Price Discrimination
- Definition
- The Commission's Attitude towards Price Discrimination
- Horizontal Price Fixing
- Pricing Prohibited under Article 82
- Excessive Pricing
- Definition
- The Commission's Attitude towards Excessive Pricing
- Predatory Pricing
- Definition
- The Commission's Attitude towards Predatory Pricing
- Price Discrimination
- Definition
- The Commission's Attitude towards Price Discrimination
- Excessive Pricing
- Legal Pricing Strategies under EC Competition Rules
- The Commission's guidelines on the applicability of Article 81 to horizontal cooperation
- Defences for Parallel Pricing
- Price Control in Vertical Agreements
- Predatory Pricing and Price Discrimination– The Defence of Meeting Competition
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This essay delves into the intricacies of pricing within the framework of European competition law. Its primary objective is to examine the different forms of pricing practices that are prohibited by Articles 81 and 82 of the Treaty of Rome, highlighting the Commission's stance on these practices. Additionally, the essay explores legitimate pricing strategies available to companies operating within the common market, particularly focusing on the guidelines related to horizontal cooperation, price control in vertical agreements, and the defense of meeting competition.
- Pricing practices prohibited under European competition law
- The Commission's perspective on prohibited pricing practices
- Legitimate pricing strategies for companies operating within the common market
- Guidelines on horizontal cooperation and price control in vertical agreements
- The defense of meeting competition
Zusammenfassung der Kapitel (Chapter Summaries)
The introduction sets the stage for the essay, defining price competition as the crucial form of competition in the marketplace. It emphasizes the role of price in promoting the interchangeability of goods and the importance of companies staying competitive by minimizing costs and achieving reasonable profits. The introduction also highlights the inherent challenges posed by price fixing, both horizontal and vertical, in light of their potential to restrict competition and harm consumer welfare.
The second chapter focuses on pricing practices prohibited under Article 81, exploring both horizontal and vertical price fixing. It delves into the definitions of these practices, discussing the potential economic advantages and disadvantages of price fixing for participating companies. The chapter also examines the Commission's firm stance against horizontal price fixing, which is considered illegal per se due to its detrimental impact on inter-brand competition and consumer welfare.
The third chapter investigates pricing practices prohibited under Article 82, specifically focusing on excessive pricing and predatory pricing. The chapter defines these practices and examines the Commission's attitude towards them. It recognizes the potential for dominant undertakings to abuse their market power and engage in practices that harm competition. While the specific details are omitted to avoid spoilers, it highlights the legal framework governing pricing strategies in the context of dominant firms.
The fourth and final chapter shifts its focus to legal pricing strategies under EC competition rules. This chapter dives into the Commission's guidelines on horizontal cooperation, exploring the complexities of managing price competition among companies operating on the same market level. Additionally, it delves into the defense of meeting competition, offering insights into how companies can legally respond to competitors' pricing strategies while remaining compliant with European competition law.
Schlüsselwörter (Keywords)
This essay focuses on the key concepts of competition law, pricing strategies, and the role of the European Commission in regulating these practices. The core themes encompass horizontal and vertical price fixing, excessive pricing, predatory pricing, price discrimination, and legal defenses against unfair competition. It delves into the Commission's guidelines on horizontal cooperation and examines the defense of meeting competition, showcasing its relevance to companies operating within the European Union.
- Quote paper
- Daniel Müller (Author), 2001, Pricing in Accordance with EC Competition Rules, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/5900
