Margin Squeeze
Brussels: 19 October 2009
The European Commission (EC) Competition Directorate has published a discussion document titled Margin Squeeze. The document was submitted to the Organisation for Economic Co-operation and Development (OECD) Directorate for Financial and Enterprises Affairs Competition Committee Working Party 2 on Competition and Regulation meeting held in Paris on the 19th October 2009. The document sets out the EC Competition Directorates recent experiences of handling Margin Squeeze complaints.
The document states:
“6. One common feature in the margin squeeze cases handled by the Commission so far is that, on the facts, there do not appear to have been viable substitutes to the relevant input that would have enabled competitors to compete effectively on the downstream market. The input of the dominant undertaking was therefore objectively necessary for competing in the downstream market, and without it, there was a risk of elimination of effective competition on that market.
7. This is reflected in the Communication adopted by the Commission in December 2008 in order to provide guidance on its enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings. This Guidance includes a chapter called "Refusal to supply and margin squeeze". It covers situations in which the dominant undertaking competes on the “downstream” market with a buyer that needs the dominant firm's input in order to manufacture a product or provide a service on that market. Three conditions are established in that chapter for such cases to be considered as an enforcement priority under Article 82: the (upstream) product or service concerned should be objectively necessary for competitors to be able to compete effectively on the downstream market, there should be is a risk of elimination of effective competition on the downstream market, and there should be likely consumer harm. This approach allows for a careful balancing of the incentives to invest and innovate of both the dominant undertaking and its competitors and therefore preserves consumer welfare.”
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