EU Competition Law and Policy - compal

©Ariel Ezrachi, December 2012
P a g e | 30
appellant cannot carry on his business in the retail market for end-user access services without incurring
losses.’ (para 255)
‘...the mere fact that the appellant would have to increase its retail prices for end-user access services in
order to avoid the margin squeeze of its competitors who are as efficient as the appellant cannot in any
way, in itself, render irrelevant the test which the General Court applied in the present case for the
purpose of establishing an abuse under [Article 102 TFEU].’ (para 181)
Comment
The Court confirmed that margin squeeze forms a standalone abuse which stems from the unfairness of
the spread between wholesale and retail prices. There is no need to establish that the retail prices are
abusive.
The judgments confirmed the possible application of EU competition law to a regulated market, when
under the national regulation the dominant undertaking has a margin of commercial discretion in
determining its action and in avoiding or ending the abuse on its own initiative.
Contrast the ex-post application of EU competition law to a market which was subjected to ex-ante
regulation, with the US Supreme Court non-interventionist approach as evident in Verizon Communications
Inc v Law Offices of Curtis v. Trinko LLP 540 US 398 (2004) (Trinko). In the Trinko judgement, Justice Scalia
held that ‘one factor of particular importance is the existence of a regulatory structure designed to deter
and remedy anticompetitive harm. Where such a structure exists, the additional benefit to competition
provided by antitrust enforcement will tend to be small, and it will be less plausible that the antitrust laws
contemplate such additional scrutiny... The regulatory framework that exists in this case demonstrates
how, in certain circumstances, regulation significantly diminishes the likelihood of major antitrust harm....
Against the slight benefits of antitrust intervention here, we must weigh a realistic assessment of its
costs... Mistaken inferences and the resulting false condemnations “are especially costly, because they chill
the very conduct the antitrust laws are designed to protect...” Even if the problem of false positives did
not exist, conduct consisting of anticompetitive violations... may be, as we have concluded with respect to
above-cost predatory pricing schemes, "beyond the practical ability of a judicial tribunal to control."
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U. S. 209, 223 (1993).’
On the analysis of margin squeeze, the Court of Justice confirmed that margin squeeze is established by
reference to the fairness of the spread between wholesale access and retail prices and is not dependant on
the possible abusive nature of the retail price. It thus rejected DT’s argument that the abusive nature of a
margin squeeze can arise only from the abusive nature of retail prices.
Contrast this view with the US Supreme Court judgement in Pacific Bell Telephone Co. v. linkLine
Communications, Inc. 29 S. Ct. 1109 (2009). Chief Justice Roberts delivered the opinion of the Court and
held that: ‘An upstream monopolist with no duty to deal is free to charge whatever wholesale price it
would like; antitrust law does not forbid lawfully obtained monopolies from charging monopoly prices...
If both the wholesale price and the retail price are independently lawful, there is no basis for imposing
antitrust liability simply because a vertically integrated firm’s wholesale price happens to be greater than or
equal to its retail price.’