The Law and Economics of Excessive and Unfair Pricing: A Review and a Proposal

The authors discuss a coherent microeconomic framework for understanding the relationships between price, economic costs, and economic value.

The law on excessive pricing by a dominant firm derives from Article 102 of the Treaty on the Functioning of the European Union, and was considered in the United Brands decision by the European Court of Justice. This decision described a test that requires an assessment of whether prices are excessive to the point of being unfair without a reasonable relation to the economic value of the product.

In this article from the Antitrust Bulletin, author Vivek Mani describes how a conventional microeconomic approach to the concepts of price, costs, and value can be used to structure the United Brands test for unfair pricing under Article 102. While their approach has solid microeconomic foundations, the author show that ultimately courts will necessarily have to make a judgment about what is, and what is not, fair pricing.

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