The judgment of the ECJ in Post Danmark, which was
issued on 27 March 2012, has clarified the rules on selective
discounts and below-cost selling under the competition law
prohibition of an abuse of a dominant position. Post Danmark
was dominant on the Danish market for unaddressed mail (direct mail
of brochures, guides, newspapers, etc.), with just one major
competitor, Forbruger-Kontakt. Post Danmark had made a low
offer for its services to one of Forbruger-Kontakt's
customers (Coop group) which did not allow Post Danmark to cover
its average total costs of providing the service to the Coop, but
did allow it to cover its average incremental costs (the average
increase or decrease in costs as a result of one more or one less
unit of output). The ECJ was asked to consider whether this
type of pricing was an exclusionary abuse by Post Danmark, even if
it was established that the prices were not set at that level for
the purpose of driving a competitor out of the market.
Price discrimination does not equal exclusionary abuse
The ECJ concluded that offering low prices to certain customers
is not an exclusionary abuse merely because the prices are between
fixed and incremental costs. It found that in order to assess
anti-competitive effects in such a situation, the national court
should consider "whether that pricing policy, without
objective justification, produces an actual or likely exclusionary
effect, to the detriment of competition and, thereby, of
In general terms, the ECJ concluded that price discrimination
"cannot of itself suggest that there exists an exclusionary
abuse", whatever form the discrimination takes. As a
consequence, it would appear that there is a low risk of finding an
abuse either for differential deals offered to customers in the
same position or uniform deals offered to customers in varying
positions (in the absence of exclusionary effect). The
ECJ also found that where a dominant undertaking sets its prices at
a level which covers most of its costs, "as a general
rule" equally efficient competitors can be expected to be in a
position to offer sustainable competition.
Precedent for market leaders to negotiate more freely
Article 102 of the Treaty on the Functioning of the European
Union prohibits the application of "dissimilar conditions to
equivalent transactions with other trading parties, thereby placing
them at a competitive disadvantage". Until now, the
precise status of the "competitive disadvantage"
requirement has been quite vague. As a consequence dominant
companies have been cautious in offering specific deals to
individual customers which may trigger accusations of illegal
discrimination. This case provides helpful direction to companies
with a strong market presence who wish to negotiate in an
unrestrained manner with their customers, in particular, where they
are confident that their customer deals will have no adverse impact
on their competitors.
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