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Sale under Costs in German Competition law Den Haag, Sept. 28, 2005

Prof. Dr. Jochen Glöckner, LL.M. (USA) Chair of German and European Private and Business law Universität Konstanz <jochen.gloeckner@uni-konstanz.de> . Sale under Costs in German Competition law Den Haag, Sept. 28, 2005. Jochen Glöckner. The Seminal Case: Gas Stations in Benrath.

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Sale under Costs in German Competition law Den Haag, Sept. 28, 2005

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  1. Prof. Dr. Jochen Glöckner, LL.M. (USA) Chair of German and European Private and Business law Universität Konstanz <jochen.gloeckner@uni-konstanz.de> Sale under Costs in German Competition lawDen Haag, Sept. 28, 2005 Jochen Glöckner

  2. The Seminal Case: Gas Stations in Benrath Den Haag, NMa 2005 Glöckner

  3. The Seminal Case: Gas Stations in Benrath • Facts of the Case • In the late 1920s the owner of a gas station refused to either join the „Fuel Convention“ or raise his prices to the level fixed by the convention. Decision of the convention to undercut his prices by only one convention member in Benrath at each time. Den Haag, NMa 2005 Glöckner

  4. The Seminal Case: Gas Stations in Benrath • The Legal Standard • No prohibition of cartels, but mere formal controls: cartel agreements must be in writing and notified, Cartel decree of 1923 • As a consequence more than 2.500 industrial cartels were registered in 1925 Den Haag, NMa 2005 Glöckner

  5. The Seminal Case: Gas Stations in Benrath • The Legal Standard • No prohibition of cartels, but mere formal controls: cartel agreements must be in writing and notified, Cartel decree of 1923 • „§ 826 Civil Code: Wilful damage contrary to public policy A person who wilfully causes damage to another in a manner contrary to public policy is bound to compensate the other for the damage“ • „§ 1 Act against Unfair Competition (1909): General Clause Any person who, in the course of business activity and for purposes of competition, commits acts contrary to honest practices may be enjoined from these acts and held liable for damages.“ Den Haag, NMa 2005 Glöckner

  6. The Seminal Case: Gas Stations in Benrath • The Legal Standard • No prohibition of cartels, but mere formal controls: cartel agreements must be in writing and notified, Cartel decree of 1923 • „§ 826 Civil Code: Wilful damage contrary to public policy A person who wilfully causes damage to another in a manner contrary to public policy is bound to compensate the other for the damage“ • „§ 1 Act against Unfair Competition (1909): General Clause Any person who, in the course of business activity and for purposes of competition, commits acts contrary to honest practices may be enjoined from these acts and held liable for damages.“ …„gegen die guten Sitten verstoßenden Weise“ … Den Haag, NMa 2005 Glöckner

  7. The Seminal Case: Gas Stations in Benrath • The Solution of the Reichsgericht (1931) • Based on §§ 1 AUC, 826 CC • Distinction between „competition on the merits“ and „exclusionary competition“ adopted from an expert opinion written by Nipperdey: • Damage to competitors has to be accepted as a consequence of competition on the merits, unlike the improvement of one‘s position on the market as a consequence of exclusionary practices • Price competition is generally competition on the merits, yet becomes exclusionary, if part of a price policy that is limited to only one local market. • Ratio decidendi is not the bad intent of the act, but the effect on the market: Court makes clear that even the cheapest price may turn out to be an illusion for the public, if, after displacing the competitors, the survivor of the predatory pricing scheme returns to monopolistic pricing. • Defendants were enjoined to sell their fuels in Benrath under price of Plaintiff as long as this price remained underneath the price fixed by the convention Den Haag, NMa 2005 Glöckner

  8. Consequences for Competition and Unfair Competition law • The purpose of Unfair Competition law • Act against Unfair Competition (AUC; 1896) • protection of competitors (since late 19th century) • Act against Unfair Competition (1909) • protection of „the public“ (?; since 1920s) • protection of consumers (since 1960/70s) • protection of competition: • always assumed, made very clearly since 1970s by some scholars • Act against Unfair Competition (2004) • protection of competition now laid down in § 1 s. 2 AUC 2004 Den Haag, NMa 2005 Glöckner

  9. Consequences for Competition and Unfair Competition law • The purpose of Competition law • since 1958 Act against Restraints of Competition (ARC) • protection of competition • somewhat reluctantly of competitors (cf. § 33 ARC) Den Haag, NMa 2005 Glöckner

  10. Consequences for Competition and Unfair Competition law • Relationship • in 1950‘s doctrine of separation • later: identity of purposes with regard to protection of competition, yet differentiation as for thrust • freedom: ARC • fairness: AUC Den Haag, NMa 2005 Glöckner

  11. Consequences for Competition and Unfair Competition law • Relationship • in 1950‘s doctrine of separation • later: identity of purpose with regard to protection of competition, yet differentiation as for thrust • various business practices with a monopolistic „touch“ have been dealt with under Unfair Competition law • predatory pricing • boycot • refusal to deal (mostly under § 826 CC) • abuse of purchasing power in specific cases („tapping“): asking of „entrance fees“, „shelf renting“, demand for advertising support) • sale under costs Den Haag, NMa 2005 Glöckner

  12. Consequences for Competition and Unfair Competition law • Relationship • in 1950‘s doctrine of separation • later: identity of purpose with regard to protection of competition, yet differentiation as for thrust • various business practices with a monopolistic „touch“ have been dealt with under Unfair Competition law • discussion under new AUC: still governed although not reflected in the special provisions of §§ 4 ff. AUC? • No case law yet, but most scholars think nothing has changed, because the legislator didn‘t want to change anything • Yet rising awareness with regard to compatibility with Competition law Den Haag, NMa 2005 Glöckner

  13. Sale under Costs under Unfair Competition law • Sale under Costs as a part of a predatory pricing scheme • covered by § 4 no. 10 AUC „Unfair in the meaning of § 3 acts, whoever … No. 10: directly hinders competitors.“ Den Haag, NMa 2005 Glöckner

  14. Sale under Costs under Unfair Competition law • Sale under Costs as a part of a predatory pricing scheme • covered by § 4 no. 10 AUC • price under costs per unit (evidence!) • intention to displace: evidentiary problems usually lead to an assessment on objective grounds: sustained sale under costs without good business reasons; • apt to displace individual competitors (wishful thinking not sufficient) • (cf. BGH, GRUR 1990, 371 – Preiskampf; GRUR 1990, 685 – Anzeigenpreis I; GRUR 1990, 687 – Anzeigenpreis II) Den Haag, NMa 2005 Glöckner

  15. Sale under Costs under Unfair Competition law • Sale under Costs without predation, i.e. without intention to displace • governed by § 3 AUC (general clause), because there is not individual hindrance • price under costs per unit (evidence!) • no business justification • e.g. market entry; sales promotion; out-stocking outmoded goods • apt to displace competitors (wishful thinking not sufficient) and • *apt to do away with competition on the relevant market almost completely (jeopardy to the mere existence of competition)* Den Haag, NMa 2005 Glöckner

  16. Sale under Costs under Unfair Competition law • BGH, GRUR 1990, 685 – Anzeigenpreis I: Identity of standards of unfairness under § 3 AUC and abuse under § 20 ARC; market power needs to be assessed also when judging unfairness • BGHZ 129, 203 (1995) – Hitlisten-Platten: Different standards of unfairness and abuse, yet tests seem to be identical Den Haag, NMa 2005 Glöckner

  17. Sale under Costs under Unfair Competition law • BGH, GRUR 1990, 371 – Preiskampf: • Price war between two large electronics discount stores in the field of LP records (1984), in the course of which prices fell from a typical 9,95 DM to 4,80 DM • The fact finding court had assessed that smaller record stores were unable to cope with these prices and would be driven out of the market • The Bundesgerichtshof was bound by this assessment of facts and applied the test described supra, thus holding the price war anti-competitive Den Haag, NMa 2005 Glöckner

  18. Sale under Costs under Unfair Competition law • BGH, GRUR 1990, 685 – Anzeigenpreis I: • Market access of an editor with a new newspaper giving away advertising space in this newspaper when combined with (paid) ad space in a pre-existent newspaper • The Bundesgerichtshof upheld its judicature with regard to the jeopardizing of competition on the whole market, • but remanded for further fact finding, pointing out that a mixed calculation is a perfectly legal conduct. Therefore it was necessary to take into consideration the price of the full package Den Haag, NMa 2005 Glöckner

  19. Sale under Costs under Unfair Competition law • BGH, WRP 1991, 484 – Motorboot-Fachzeitschrift: • one editor of a (monthly) yachting magazine gives away advertising space for private classifieds • The Bundesgerichtshof upheld its judicature with regard to the jeopardizing of competition on the whole market, • and found such jeopardy, because it was a closed market of few magazines • „network effects“ Den Haag, NMa 2005 Glöckner

  20. Sale under Costs under Unfair Competition law • BGHZ 129, 203 – Hitlisten-Platten (1995): • sale under costs of CDs that were partly in the charts • The Cartel Senate of the Bundesgerichtshof rejected a jeopardy for competition on the whole market under § 1 AUC 1909 Den Haag, NMa 2005 Glöckner

  21. Sale under Costs under Unfair Competition law • BGH, WRP 2003, 1101 – Foto-Aktion • Foto processing was offered by a drugstore at DM 0,01 per exposure • BGH rejected „excessive enticement“, because there was no other sale tied to the foto processing • fact that customers enter drug store to bring in films and pick up processed films doesn‘t make it illegal to bait with almost free products • anticompetitive sale under costs, jeopardizing competition on the market as a whole, had not been pleaded by the plaintiff Den Haag, NMa 2005 Glöckner

  22. Sale under Costs under Competition law • Sale under Costs as a part of a predatory pricing scheme • covered by § 19 para. 1 ARC: Abuse of a dominant position: „§ 19 ARC: Abuse of a Dominant Position (1) The abusive exploitation of a dominant position by one or several undertakings shall be prohibited. Den Haag, NMa 2005 Glöckner

  23. Sale under Costs under Competition law • Sale under Costs as a part of a predatory pricing scheme • covered by § 19 para. 1 ARC: Abuse of a dominant position • requires a dominant position as defined in § 19 para. 2, 3 ARC: „(2) An undertaking is dominant where, as a supplier or purchaser of certain kinds of goods or commercial services, it 1. has no competitors or is not exposed to any substantial competition, or 2. has a paramount market position in relation to its competitors; for this purpose, account shall be taken in particular of its market share, its financial power, its access to supplies or markets, its links with other undertakings, legal or factual barriers to market entry by other undertakings, actual or potential competition by undertakings established within or outside the area of application of this Act, its ability to shift its supply or demand to other goods or commercial services, as well as the ability of the opposite market side to resort to other undertakings. Two or more undertakings are dominant insofar as no substantial competition exists between them with respect to certain kinds of goods or commercial services and they jointly satisfy the conditions of sentence 1. (3) An undertaking is presumed to be dominant if it has a market share of at least one third. …“ Den Haag, NMa 2005 Glöckner

  24. Sale under Costs under Competition law • Sale under Costs as a part of a predatory pricing scheme • covered by § 19 para. 1 ARC: Abuse of a dominant position • requires a dominant position as defined in § 19 para. 2, 3 ARC • covered by § 20 para. 1 ARC: unjustified hindrance (unbillige Behinderung): „Dominant undertakings, associations of undertakings within the meaning of Sections 2 to 8, 28 (1) as well as Section 29, and undertakings which set retail prices pursuant to Sections 15, 28 (2), 29 (2) and Section 30 (1), shall not directly or indirectly hinder in an unfair manner another undertaking in business activities which are usually open to similar undertakings, nor directly or indirectly treat it differently from similar undertakings without any objective justification.“ Den Haag, NMa 2005 Glöckner

  25. Sale under Costs under Competition law • Sale under Costs as a part of a predatory pricing scheme • covered by § 19 para. 1 ARC: Abuse of a dominant position • requires a dominant position as defined in § 19 para. 2, 3 ARC • covered by § 20 para. 1 ARC: unjustified hindrance (unbillige Behinderung) • still requires a dominant position; • existence of provision has historic reasons: before the 6th amendment of the ARC (1999) it was necessary to have a provision directly applicable for competitors, as the predecessor of § 19 ARC was only armed with administrative sanctions of the cartel authorities Den Haag, NMa 2005 Glöckner

  26. Sale under Costs under Competition law • Sale under Costs as a part of a predatory pricing scheme • covered by § 19 para. 1 ARC: Abuse of a dominant position • requires a dominant position as defined in § 19 para. 2, 3 ARC • covered by § 20 para. 1 ARC: unjustified hindrance (unbillige Behinderung) • still requires a dominant position; • covered by § 20 para. 2 ARC (since 1989) „Subsection (1) shall apply also to undertakings and associations of undertakings insofar as small or medium-sized enterprises as suppliers or purchasers of certain kinds of goods or commercial services depend on them in such a way that sufficient or reasonable possibilities of resorting to other undertakings do not exist.“ • so-called relative market power Den Haag, NMa 2005 Glöckner

  27. Sale under Costs under Competition law • Sale under Costs as a part of a predatory pricing scheme • covered by § 19 para. 1 ARC: Abuse of a dominant position • requires a dominant position as defined in § 19 para. 2, 3 ARC • covered by § 20 para. 1 ARC: unjustified hindrance (unbillige Behinderung) • still requires a dominant position; • existence of provision has historic reasons: before the 6th amendment of the ARC (1999) it was necessary to have a provision directly applicable for competitors, as the predecessor of § 19 ARC was only armed with administrative sanctions of the cartel authorities • covered by § 20 para. 2 ARC • doesn‘t require dominant position, but only that other SME depend upon addressee (relative market power) • price under costs per unit (evidence!) • intention to displace individual competitors • usually based on objective evidence: no business justification (e.g. market entry; sales promotion; out-stocking outmoded goods) • apt to displace competitors (wishful thinking not sufficient) Den Haag, NMa 2005 Glöckner

  28. Sale under Costs under Competition law • Sale under Costs without predatory pricing • covered by § 19 para. 1 ARC: Abuse of a dominant position • covered by § 20 para. 1 ARC: unjustified hindrance (unbillige Behinderung) • covered by § 20 para. 2 ARC • price under costs per unit (evidence!) • no business justification • market entry; sales promotion; out-stocking outmoded goods • apt to do away with competition on the relevant market almost completely (jeopardy to the mere existence of competition) Den Haag, NMa 2005 Glöckner

  29. Sale under Costs under Competition law • BGHZ 129, 203 – Hitlisten-Platten (1995) • standard of unjust exclusion under § 20 para. 2 ARC (ex-§ 26 para. 4 ARC) requires balancing of interests • ARC doesn‘t tolerate intentional displacement • ARC doesn‘t tolerate the creation of impediments to SME‘s business conduct to an extent that the structural preconditions for effective competition are essentially jeopardized • the latter requires • sale under costs not only occasional, but systematic • advertisement with sales under costs frequent and intensive enough to give rise to the jeopardy to competition • action rejected, because chart-breaking records were advertised at prices under costs only on nine days within one half year Den Haag, NMa 2005 Glöckner

  30. Sale under Costs under Competition law • Sale under Costs without predatory pricing • covered by § 19 para. 1 ARC: Abuse of a dominant position • covered by § 20 para. 1 ARC: unjustified exclusion (unbillige Behinderung) • covered by § 20 para. 2 ARC • covered by § 20 para. 4 s. 2 ARC (since 1999) „(4) Undertakings with superior market power in relation to small and medium-sized competitors shall not use their market power directly or indirectly to hinder such competitors in an unfair manner. An unfair hindrance within the meaning of sentence 1 exists in particular if an undertaking offers goods or services not merely occasionally below its cost price, unless there is an objective justification for this. Den Haag, NMa 2005 Glöckner

  31. Sale under Costs under Competition law • Sale under Costs without predatory pricing • covered by § 19 para. 1 ARC: abuse of a dominant position • covered by § 20 para. 1 ARC: unjustified exclusion (unbillige Behinderung) • covered by § 20 para. 2 ARC • covered by § 20 para. 4 s. 2 ARC (since 1999) • reaction to the Bundesgerichtshof‘s judgment Hitlisten-Platten • „double analogy“ • extension of the concept of relative market power (§ 20 para. 2 ARC) from vertical to horizontal relations • assessment of resources, cf. § 19 para. 2 no. 2 ARC Den Haag, NMa 2005 Glöckner

  32. Sale under Costs under Competition law • Sale under Costs without predatory pricing • covered by § 19 para. 1 ARC: Abuse of a dominant position • covered by § 20 para. 1 ARC: unjustified exclusion (unbillige Behinderung) • covered by § 20 para. 2 ARC • covered by § 20 para. 4 s. 2 ARC (since 1999) • reaction to the Bundesgerichtshof‘s judgment Hitlisten-Platten • „double analogy“ • closing an apparent gap of protection: • doing away with requirement of jeopardy to competition • shift of burden of proof Den Haag, NMa 2005 Glöckner

  33. Sale under Costs under Competition law • Sale under Costs without predatory pricing • § 20 para. 4 ARC in action • first cases: Aldi-Nord, Wal*Mart, Lidl, BKartA, 1.9.2000, WuW/E DE-V 314, 316: prohibition to sell under costs; on appeal OLG Düsseldorf, 19.12.2001, WuW/DE-R 781 - Wal*Mart: decision of the BKartA quashed; on appeal on law BGH, 12.11.2002 – Wal*Mart: partly remanded Den Haag, NMa 2005 Glöckner

  34. Sale under Costs under Competition law • Sale under Costs without predatory pricing • § 20 para. 4 ARC in action • The results of Wal*Mart: • addressees of the provision: • it is immaterial whether or not there are other powerful competitors • the provision wants to avoid a concentrative process at an early stage • if competitor needs to react to (anti-)competitive conduct of other powerful competitors, this relates to a possible justification, but doesn‘t save him from being an addressee of § 20 para. 4 ARC Den Haag, NMa 2005 Glöckner

  35. Sale under Costs under Competition law • Sale under Costs without predatory pricing • § 20 para. 4 ARC in action • The results of Wal*Mart: • addressees of the provision • sale under costs • it is not necessary for the provision to be applied that the addressee drops his sale prices below costs • it is sufficient, if the costs rise above the continued sale price Den Haag, NMa 2005 Glöckner

  36. Sale under Costs under Competition law • Sale under Costs without predatory pricing • § 20 para. 4 ARC in action • The results of Wal*Mart: • addressees of the provision • sale under costs • „not just occasionally“: more than two months sufficient Den Haag, NMa 2005 Glöckner

  37. Sale under Costs under Competition law • Sale under Costs without predatory pricing • § 20 para. 4 ARC in action • The results of Wal*Mart: • addressees of the provision • sale under costs • „not just occasionally“: more than two months sufficient • no additional requirement of appreciability of detriment to competition Den Haag, NMa 2005 Glöckner

  38. Sale under Costs under Competition law • Sale under Costs without predatory pricing • § 20 para. 4 ARC in action • The results of Wal*Mart: • addressees of the provision • sale under costs • „not just occasionally“: more than two months sufficient • no additional requirement of appreciability of detriment to competition or jeopardy to competition • no need to show a causal link between market position and sale under costs; legislator has created an assumption that such link exists. Objective justification is only way out of liability Den Haag, NMa 2005 Glöckner

  39. Sale under Costs under Competition law • Sale under Costs without predatory pricing • § 20 para. 4 ARC in action • The results of Wal*Mart: • (cont‘d) objective justification, because competitors started price war and were first to sell under costs? • No! § 20 para. 4 ARC requires look at the market as a whole. Conduct of individual competitors as a rule cannot give rise to justification Den Haag, NMa 2005 Glöckner

  40. Sale under Costs under Competition law • Sale under Costs without predatory pricing • § 20 para. 4 ARC in action • The results of Wal*Mart: • (cont‘d) objective justification, because competitors started price war and were first to sell under costs? • No! § 20 para. 4 ARC requires look at the market as a whole. Conduct of individual competitors as a rule cannot give rise to justification • Exception: Irreparable damage + no means to defend against anticompetitive conduct of competitors (e.g. injunctive relief) • Exception granted, when cost prices rose in a „hold-up“ like manner, competitor seeks for other (cheaper) sources, which he finds subsequently and bridges only a short period of time without actively promoting price war Den Haag, NMa 2005 Glöckner

  41. Sale under Costs under Competition law • Sale under Costs without predatory pricing • § 20 para. 4 ARC in action • KG, 12.7.2001, WuW/E DE-R 727 - Dienstagspreise: • the concept of cost price („Einstandspreis“): • case dealt with ticket prices for movie theaters • term „cost price“ relates not to the calculated price per unit (Selbstkosten), but to the price that was paid to a supplier (Einstandspreis) • provision not applicable to goods that are produced or services that are created Den Haag, NMa 2005 Glöckner

  42. Sale under Costs under Competition law • Sale under Costs without predatory pricing • § 20 para. 4 ARC in action • BKartA, 17.12.2003, WuW/E DE-V 911 – Fotoarbeitstasche • the scope of § 20 para. 4 ARC exceeds the scope of § 1 AUC 1909 (now § 3 AUC), because jeopardy to competition on the market as a whole is not required • the concept of cost price (Einstandspreise) • service prices can be cost prices under § 20 para. 4 ARC: Laboratory services for foto processing are bought by drugstores and resold to end consumers • all rebates have to be included to calculate cost price • not only occasionally: more than three weeks sufficient • no justification by competitors‘ conduct under recourse to BGH – Wal*Mart Den Haag, NMa 2005 Glöckner

  43. Sale under Costs under Competition law • Sale under Costs without predatory pricing • § 20 para. 4 ARC in action • VG Köln, 18.2.2005, CR 2005, 269 • the scope of § 20 para. 4 ARC is limited by the special provision in § 24 para. 2 no. 2 Act on Telecommunikation 1996 Den Haag, NMa 2005 Glöckner

  44. Sale under Costs under Competition law • Sale under Costs without predatory pricing • § 20 para. 4 ARC in action • OLG Hamburg, 20.11.2003, 3 W 127/03 – Verkäufe unter Einstandspreis • § 20 para. 4 ARC – an instrument for resale price maintenance? • The producer tried to enjoin a distributor from selling his goods under price • no standing to sue under § 33 ARC 1998 • help from § 1 AUC 1909 (now §§ 4 no. 11, 8 para. 3 no. 1 AUC? anticompetitive advantage through an infringement • court rejects: system of limited standing to sue under § 33 ARC would be frustrated, if violation of § 22 para. 4 s. 2 ARC was considered a violation giving rise to a competitive advantage under § 4 Nr. 11 AUC Den Haag, NMa 2005 Glöckner

  45. Sale under Costs -Some Conclusions • Sale under Costs under a predatory pricing scheme („in Verdrängungsabsicht“) • prohibition based on competition law is economically sound • the grounds for prohibition, however, cannot be the bad intention, but only the negative effect on competition • market participants will enter into „real“ predatory pricing only, if they are sufficiently secure (1) to succeed, (2) to recoup their investment • the latter is only possible, if the predatory pricing leads to monopolistic market structures • it is only fair to hold them by their conduct • the problem is to identify „real“ predatory pricing • seldom do we find direct evidence (blackmailing letters; board minutes) • when relying on indirect evidence it is essential to exclude good business reasons • (cf. Art. 7 para. 2 let. d Swiss Cartel Act) Den Haag, NMa 2005 Glöckner

  46. Sale under Costs -Some Conclusions • Sale under Costs under a predatory pricing scheme („in Verdrängungsabsicht“) • prohibition based on competition law is economically sound • Sale under Costs without predatory pricing scheme • prohibition based on jeopardy to competition on the market as a whole is theoretically plausible, but … • … very hard to prove for plaintiff in an individual case Den Haag, NMa 2005 Glöckner

  47. Sale under Costs -Some Conclusions • Sale under Costs under a predatory pricing scheme („in Verdrängungsabsicht“) • prohibition based on competition law is economically sound • Sale under Costs without predatory pricing scheme • prohibition based on jeopardy to competition on the market as a whole is theoretically plausible, but … • … very hard to prove for plaintiff in an individual case • … legal assumption not very plausible: will pricing practice really ultimately lead to a weakening of competition? Den Haag, NMa 2005 Glöckner

  48. Sale under Costs -Some Conclusions • Sale under Costs under a predatory pricing scheme („in Verdrängungsabsicht“) • prohibition based on competition law is economically sound • Sale under Costs without predatory pricing scheme • prohibition based on jeopardy to competition on the market as a whole is theoretically plausible, but … • … very hard to prove for plaintiff in an individual case • … legal assumption not very plausible: will pricing practice really ultimately lead to a weakening of competition? • … somewhat old-fashioned with regard to Industrial Economics: the state‘s role as a kind of preserver of endangered species is no longer acceptable. This holds particularly true, where there is fierce competition between big competitors (LP records case) Den Haag, NMa 2005 Glöckner

  49. Sale under Costs -Some Conclusions • Sale under Costs under a predatory pricing scheme („in Verdrängungsabsicht“) • prohibition based on competition law is economically sound • Sale under Costs without predatory pricing scheme • prohibition based on jeopardy to competition on the market as a whole is theoretically plausible, but … • … very hard to prove for plaintiff in individual cases • … legal assumption not very plausible: will pricing practice really ultimately lead to a weakening of competition? • … somewhat old-fashioned with regard to Industrial Economics: the state‘s role as a kind of preserver of endangered species is no longer acceptable. This holds particularly true, where there is fierce competition between big competitors (LP records case) • prohibition independent of any appreciable detriment to competition • is even harder to justify • „Mittelstandsschutz“ at its worst Den Haag, NMa 2005 Glöckner

  50. Sale under Costs -Some Conclusions • Sale under Costs under a predatory pricing scheme („in Verdrängungsabsicht“) • prohibition based on competition law is economically sound • Sale under Costs without predatory pricing scheme • prohibition based on jeopardy to competition on the market as a whole is theoretically plausible, but … • … very hard to prove for plaintiff in individual cases • … legal assumption not very plausible • … somewhat old-fashioned with regard to Industrial Economics • prohibition independent of any appreciable detriment to competition • is even harder to justify • „Mittelstandsschutz“ at its worst • alternative solutions • Art. 3 let. f Swiss AUC: assumption of misleading effect with regard to overall price level • increased control of purchasing power Den Haag, NMa 2005 Glöckner

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