PROJECT

ON
competition law
A CRITICAL STUDY ON PREDATORY PRICING

SUBMITTED BY:
SIMRAN KATYAL
1282096
BBALLB (B)
4TH YR
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ACKNOWLEDMENT
Every project big or small is successful largely due to the effort of a number of wonderful people
who have always given their valuable advice or lent a helping hand. I Sincerely appreciate the
inspiration, support and guidance of all those people who have been instrumental in making this
project a success.
I am extremely grateful to "ASSISTANT PROF.KAUSHIKI" for the confidence bestowed in me
and entrusting my case study entitled " a critical study on "PREDATORY PRICING". I also
extend my gratitude to my project guide to mam who assisted me in compiling the project.
At this juncture I feel deeply honored in expressing my sincere thanks to Director N.K.
Chakraborty for making the resources available at right time and providing and providing
valubale insights leading to the successful completion of my project.
I would also like to thank for providing all necessary documents and other resources necessary
for completion of the work assigned.
Last but not least I place a deep sense of gratitude to my family members and my friends who
have been constant source of inspiration during the preparation of this project work.

NAME: SIMRAN KATYAL

ROLL NO. 1282096.

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Contents
ACKNOWLEDMENT...................................................................................................... 1
INTRODUCTION........................................................................................................... 3
FACTORS DETERMINING PREDATORY PRICING............................................................5
DOMINANCE:........................................................................................................... 5
BARRIERS TO ENTRY AND RE-ENTRY:.......................................................................5
EXCESS CAPACITY:................................................................................................... 6
NON-PRICE PREDATION:.......................................................................................... 6
OTHER FACTORS:..................................................................................................... 6
IDENTIFICATION OF PREDATORY PRICING...................................................................7

Price-Cost Tests................................................................................................. 7

The Two-Tier Test:.............................................................................................. 8

Test for Predatory Intention...............................................................................8

Above Cost Pricing Test:.................................................................................... 8

Possibility of Recoupment................................................................................. 8

COST MEASURES ADOPTED IN INDIAN COMPETITION LAW.........................................9

FEASIBILITY OF PREDATORY PRICING........................................................................10
COMPARISON OF THE LAW IN DIFFERENT JURISDICTIONS WITH REFERENCE TO SOME
CASES....................................................................................................................... 11
Certain cases:........................................................................................................... 13
AKZO v. Commission [1991].................................................................................. 13
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.......................................14
Tetra Pak International SA v. Commission..............................................................14
Deutsch Post AG [2001]........................................................................................ 14
Matsushita v. Zenith Radio Corp............................................................................14
CONCLUSION AND SUGGESTIONS............................................................................15
BIBLIOGRAPHY.......................................................................................................... 16

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INTRODUCTION
Predatory Pricing refers to the situation where a dominant firm reduces its price to below cost
level for a period of time during which it will be able to eliminate or contain a competitive
force.1 Following that, and once the predatory firm deems it safe enough; it will raise its price to
a level above the competitive price level in order to recoup the losses made during the reduction
period.2 It is the dominant company in such a market which is likely to have both the inclination
and the resources to finance such strategy and such pricing can be equally unfair to
competitors.3
Predatory pricing is in practice often difficult to distinguish from normal price competition. The
lowering of prices, the directly visible part of predation, is also an essential element of
competition. By lowering its price or improving the quality of its product a company competes
on the market. This competition that benefits consumers and that a competition authority wants
to defend and protect. Pricing is not predatory merely because a company is lowering its price.4
The concern with predatory pricing is that firms might strategically cut prices to unprofitable
levels in the short term in order to eliminate or discipline rivals and then raise long run prices to
supra-competitive levels, inflicting a net long-term injury on consumers. 5 The problem is that
such harmful predatory pricing is often hard to distinguish from desirable competitive price
cutting, so that attempts to condemn the former may mistakenly condemn and deter the latter.6

1 Maher M. Dabbah; EC and UK Competition Law:- Commentary, Cases and Materials, Cambridge
University Press, pp319.
2 Id. At pp319.
3 Joanna Goyder and Albertina Albors- Llorens, Goyders EC Competition Law, Oxford University
Press, pp319.
4 Doris Hildebrand, The Role of Economic Analysis in the EC Competition Rules, Kluwer Law
International, pp373-375.
5 Einer Elhauge and Damien Geradin, Competition Law and Economics, Hart Publishing, pp314.
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Rebates and similar practices are an essential component of the competitive process, and that the
law should not deter a dominant firm from passing on its efficiency to customers in the form of
lower prices. The law on predatory pricing has to tread a fine line between not condemning
competitive responses on the part of dominant firms on the one hand and prohibiting
unreasonable exclusionary conduct on the other.7
Pricing is also not predatory just because the lower price means incurring losses or foregoing
profits in the short run. An investment in temporarily lower prices may for instance be required
to enter a market or to make more customers familiar with the product.8
Now the question that arises is why would a company practice predatory pricing?
The answer is simply to create a monopoly market and be the price maker. Another reason for
firms to do predatory pricing may be because it is a better alternative to mergers. The McGeePosner Debate compares the pros and cons of mergers and predatory pricing in which Posner
held that predatory pricing is better as it is difficult to be identified and also lower in cost. 9
Generally predatory pricing is taken as an unfair practice because it is an Entry Barrier that
hinders fair competition and many undertakings may employ unethical means to cut down on
costs. Also, it harms consumers in the long run. This is, without a doubt, an anti-competitive
practice and hence illegal. To understand the full implication of the concept of predatory pricing,
let us first understand the two terms dominant and abusive.
A dominant company refers to a company holding a chunk of the share of the relevant market. As
to how much should the market share be, is a debatable question. Dominant position is a position
of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to:
6 Id. At pp315.
7 Doris Hildebrand, The Role of Economic Analysis in the EC Competition Rules, Kluwer International
Volume 39, pp 373-374.
8 ibid.
9 Richard Posner (2001), Antitrust Law: An Economic Perspective, 2 nd edition, University of Chicago
Press, pp185.
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Operate independently of competitive forces prevailing in the relevant market; or

Affect its competitors or consumers or the relevant market, in its favour.10

As far as the term abuse is concerned, it is very obvious that in every market there will be a small
number of dominant players and some smaller players. The small players, individually, do not
have the power to affect the market conditions as such. But the dominant players, simply by
virtue of the holding in the market, can influence the market to a considerable extent. Now, when
a dominant player uses its power to influence the market to benefit itself in some way other than
through fair competition, it is known as an abuse of the dominance. That is, when a company
takes unfair advantage of its dominant position to hinder competition, it is an abuse. Section 4(1)
of the Indian Competition Act states that no enterprise shall abuse its dominant position.
Thus the major elements involved in the determination of predatory behaviour are:

Establishment of dominant position of the enterprise in the relevant market.

Pricing below cost for the relevant product in the relevant market by the dominant

enterprise.11
Intention to reduce competition or eliminate competitors.

FACTORS DETERMINING PREDATORY PRICING

DOMINANCE:
Since large capital reserves are needed to sustain the losses during the below cost selling period,
hence only a dominant firm would be able to practice predatory pricing. 12 The dominance of a
company can be analyzed with regard to the relevant product and geographic market by

10 Explanation to Sec. 4(2) of the Indian Competition Act.

11 Cost for this purpose has been defined in the Competition Commission of India (Determination of
Cost of Production) Regulations, 2009 as notified by the Commission.
12 W. Kip Viscusi, Joseph E. Harrington, JR John M. Vernoni, Economics of Regulation and Anti-trust,
MIT Press, pp316.
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examining the potential demand and substitutability of the products or services. The economic
strength of the predator may derive from its position in other markets.13
BARRIERS TO ENTRY AND RE-ENTRY:
Successful predatory pricing requires certain level of entry barriers to the market. Otherwise
other potential rivals would immediately re-enter the market once the predator raises its prices
and by adding their output to that of the predator drive the prices back to competitive level. 14
Entry barriers exist when a new market entrant faces cost that the incumbent firm need not bear
or no longer faces, i.e., fixed cost investments etc. The entrant on the other hand must incur such
costs and hence faces the risk of under-pricing by an incumbent with sunk costs, the latter acting
as a barrier to entry, giving the incumbent the power to raise prices above the competition level. 15
Re-entry barriers on the other hand exist when a firm that has left a market bears significant costs
in seeing to reopen its business. In the absence of re-entry barriers the firm which has been
forced to exit the market because it was unable to sustain the artificially low prices dictated by
the predator could enter the market again once prices are raised to monopoly level, thus being
able to undermine the predators pricing policy.16
EXCESS CAPACITY:
Excess capacity is a pre-requisite for predatory pricing. The predator must be able to absorb all
the new demand created by its price cuts, and in the case of predation against existing rivals, the
predator must be able to absorb the rivals sales. If it cannot do both these, demand will exceed
predators output and prices will have to rise, which will take the pressure off the rivals and
allow them to survive.17

13 H. Hovenkamp, Federal Antitrust Policy, Thomson/West, 2005, chap 8.

14 Brodley et al, Predatory Pricing.
15 Eugene Buttigieg, EC Competition Law, Wolters Kluwer Law and Business, pp419.
16 ibid
17 W. Kip Viscusi, Joseph E. Harrington, JR John M. Vernoni, Economics of Regulation and Anti-trust,
MIT Press, pp314.
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NON-PRICE PREDATION:
Non price predation includes excessive product differentiation, predatory advertisement and
investment, predatory product innovation. The main aim of these non price predatory pricing is
to raise the costs of the rival firms. If cost increase can be imposed on the rivals, the predatory
firm can profit immediately, even if the rivals remain in business, this is because its margin will
increase proportionately with rising price levels. Another scenario is even if the prices remain
constant, the predatory firm gains market share as rival restricts output.18
OTHER FACTORS:
Examining market share trends during the period of predation is important for recoupment
analysis. If the shares did not change during that period, then recoupment would have to appear
to be implausible.19 Low price elasticity of demand facilitates recoupment as demand will decline
relatively less when the firm raises the market price.20 If a predator enjoys greater brand royalty,
the less costly a predatory pricing shall be for the firm. 21 The more efficient the incumbent is to
its rivals, the less expensive it will be to conduct a predatory pricing campaign.
Predatory pricing is often considered to be feasible only where firms operate in multimarket. It is
argued that if the firm operates in only one market it is more rationale for it to absorb the new
entrant (by merger or takeover) or to accommodate it, rather than incur greater losses by
undercutting it.22 Losses suffered by the firm operating in a multi market can be recouped by the
profits from the other market in which the firm operates. A firm may be a multimarket in

18 Richard Lindberg, The Ambiguity of Predatory Pricing: Strategy as a Clarifier, Research Paper, pp37
19 John R. Lott Jr., Are Predatory Commitments Credible? Who Should the Courts Believe?, Chicago:
University of Chicago Press, 1999. pp105
20 Journal article by Greg Le Blanc; Rand Journal of Competition Law, Signalling Strength: Limit
Pricing and Predatory Pricing, Vol. 23, 1992.
21 Aaron S. Edlin, Predatory Pricing Research Handbook on Economics of Antitrust, Ed. Einer
Elhauge, Edward Elgar, 2010.
22 Doris Hildebrand, The Role of Economic Analysis in the EC Competition Rules, Kluwer Law
International, pp367.
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geographical rather than a product sense, so that reputation for predation in one market may deter
entrants elsewhere.23

IDENTIFICATION OF PREDATORY PRICING

The various tests most commonly employed for identifying predatory pricing are as follows:

Price-Cost Tests (PCT): Price-Cost Tests are most commonly used tools to identify
Predatory Pricing, and is used across all jurisdictions, in some form or the other. These
tests examine whether the company or firm is incurring some losses for legitimate
reasons or just for Predatory Pricing. These tests look into the detailed accounts of the
firms and compare their costs and their prices to reach the conclusion. The Price-Cost
Tests may be of various types; the most important among them being the Areeda-Turner
test that if the sell price is below the Short Run Average Variable Cost or the marginal
cost, it is a case of predatory pricing.24 The Greers test25 held that the scope of the
Areeda-Turner test was too wide and that it should be coupled with a test of intention and
is another Price-Cost Test. There are numerous other Price-Cost Tests but all of them

basically aim at the same thing.

The Two-Tier Test: The Two-Tier Test of Joskow and Klevorick 26 consists of two-tiers
as the name suggests. The first is the structural test to examine the type of the relevant
market. For example, if the market is a very competitive one with fairly low entry
barriers, then chances of a successful predatory pricing is almost nil. The second tier is a

23 Alison Jones and Brenda Sufin, EC Competition Law: Text, Cases and Materials, Oxford University
Press, pp445.
24 Areeda and Turner (1975), Predatory Pricing and Related Practices under Section 2 of the Sherman
Act, Harvard Law Review, pp685-688.
25 Douglas F. Greer, (1979), A Critique of Areeda and Turners Standard for Predatory Practices,
Antitrust Bulletin, (24), pp235.
26 Paul L. Joskow and Alvin K. Levorick, (1979), A Framework for Analysing Predatory Pricing, Yale
Law Journal 89(2), pp245-258.
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behavioural test which examines the behaviour of one particular enterprise in relation

with the market to ascertain if there is an abuse of dominance or not.

Test for Predatory Intention: The Test for Predatory Intention is yet another test which
has been accepted in many jurisdictions in many cases. In India, below cost testing is also
accompanied by proving intent, which is necessary in proving any alleged predatory
conduct. According to the Act, below-cost pricing with a view to reduce competition or
eliminate the competitors shall amount as abuse of dominance. In the price abuse cases,
exclusionary intent is very important as is given by the AKZO 27 rule in the EC

Competition Law.
Above Cost Pricing Test: The Above-Cost Pricing Test is not a complete test but it says
that even though the prices are not below cost for that enterprise, it may still be Predatory
Pricing. However, it brings an idea different from most other prevalent tests, by its very
premise. It applies to alleged predators that are selling at a price above the costs, and not
below but are still predating. To give an example, there may be a very dominant and large
enterprise which by virtue of its large scale of production has very low cost of production
in comparison to the cost incurred by other enterprises and hence may have a predatory

effect in the long run.

Possibility of Recoupment: The Possibility of Recoupment Test as the name implies,
says that there should be a possibility for the enterprise to recover its losses of the initial
phase of the plan at some point of time. In Brooke Group Ltd. V. Brown and Williamson
Tobacco Corp28, the Courts held that to hold an enterprise guilty of predatory pricing, it
must be shown that there is reasonable possibility of recoupment. Others: Williamson
Output Increase Rule29, Baumol Price Reversal Rule30, Rule of Reason Approach are

27 Case C-62/86, AKZO Chemie BV v. Commission (1991)ECR I-3359

28 509 U.S. 209 (1993)90
29 Oliver E. Williamson(1979), Commentary: Williamson on Predatory Pricing II, The Yale Law Journal,
88 (6), pp1183-1200
30 Baumol (1979), Quasi-Permanence of Price Reductions: A Policy for Prevention of Predatory Pricing,
88, The Yale Law Journal.
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tests which never really gained valediction and popularity. Another test is the no-rule test
which says that there is no hard and fast rule to determine predatory pricing.

COST MEASURES ADOPTED IN INDIAN COMPETITION LAW

The Indian competition law has adopted Average Variable Cost as the appropriate measure of
cost, which is by and large the measure of cost adopted in all jurisdictions. There is a
presumption in most cases that where the enterprise sets its sale price below its Average
Variable Cost, it has engaged in a predatory pricing practice. However, prices falling between
the ATC and AVC are also subject to inquiry, but in such case specific intent would have to
be shown. Prices set above the ATC are unlikely to be challenged. The CCI also has proposed
certain regulations with respect to determining cost in cases of multi-product enterprises 31,
Joint products and By-products32, transfer pricing33, and captive consumption34. Once a
predatory price allegation is established, the enterprise would be said to have abused its
dominant position. Where after inquiry, the CCI finds that an enterprise in a dominant
position is in contravention of the provisions of Section 4, it may pass any of the orders
specified under Section 27 of the Act and may further under Section 28 of the Act direct the
division of an enterprise enjoying a dominant position to ensure that such an enterprise does
not abuse its dominant position.

31 Regulation 5.
32 Regulation 6.
33 Regulation 7.
34 Regulation 8.
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FEASIBILITY OF PREDATORY PRICING

While there is much discussion and debates going on for decades about the nitty-gritty
details of predatory pricing, many are of the opinion that it is not a real concept, that is,
nothing like it can ever exist. The major criticisms against the theory of PP may be

The first and the most obvious reason as to why this entire concept is often criticised
is that, the competitors who had left the market during the predation phase may pop-

up again in the recoupment phase.

Also, the competitors may be stronger than what the predator expected them to be
stronger than what the predator expected them to be and may take longer time to
leave the market than expected, hence prolonging the phase of predation, leading to

such losses as cannot be recouped or as would turn the predator itself bankrupt.
Moreover, just because a firm is bankrupt at one point of time does not really
guarantee that they will forever be so. To give an example, The Washington Post
went bankrupt in 1933 for some reasons. But its work force and goodwill remained.
Not only that, its publisher Eugene Meyer acquired everything at a much lower price

than before and eventually, went on to climb the ladder of success again.
Alternatively, even if the preyed-upon firms went bankrupt, other firms could
purchase their facilities and compete with the alleged predator 35. Such acquisitions of
those bankrupt firms will be at a very low price and hence the acquiring firm may
offer very low prices too, so much so, that it may even be able to offer lesser price

than the predator.

Practically speaking, it is foolish to expect that all the competing firms would just
one by one turn bankrupt and leave the market without even trying to employ any

counter-strategy. One such counter-strategy may be mergers amongst them.

Another very interesting probability may be that the consumers may stock up on the
product or service during the predatory phase lured by the excessive low pricing, or
anticipating a price-rise after some time. If that is the case, then whenever the
predator will increase the prices, the demand will fall as the consumers will already
have a surplus. If the predating enterprise tries to address this difficulty by limiting

35 The Myth of Predatory Pricing, Thomas J. DiLorenzoThomas J. DiLorenzo holds the Scott L. Probasco, Jr.,
Chair of Free Enterprise at the University of Tennessee at Chattanooga.

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supply, then also it will not succeed as then the competitors who had left the market
will come in to supply further quantities.
Then the question arises that if the predatory pricing is an arbitrary concept, why is this
still being litigated upon?
It has been estimated that the average cost to a major corporation of litigating a predation case is
$30 million.36
Predatory pricing is often a weapon used not by a dominant firm, but in fact, against a dominant
firm for smaller enterprises just to undermine the reputation, increase costs by attaching the cost
of litigation. At times such cases may also be able to restrain the dominant firm from actually
offering very low-prices. But this is anything but maintaining competition, rather it stifles
competition. Filing an antitrust lawsuit is a common alternative to competing by cutting prices or
improving product quality, or both37. Legal restrictions on price cutting, in the name of
combating predation, are inevitably protectionist and anti-consumer38.
Some of the enterprises against whom Predatory Pricing allegations have been brought are
Microsoft Security Products, Walmart, France Telecom/Wanadoo, amazon.com etc.

COMPARISON OF THE LAW IN DIFFERENT JURISDICTIONS WITH

REFERENCE TO SOME CASES
U.S.: in the case of Brooke Group v. Brown &Williamson Tobacco, 1993, it was observed by the
U.S. Supreme Court that predatory pricing is an irrational practice and the laws designed to

36 Frank Easterbrook (1981), Predatory Strategies and Counterstrategies, University of Chicago Law
Review, 48, pp334.
37 The Myth of Predatory Pricing, Thomas J. DiLorenzoThomas J. DiLorenzo holds the Scott L. Probasco, Jr.,
Chair of Free Enterprise at the University of Tennessee at Chattanooga.

38 Harold Demsetz (1982), Barriers to Entry, American Economic Review 72 pp52-56.

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prevent it only inhibit competition. Hence it can be said that the U.S. Courts are reluctant to tag
any practice of lowering of the selling price as a case of predatory pricing.
Section 2 of the Sherman Act states: Every person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other person or persons, to monopolize any part of
the trade or commerce among the several States, or with foreign nations, shall be deemed guilty
of a felony, and.... This section addresses the actions of single firms that monopolize or attempt
to monopolize as well as the conspiracies and combinations that attempt to monopolize.39
E.U.: the relevant law on this point under the E.U. law is found under Article 82 of the Treaty of
the European Communities. The AKZO40 case established that pricing below average total cost is
predatory and it was also accepted in the case of Michelin v. Commission41 that a dominant
undertaking has responsibility not to allow its conduct to impair competition. But it is also to be
noted that in the United Brands42 case, it was held that the dominant undertaking is entitled to
take reasonable steps to protect its commercial interests too. Hence, they take a rule of reason
approach and weigh the various parameters to reach a decision on predatory pricing.
INDIA: Predatory Pricing is defined by the Act as the sale of goods or provision of services, at a
price which is below the cost, as may be determined by regulations, of production of goods or
provision of services, with a view to reduce competition or eliminate the competitors.43

39 Spectrum Sports Inc. V. McQuillan 506 US 447 (1992)

40 Case C-62/86 AZCO Chemie BV v. Commission [1991]ECR I-3359
41 Case 322/81 Michelin v. Commission [1983] ECR 3461
42 Case 27/76 United Brands v. Commission [1978] ECR 207.
43 Section 4, Explanation, The Competition Act, 2002.
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India has adopted AVC as the standard to measure price predation 44. The Commission also has
the discretion of adopting any other cost standard (such as avoidable cost, long run incremental
cost, or market value), if it considers doing so fit.45
In the MCX case in India46, MCX alleged that NSE was practicing predatory pricing in the form
of waiver of transcription fee, admission fee and data feed fee. The DG found NSE indeed was
abusing its dominance. NSE countered on two grounds- that there was no concrete evidence to
show the intent to do such an act that such low pricing was a promotional policy for the nascent
market and hence not predatory. NSE also claimed that they were offering the zero pricing policy
as its costs were zero.
The CCI found NSE to be abusing its dominant position because that particular segment of the
market was no longer in the nascent stage; rather it was in its infant stage. Also the DGs findings
regarding the costs showed that it was not zero.
However, it is interesting to note that the CCI did not consider the pricing to be predatory in the
strict sense of the term. Instead it was considered to be Unfair 47 and possible only by virtue of
its deep pockets48 and could not be sustained by its competitors.
The Commission further commented that if even zero pricing by dominant player cannot be
interpreted as unfair, while its competitor is slowly bleeding to death, then this Commission
44 Regulation 3, The Competition Commission of India (Determination of Cost of Production
Regulations)
45 ibid
46 Case No. 13/2009, MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd., (23 July,
2011).
47 As per Section 4 of the Competition Act, 2002, predatory pricing is a subset of unfair pricing.
However, unlike predatory pricing which is defined in the explanation to Section 4, the term unfair
pricing has not been defined in the Act, and needs to be determined as per the facts and circumstances of
each case.
48 Supra 46.
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would never be able to prevent any form of unfair pricing including predatory pricing in
future49.

Certain cases:
AKZO v. Commission [1991]50
In AKZO case the commission did not prescribe any specific price rules linked to costs rather it
concentrated on the objectives of a dominant company obtained from the evidence obtained by
the commission.51 The commission decision finding predation focused on AKZOs threats and its
eliminatory intent. It stated in its judgment that, in applying the Hoffmann-La-Roche principles
to AKZO pricing , it was to be presumed that prices charged that were lower than AVC alone
were intended to eliminate competitors since they would be necessarily loss making. 52 Also even
prices above AVC but below ATC are considered to be predatory if it was a plan to deliberately
eliminate a competitor.53

Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.54

In this case the US Supreme Court held that below cost prices can be predatory in nature only if
the dominant undertaking had a reasonable prospect of subsequently recouping its deliberately

49 Supra 46.
50 Supra 40.
51 Joanna Goyder and Albertina Albors-Llorens, Goyders, pp320.
52 Richard Whish, Competition Law, Oxford Publication, pp731-732.
53 ibid
54 Case No. 333/94 [1996] ECR I-5941.
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incurred losses.55If it did not, the market itself would punish the price cutters; there would be no
need for any intervention.56It laid out a clear two-tier policy for judging predatory pricing.57

Tetra Pak International SA v. Commission58

This is a case where the dominance and abuse are on different markets. In this case the
commission held that Tetra Pak had abused its dominant position on the aseptic market by its
conduct on the non-aseptic market which was designed to obtain a competitive advantage on the
non-aseptic market.59

Deutsch Post AG [2001]60

In Deutsch Post the commission applied an incremental cost standard, instead of the AKZO AVC
threshold, when it dealt with a statutory monopolist which was also active on a competitive
market. The Deutsch post hinders competition by cross subsidizing commercial parcel services
through the reserved letter post services.61

55 Eugene Buttigieg, pp178-179.

56 In holding that recoupment is an essential element of the test for predatory pricing the Supreme Court
(at pp226) observed that cutting prices in order to increase business often is the very essence of
competition.
57 W. Kip Viscusi, Joseph E., Harrington, JR John M, Verconi, pp304.
58 Case No. 333/94 [1996] ECR I-5941.
59 Alison Jones and Brenda Sufin, pp456-457.
60 OJ L 125/27, [2001]5 CMLR 99.
61 Supra 59.
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Matsushita v. Zenith Radio Corp.62

Under this case the Supreme Court has rejected the claims made by Zenith Radio Corp. the Court
held that the firms charged with predation does not possess a lot of market power and there is no
possibility of recoupment of loss.

CONCLUSION AND SUGGESTIONS

Predatory Pricing is a very perplexing and puzzling topic for the anti-trust communities of many
countries. Critics of predatory pricing argue that it is not a rational strategy to be pursued by the
firms. The problem is that it is very hard to distinguish predatory pricing from other desirable
competitive price cutting. The antitrust laws should adequately curb the predatory pricing
without overly deterring competitive price cutting.
Antitrust courts should make use of the economic evidences in detecting predatory pricing. Also,
economic evidences are now able to show the rationality of predatory pricing like the possibility
of recoupment which is an essential element in determining the rationality of predatory strategy
of a firm.
It is also necessary for the anti-trust authorities to make sure that the market structure supports
the prospects of predatory pricing. This requires a complex analysis of the markets where
anticompetitive effects have occurred or are probable. This includes defining the dominance of
the predatory firm, the barriers to entry, and the market power of the competitors.
After the entire research it can be concluded saying that predatory pricing is a very complex mix
of situations, intentions and accounts. It is impossible to adhere to any one or more of the
practices tests as a conclusive test to prove predatory pricing. In fact all the tests employed are
merely indicative.
It is true that parts of the existing theory is practical but the entire theory of predatory pricing
including the predation, bankruptcy of all other firms, obtaining complete monopoly over
relevant market, no re-entry of any of the previous firms or entry of new firms in the recoupment
phase and finally recoupment of all losses is nothing less than a fantasy.
62 475 U.S. 574 (1986).
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But having said so, it cannot be denied saying that certain elements of predatory pricing are seen
in the market and have its harmful impacts. So even though the theory is applied in parts, in its
entirety, it is nothing more than a falsity.

BIBLIOGRAPHY

Maher M Dabbah; EC and UK Competition Law, Commentary, Cases and Materials;

Cambridge University Press.

Joanna Goyder and Albertina Albors; Llorens, Goyders EC Competition Law; Oxford

University Press.
Doris Hildebrand; The Role of Economic Analysis in the EC Competition Rules; Kluwer

Law International.
Indian Competition Act,2002
Richard Posner (2001); Antitrust Law: An Economic Perspective; 2 nd edn; University of

Chicago Press.
W. Kip Viscusi, Joseph E. Harrington, JR John, M. Vernoni; Economics of Regulation

and Antitrust; MIT Press.

The Myth of Predatory Pricing; Thomas J. DiLorenzo.
Frank Easterbrook (1981); Predatory Strategies and Counterstrategies; University of

Chicago Law Review.

The Sherman Act.
Richard Whish; Competition Law; Oxford Publication.
Eugene Buttigieg; EC Competition Law; Wolters Kluwer Law and Business.
Richard Lindberg; The Ambiguity of Predatory Pricing: Strategy as a Clarifier.
Areeda and Turner (1975); Predatory Pricing and Related Practices.
Journal article by Greg Le Blanc; Rand Journal of Competition Law; Signalling Strength;
Limit Pricing and Predatory Pricing.

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