CHAPTER 1 - INTRODUCTION
Background
Competition and monopoly are critical issues in market economies, requiring effective regulation to ensure a healthy business environment Vietnam, having transitioned from a planned economy just over two decades ago, faces unique challenges in promoting fair competition and preventing abuse of market dominance The abuse of dominance is one of the most pressing concerns in Vietnam's evolving market landscape, highlighting the need for targeted research and effective regulatory measures Understanding the relationship between competition and monopoly, along with economic theories on pricing and market dynamics, is essential for shaping policies that foster fair competition Currently, Vietnam's legal and practical framework for regulating abusive pricing practices is still developing, making research in this area vital for strengthening the country's market economy and promoting sustainable growth.
1.1.1.Relationship of competition and monopoly
Competition is a vital component of a market economy that drives societal benefits by motivating suppliers to continually improve performance, enhance product quality, and offer more reasonable prices to consumers While healthy competition stimulates economic growth, it can also lead to monopolies when successful firms surpass certain strengths, ultimately hindering fair market dynamics Excessive dominance by a few firms enables them to control prices and restrict competition, potentially damaging the overall economic process.
From a philosophical viewpoint, competition and monopoly are interconnected aspects forming a balanced whole Monopoly, as the opposite of competition, emerges when a single enterprise dominates the market, often stemming from successful competitive efforts While monopoly can incentivize innovation and drive economic growth by rewarding successful competitors with market dominance, it also has drawbacks, such as reducing market motivation and consumer choice Leading firms that approach monopoly status typically possess significant financial and technical strengths, enabling them to innovate, reduce costs, and efficiently meet market demand However, stable monopolies risk creating market imbalances where the monopolist may exploit their position by restricting output and raising prices, ultimately limiting consumer options and hindering societal progress Long-term monopoly can hinder optimal resource allocation, diminish efficiency, and cause societal harm by preventing consumers from accessing the best alternatives.
The European Commission's Ninth Report on Competition Policy (1979) states that "It is an established fact that competition carries within it the seeds of its own destruction," highlighting the inherent vulnerabilities within competitive markets Additionally, Cattermole's work on "The Development and Implications of 'Collective Dominance'" offers insights into how collective market power can influence competition dynamics and regulatory considerations.
EC Competition Law, Lund University Centre for European Studies Working Paper No 14
(2002) p 14, available at http://www.cfe.lu.se/publikationer/cfe-working-papers-series: ; and Lankhorst, Marco, Increasing the Requirements to Show Antitrust Harm in Modernised
Effects-Based Analysis: An Assessment of the Impact on the Efficiency of Enforcement of Art 81 EC, (2010) (Ph.D dissertation University of Amsterdam Center for Law &
Economics), p.20 ("Yet, competition carries within it the seeds of its own destruction."), available at http://dare.uva.nl/document/159558
Vu Huan Dang's 2004 publication, "Regulations on Monopoly Control and Anti-Unfair Competitive Activities in Vietnam," provides comprehensive insights into the country's legal framework for promoting fair competition The book emphasizes the importance of effective monopoly regulation and measures to prevent unfair business practices, aligning Vietnam's policies with international standards to foster a healthy competitive environment These regulations aim to curb anti-competitive behaviors and ensure a level playing field for all market participants, supporting economic growth and consumer protection.
1.1.2.Pricing in competition and monopoly
In a market economy, prices are one of the most important signs of the state of competition Prices are established and exercised by economic rules
In a market economy, prices are determined through competition, illustrating that demand and supply form the "material bones," with prices serving as the "face" and competition as the "soul" of the market Key economic concepts such as the demand curve, which shows the relationship between price and demand, and price elasticity, which measures how demand responds to price changes, are fundamental to understanding price dynamics The relationship between prices and costs helps differentiate market structures like perfect competition and monopoly Whether sellers are price-takers or price-makers indicates if the market is competitive, monopolistic, or oligopolistic In a competitive market, prices are set by objective economic laws rooted in supply and demand, and sellers must adhere to these rules to survive, or they risk being driven out of the market in the long run.
Pricing is a critical tool for competitors vying for market presence and survival, as it directly influences a company's ability to achieve its business objectives in a market economy As the foundational element in competitiveness, strategic pricing decisions are often prioritized over other factors such as product quality, functions, guarantees, or after-sales service, which have more indirect impacts on price Additionally, pricing strategies can serve both pro-competitive and anti-competitive purposes, affecting market dynamics and company positioning.
In a monopoly market, the seller holds the power to set prices, which can lead to exploitation and the suppression of competition Effective regulation is essential to prevent monopolists from abusing their market dominance and to maintain a fair, competitive environment Proper oversight ensures that market power is controlled, promoting consumer interests and preventing monopolistic abuses.
1.1.3.Monopoly control laws in US, EU and
Market self-correcting mechanisms reduce monopoly power over time, leading to its eventual elimination The economic rent or extra profit attracts new competitors, especially when barriers to entry are low, encouraging market entry and re-entry This competitive dynamic ultimately erodes monopolistic control, fostering a more competitive market environment.
Market competition is essential for ensuring welfare benefits through better products and services, as monopolists who attempt to exploit their power by raising prices and lowering output will eventually lose their monopoly to more efficient firms Recognizing this threat, monopolists often take measures to prevent new entrants and maintain their dominance, which can hinder the market’s natural ability to regulate unfair practices In cases where market mechanisms fail to curb anti-competitive behavior, government intervention becomes necessary to promote fair competition and prevent abuse of monopoly power, ensuring the sustainable development of a competitive market environment.
There is another aspect of the process, which we should also not neglect:
Unrestrained market competition can lead to unfair and dishonest business practices, as the path of least resistance often favors those willing to engage in unethical activities to achieve quick profits with less time and expense Fair competition demands greater talents, morals, patience, and perseverance, making unethical shortcuts tempting for many Without a powerful authority to identify and regulate wrongful practices, a profit-driven mindset may cause many competitors to act unjustly, neglecting morals The government serves as the essential authority to protect society and ensure fair market operations, acting alongside the self-correcting "invisible hand" in market economies While the "invisible hand" facilitates market balance, it cannot operate independently without the oversight and intervention of state power to prevent abuse and promote fairness.
In a market economy, while free competition is encouraged, the State implements measures to promote healthy competition and address monopoly disadvantages These measures are categorized into administrative and economic tools—such as taxation policies, price controls, monopoly adjustments, and nationalization—and legal regulations, including anti-unfair competition laws and monopoly control statutes Many countries have enacted “Anti-Monopoly” laws, but outright banning of monopoly is rare, as monopolies can result from fair competition (economic monopolies), natural conditions (natural monopolies), or state initiatives (state monopolies) Therefore, these laws primarily focus on regulating how monopolies arise and their activities, especially concerning cartels, mergers, and abuses of dominant market positions.
Cartels and mergers involve collaborations that unite companies—whether temporary or permanent, secret or open—to create significant market power These activities can potentially overpower, constrain, or eliminate competitors, leading to monopolistic dominance Consequently, antitrust laws target cartels and mergers to prevent the formation of monopolies that threaten free competition and market fairness.
The concept of "dominant position" is a central focus of this dissertation, representing a market entity with enough power to influence market dynamics, often equated with monopoly power While holding a dominant position is generally permitted, laws specifically target prohibiting abusive practices to prevent monopolistic behaviors that could eliminate competition and harm consumer welfare Understanding and regulating dominant positions are essential to maintaining fair competition within the market.
Monopoly abuse of market power causes greater harm than unfair competition activities, highlighting the critical importance of monopoly control laws alongside anti-unfair competition laws Such abuse not only damages competitors and specific customers but also negatively impacts consumers and society as a whole Some experts view monopoly control laws as a higher-tier legal framework in the hierarchy of competition regulation Just as a constitution regulates political power and ensures government accountability, monopoly control laws serve to govern economic power, compelling it to adhere to competitive standards Consequently, monopoly control laws are a vital element of the so-called “Economic Constitution,” safeguarding fair market practices and promoting economic balance.
4 Dang, Vu Huan, supra note 2, pp 77-78
Purposes
This research aims to examine both the theoretical frameworks and practical enforcement of competition laws regarding abusive pricing by dominant enterprises It focuses on analyzing how the EU, US, and Vietnam implement regulatory measures to prevent and address such anti-competitive practices The study seeks to compare the effectiveness of legal approaches across these regions, providing insights into best practices for maintaining fair market competition.
58 Tran, Hoang Nga, Regulations on abuse of dominant position and monopoly in Vietnam
The current legal framework in Vietnam aims to combat the abuse of dominant market positions and monopolistic practices, aligning with international standards However, practical enforcement remains challenging, resulting in persistent anti-competitive behaviors When compared to countries like the United States and the European Union, Vietnam's regulations are still evolving, with more robust mechanisms in place to prevent market abuse Strengthening legal provisions and enforcement efforts is crucial for ensuring fair competition and protecting consumer interests in Vietnam's growing economy.
In November 2004, the author completed an LL.M thesis at Ho Chi Minh City University of Law, available in both English and Vietnamese The thesis explores universally accepted legal concepts and common measures used to prevent and address infringements It also analyzes the differences among various countries' laws and examines the conditions and consequences arising from these legal disparities.
This article aims to draw valuable lessons for Vietnam by first establishing a clear understanding of the country's current situation regarding abusive pricing It emphasizes the importance of analyzing the effectiveness and practical impact of existing regulations, while also identifying any deficiencies within Vietnamese competition law The ultimate goal is to propose targeted solutions to strengthen regulatory frameworks and promote fair pricing practices in Vietnam’s market.
In the light of the above mentioned purposes, this dissertation has the following particular tasks:
Systematically research the theoretical bases evaluating the nature and influence of monopoly and abuses of a dominant position on the economy;
Systematically research basic concepts relating to the practice of
This article explores the concept of “abusive pricing” and examines various approaches to addressing infringements within selected legal systems It analyzes common challenges and effective solutions, highlighting notable differences across jurisdictions, with the goal of gathering valuable insights that can be adapted to the Vietnamese legal context.
Examine the social and economic characteristics and the current competitive situation in Vietnam, with a focus on abuses of market power;
Research current provisions of the VLC and other relevant legal documents on the abuse of dominant position to identify their strengths and weaknesses in relation to Vietnam‟s markets;
Propose improvements in the content and practical effects of regulations on dealing with abusive pricing by dominant enterprises in Vietnam.
Definition and delimitation
There is no universally accepted official definition of “abusive pricing” or “pricing abuses” in the legal systems I have studied, but the term is commonly used in legal documents and academic works It is generally understood to refer to unfair practices involving the abuse of dominant or monopolistic market positions concerning pricing strategies In this dissertation, I will adopt this common interpretation to analyze pricing abuses within competition law.
Abusive pricing refers to the illegal exploitation of a dominant or monopoly position, as defined by EU and Vietnamese competition laws, or the monopolization and attempted monopolization of markets under US antitrust regulations It involves the pricing of goods or services in a way that unlawfully disadvantages competitors or consumers, exploiting market dominance for unfair gain This practice is considered a breach of competition law and can lead to legal penalties to promote fair and competitive markets.
This dissertation concentrates exclusively on laws targeting abusive pricing practices, focusing on unilateral pricing as a form of anti-competitive restraint It specifically excludes discussions on collusive behavior, such as agreements and concerted practices, even when related to pricing strategies Additionally, the scope does not cover other types of abuses that are not directly connected to pricing effects, ensuring a targeted analysis of unilateral pricing violations within competition law.
This article examines relevant competition laws, emphasizing their core principles and importance through case studies and analysis of emerging, unregulated issues It identifies four key elements that ensure the effectiveness of competition regulation, with a focus on abusive pricing control The first element involves establishing clear legal provisions outlining fundamental rules The second element emphasizes the need for laws that verify relevant facts in each case to accurately determine infringements The third element pertains to the procedural frameworks and institutional structures responsible for fairly enforcing competition laws; however, this aspect is excluded from the current discussion due to its variability across legal systems The fourth element covers legal remedies for violations, ensuring appropriate sanctions and corrections are available for infringing conduct.
This dissertation focuses on analyzing the competition laws of three key legal systems: the European Union, the United States, and Vietnam, with particular emphasis on the EU and US laws, which are the most influential and characteristic in this field US antitrust law, established over a century ago, is regarded as the pioneering model and continues to shape global competition regulations The EU’s competition law also plays a crucial role in governing fair market practices within its member states, making these systems essential for comprehensive legal comparison Vietnam’s competition law is included to provide a diverse perspective on how different jurisdictions address antitrust issues in the modern era.
EU Enacted long after the US antitrust law, but still more than 50 years ago,
EU competition law offers significant advantages in addressing anti-competitive practices, particularly abusive pricing Both legal systems possess extensive experience in combating various forms of competition abuse, including abusive pricing strategies Relevant authorities in these jurisdictions have issued comprehensive guidelines to identify and prevent abusive pricing practices Analyzing the experiences of these two legal frameworks provides valuable insights into effective strategies for fighting against abusive market behaviors.
Under EU law, specifically Article 101 TFEU, and US law, regulated by Section 1 of the Sherman Act, pricing strategies are critical areas for legal regulation Applying insights from these legal frameworks to the Vietnamese context offers valuable guidance for addressing issues related to abusive pricing This article analyzes the existing Vietnamese legal provisions, rules, and remedies concerning abusive pricing to identify gaps and weaknesses The focus is on evaluating current laws and proposing meaningful solutions to strengthen Vietnam’s legal response to abusive pricing practices.
This dissertation draws upon a comprehensive range of sources, including statutes, regulations, official guidance, and decisional law from courts and administrative authorities, to ensure a thorough legal analysis It also incorporates academic perspectives from books, empirical studies, legal journals, and reports from forums, conferences, and official bodies, complemented by relevant statistics and mass media reports All referenced websites were verified as of June 30, 2011, to ensure the information’s accuracy and reliability Every effort has been made to use trustworthy and up-to-date data to support the research's credibility.
This dissertation analyzes key legal issues by examining relevant case law from the EU and US, highlighting the current state of the law as of March 31, 2011 Selected cases illustrate the legal developments and historical context within both jurisdictions, emphasizing the depth and diversity of sources in EU and US law for a comprehensive understanding.
US law is extensive, offering diverse perspectives and practical experience relevant to this dissertation's research topics However, its breadth poses challenges for macro-level comparisons to identify key similarities and differences between EU and US legal systems Consequently, this dissertation primarily relies on official reports and guidelines from EU and US competition authorities when examining their historical development and theoretical discussions, referencing these sources even when not personally studied in full.
Researching Vietnamese competition law faces significant challenges due to limited access to current case information, as the VCA and VCC websites and publications lack detailed updates on ongoing and final cases, making it difficult to evaluate facts, arguments, and legal analyses To address this, researchers rely on multiple unofficial sources, prioritizing official reports and publications from relevant government agencies, followed by academic articles and conference speeches, with mass media serving as a last resort Additionally, comparing economic terminology across Vietnamese legal documents and international standards is problematic; thus, suitable common economic terms are employed to ensure clarity and avoid ambiguities in translations.
Methods
To achieve my research objectives, I utilize a combination of study methods, including traditional legal (dogmatic) analysis and comparative legal methods Additionally, I incorporate historical and law and economics perspectives to offer a comprehensive approach to legal research This multi-faceted methodology enhances the depth and insight of my legal studies, ensuring a well-rounded and thorough analysis.
The traditional legal method, or Legal Dogmatics, is employed to interpret and systematize specific legal provisions by analyzing sources such as laws, case law, preparatory works, and doctrine to clarify legal issues Its main goal is to evaluate current laws regarding abusive pricing within different legal systems, providing both descriptive insights into applicable laws and analytical understanding of why laws are constructed as they are This approach aims to identify key legal rules and technical significance in legislation, facilitating comprehensive legal analysis In my dissertation, this method is divided into two parts: the descriptive part outlines the relevant area of law, while the analytical part examines the legal problem’s components and synthesizes them into a cohesive understanding Chapters 2, 3, and 4 of the dissertation utilize this methodology to explore the subject in depth.
Comparative legal method: I use this method for discovering and dealing with similarities and differences between the US, the EU, and Vietnamese legal systems regarding abusive pricing The interdependence and
60 See general theory of these methods in the Article “Methods in legal research” of
Professor Hans Henrik Lidgard and his master students in the collection of “Research
The article highlights foundational methodologies used in legal research, emphasizing the importance of rigorous research techniques as outlined in the "Methodology Articles" published by Lund University Faculty of Law for Doctoral Courses in Research Methodology and Legal Writing (2006) Additionally, Nguyen Thanh Tu’s doctoral dissertation explores the impact of Competition Law on technology transfer under the TRIPS Agreement, focusing on its implications for developing countries, and provides valuable insights into international legal frameworks and their enforcement challenges.
In May 2009, Infolog in Göteborg analyzed system disparities by examining their spirit, style, and methodology at a macro level The study also employs micro-level comparisons to evaluate the similarities and differences in solutions these systems offer for addressing abusive pricing issues This comprehensive method is detailed and applied across Chapters 2, 3, and 4 to provide a thorough understanding of the systems' approaches and effectiveness.
This article emphasizes the importance of understanding the historical development of law to accurately analyze current legal provisions, especially concerning abusive pricing, which has significant economic implications It highlights that analyzing historic changes and their impact enhances comprehension of legal evolution The research adopts an economic perspective, employing economic analyses to explain and predict legal issues related to competition and pricing, while focusing on general economic theories rather than complex models By integrating economic theories with legal norms, the study aims to shed light on how market-based factors influence legal frameworks, providing valuable insights without delving into detailed mathematical formulations.
In the process of applying above mentioned methods, the thesis will benefit from tools, such as:
Descriptions: Where what the issues concern historical events or practical truths, I attempt to provide a clear, concrete and exact description in words and provide basic information from all perspectives;
Dialectics: Linking the issues in relation to historical, economic, cultural and traditional conditions to discover and test truths by discussion and logical argument;
Synthetics: With respect to all materials, information, doctrines and sources of laws, I provide a general overview and try to extract objective rules and ideas;
This article compares the legal systems by highlighting their key similarities and differences It examines the historical and cultural backgrounds that have shaped these laws, providing insights into the reasons behind their similarities and divergences Analyzing these aspects offers a comprehensive understanding of how different legal frameworks evolve and interact.
Analytics: I use my own reasoning to assess the data at its true worth to deduce or infer solutions suitable to the problems I have identified.
Value of the research
This pioneering research in Vietnam focuses on the abuse of dominant position using Comparative Law methods, offering a comprehensive comparison of legal approaches The dissertation provides valuable insights into theoretical issues related to regulations against abusive pricing by dominant enterprises, serving as an essential reference for studying and teaching Competition Law and Comparative Law in Vietnam.
This dissertation aims to serve as a foundational resource for international researchers seeking to understand Vietnam's legal system and its efforts to regulate monopolies during the initial years of integrating into the global market economy It highlights the country's commitment to controlling market dominance and promoting fair competition within its evolving legal framework.
This dissertation provides practical insights for both enterprises and consumers seeking to understand various forms of abuse of dominant position, such as abusive pricing It aims to help businesses avoid infringing behaviors and equip them with strategies to defend against such violations Additionally, the study proposes solutions tailored to meet the requirements of the Vietnamese legal system in combating abusive pricing practices by dominant enterprises.
Outline
In addition to Chapter 1, which has briefly introduced the research, this Dissertation has three main parts Part I comprises a comparison between
Part I, Chapter 2 of the article examines measures for addressing abusive pricing under EU and US laws, providing a comprehensive analysis of legal frameworks It begins by exploring fundamental legal principles, concepts, and various forms of abusive pricing, offering a solid theoretical foundation The chapter further correlates and examines relevant EU and US legislation, highlighting key legal provisions and enforcement practices aimed at preventing and combating abusive pricing practices.
Part II of Chapter 3 offers an introduction to the key legal issues addressed by the Vietnamese legal system, providing a comprehensive comparison with EU and US regulations This section systematically analyzes the similarities and differences among these legal frameworks, highlighting how Vietnamese laws align with or diverge from international standards The comparative approach enhances understanding of the legal nuances across these jurisdictions, emphasizing the importance of harmonizing legal practices in a globalized context for better legal coherence and effective policy implementation.
Part III focuses on proposals for application to Vietnamese competition law drawn from the experiences obtained from the comparative research into EU and US laws This part is presented in Chapter 4, together with final conclusions of this Dissertation.
CHAPTER 2 - REGULATIONS AGAINST ABUSIVE PRICING
Basic rules and concepts on abusive pricing in EU and US
ABUSIVE PRICING IN EU AND US
Basic legal rules are essential prerequisites established at the outset to create a clear framework for all regulations and decisions within the legal system These rules must be carefully examined to ensure a precise understanding before assessing the appropriateness and effectiveness of specific regulations Both EU and US laws addressing abusive pricing share two fundamental principles: firstly, a directive against all forms of abusive conduct, including abusive pricing; and secondly, a focus on protecting competition rather than individual competitors This section will explain these two key rules in detail.
2.1.1.1 EU Competition Law and US Anti-Trust
Law are directed against abusive conduct, which includes abusive pricing
Article 102 TFEU is the key regulation in the EU addressing abuse of a dominant market position, prohibiting any conduct by undertakings that exploit their dominance to distort competition within the internal market This provision aims to prevent practices that could harm trade between Member States, ensuring fair competition Specifically, it prohibits abusive behaviors by dominant companies that may include leveraging market power to impose unfair prices, limiting production or innovation, or imposing unfair trading conditions Enforcing Article 102 TFEU is essential for maintaining a competitive, open, and integrated European internal market.
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b) limiting production, markets or technical development to the prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
Making contract conclusions conditional upon the other parties accepting supplementary obligations that, by their nature or customary practice, are unrelated to the main subject of the contracts can impact enforceability and legal clarity This practice introduces additional requirements that may complicate contractual agreements and affect the rights and obligations of involved parties Ensuring that contractual obligations are clear and directly connected to the contract's core purpose is essential for legal certainty and effective enforcement.
Under Article 102 TFEU, three key conditions must be satisfied for the article to be applicable: the undertaking must hold a dominant position in a relevant market, it must engage in abusive conduct, and such abuse must impact trade between Member States While there is no explicit statutory definition of “abuse” within Article 102 TFEU, it is generally understood to involve anti-competitive business practices aimed at maintaining or strengthening market dominance.
Under US Anti-Trust Law, Section 2 of the Sherman Act (hereinafter
This dissertation follows specific rules for citing articles of the EC and EU Treaties, particularly referencing the post-Lisbon Treaty amendments When the Treaty on the Functioning of the European Union (TFEU) maintains the same provisions as the previous EC Treaty, each article is cited with its updated designation, such as Article 102 TFEU These guidelines ensure accurate and consistent referencing of legal sources in the context of EU law research.
To refer to a pre-Lisbon factual situation covered by the EC Treaty where Lisbon makes no change to the previous Treaty Article, it uses e.g Article [102TFEU]
According to UNCTAD's Model Law of Competition (2007), abuse of a dominant position and market power is a critical aspect of maintaining fair competition, as outlined in Box 8, paragraph 1 This legal framework emphasizes that companies holding dominant market positions must refrain from actions that distort competition or harm consumers Specifically, enforcing measures against abusive practices helps promote a level playing field, encouraging innovation and efficiency across markets For comprehensive insights, see UNCTAD's detailed guidance, available at the official publication.
Padilla, A Jorge, The Law and Economics of Article 82 EC, Hart Publishing, Oxford and
Portland, Oregon, 2010, p 174, (“The term “abuse” broadly covers exclusionary or other strategic acts that are designed to extend or maintain the dominant firm's market power, to the detriment of consumers.”)
Section 2 Sherman Act) is considered to be the corresponding provision and equivalent, in broad terms, to Article 102 TFEU Section 2 Sherman Act states: “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony ”
Section 2 Sherman Act establishes three offenses: “monopolization”,
The terms “attempt to monopolization” and “conspiracy to monopolization” exemplify common law legislative style, where concise provisions set forth key terms while leaving detailed interpretation to the courts Over the past 120 years of antitrust law development, the US Supreme Court currently interprets Section 2 as encompassing three distinct offenses, each with specific constituent elements that define their application.
The offense of “monopolization” under Section 2 Sherman Act has two elements: (1) the possession of monopoly power in the relevant market and
Monopolization refers to the willful acquisition or maintenance of monopoly power through anti-competitive conduct, rather than through natural growth or development resulting from superior products, business acumen, or chance It is characterized by two forms: monopoly acquisition, which involves unlawful conduct used to unlawfully obtain monopoly power, and monopoly maintenance, which involves tactics used to unlawfully sustain that power.
“Attempt to monopolize” has three elements: (1) a predatory or anti- competitive conduct, (2) a specific intent to monopolize, and (3) a dangerous probability of achieving monopoly power 4
“Conspiracy to monopolize” also has three elements: (1) a proof of conspiracy, (2) a specific intent to acquire monopoly power, and (3) an ability to do so 5
Section 2 Sherman Act and Article 102 TFEU are similar in style The two provisions indicate the basic rules behind the law The development, interpretation and application of the provisions‟ terms have been left to the respective authorities and courts 6 Article 102 TFEU goes one step further in
3 United States v Grinnell Corp., 384 U.S 563, (1966) at 570-71
4 Spectrum Sports, Inc v McQuillan, 506 U.S 447, (1993) at 456
5 American Tobacco Co v United State, 328 U.S 781, (1946) at 809-810
The EU legal order is primarily governed by a series of treaties to which all Member States have acceded, enabling the enactment of secondary legislation such as EU competition law decisions Case law from the European Courts forms a crucial part of EU law, alongside general principles that address issues like abuses Additionally, EU law relies on implementing documents from competent agencies, allowing the legal framework to be continuously updated in line with evolving commercial realities.
Both provisions share a key similarity in their fundamental conditions, specifically the essential elements of conduct that laws target Any individual with significant market power—such as a dominant position in the EU or monopoly power in the US—who engages in prohibited activities can be penalized under Article 102 TFEU or Section 2 of the Sherman Act When a market power holder conducts anti-competitive behavior, it is considered an abuse of dominant position or an act of monopolization, leading to legal condemnation.
In US law, the offense of “conspiracy to monopolize” involves elements that imply the existence of “monopoly power,” specifically the ability to exclude competitors Although US courts do not explicitly mention “having monopoly power,” the third element—“an ability to do so”—conveys the same concept The US Supreme Court in American Tobacco Co v United States clarified that it is unlawful for parties to conspire to acquire or maintain power to exclude competitors, provided they have the capacity to do so and the intent to exercise that power, emphasizing the key role of both the ability and purpose in establishing illegal monopolistic behavior.
Article 102 TFEU prohibits only the abuse of a dominant market position, not the mere possession or pursuit of such a position, whereas US antitrust law, specifically Section 2 of the Sherman Act, aims to prevent attempts to monopolize—focusing on practices that seek to unfairly establish monopoly power even if it is not yet achieved.
"dangerous probability" that it may achieve it exists To assess this element,
US courts rely on the same factors used to ascertain whether a defendant charged with monopolization has monopoly power, while recognizing that a
7 American Tobacco Co v United State, supra note 5, at 809-810
In Europemballage Corp and Continental Can Co Inc v Commission (Case 6/72 [1973] CMLR 199, para 26), it is clarified that a lesser quantum of market power can suffice to pose antitrust concerns This understanding suggests that the element of a “dangerous probability of achieving monopoly power” refers to possessing considerable market power, even if it does not reach the level of a full monopoly.
Specific forms of abusive pricing
In the EU, a dominant firm violates Article 102(a) TFEU if it "directly or indirectly" imposes "unfair purchase or selling prices." This provision targets situations where the prices offered to customers are excessively high or where suppliers are subjected to unreasonably low sales prices Such unfair pricing strategies aim to increase turnover and profits beyond what would be achievable in a more competitive market Excessive pricing is considered an exploitative abuse, as it directly harms consumer welfare by causing financial harm to consumers The EU Commission emphasizes that conduct involving unfair pricing practices undermines fair competition and market integrity.
“directly exploitative of consumers, for example charging excessively high price” is liable to infringe Article 102 TFEU 127
A significant difference between EU competition law and US antitrust law lies in this issue
In the US a „special responsibility‟towards the competitive process is not impressed on dominant firms as in the EU 128 , and the Sherman Act is not
127 EU Commission, supra note 43, para 7
Excessive pricing alone is not illegal under US law, as legitimate monopolists are permitted to set prices at profit-maximizing levels through lawful means to achieve competitive success US courts view profit as a reward for successful competition, and monopoly power, including charging monopoly prices, is considered a normal element of the free market system that encourages risk-taking, innovation, and economic growth When prices become excessively high, customers and suppliers are expected to switch to competitors, promoting market competition and preventing long-term exploitation.
Therefore, the following section will analyse regulations against excessive pricing only under EU competition law
2.2.1.1 Excessive pricing on the selling side
Excessive pricing is considered “exploitative” because dominant firms leverage their market power to extract higher rents from customers than non-dominant firms could achieve The term “excessive” signifies a substantial gap between what is considered a “fair” price and an “unfair” one However, there is no universal consensus on defining unfair or excessive prices in economics, as concepts of “fair” pricing vary among economists Some rely on cost-based approaches, as seen in Marxist and classical economics, while others, such as neo-classical economists and ordoliberals, base their definitions on the relationship between competitive markets and pricing.
(“the undertaking concerned has a special responsibility not to allow its conduct to impair genuine undistorted competition on the common market”)
129 Verizon Communications Inc v Law Offices of Curtis V Trinko, supra note 40, at 407
130 See Fraser, Tim, Monopoly, Competition and the Law – The regulation of business activity in Britain, Europe and America, Harvester Wheatsheaf, 1992, p 59-60;
In United Brands Company v Commission, it was established that a dominant firm uses its market position to secure trading benefits that would not be achievable under normal and effective competition This behavior highlights the risks associated with market dominance, where the dominant company can leverage its power to influence market conditions unfairly Such practices can undermine competitive markets and harm consumer interests, emphasizing the importance of regulatory oversight to prevent abuse of dominance.
According to O'Donoghue and Padilla (supra note 2, p 604), Marxist economists believe that the "fair" price of a product should reflect the value of the labor involved in its production Classical economists also support a cost-based theory of value, emphasizing production costs as the basis for pricing In contrast, neo-classical economists determine the "fair" value of goods or services through market supply and demand dynamics, rather than solely focusing on labor or production costs.
EU competition law prohibits excessive pricing to address the negative effects of monopolies, yet EU authorities recognize that some level of high pricing can play a role in a healthy free market economy In its XXIVth Report on Competition Policy, the EU Commission acknowledged the importance of balancing regulation with market dynamics, suggesting that excessive pricing may sometimes serve as an incentive for innovation and investment within competitive markets.
Having a dominant position is not inherently against competition rules However, consumers may suffer if a dominant company exploits its position, typically by setting higher prices than in a competitive market The Commission usually does not regulate high prices directly but focuses on the behavior of the dominant company aimed at maintaining its dominance, especially actions targeting competitors or new entrants that could challenge effective competition and influence price levels.
Excessive prices can sometimes promote competition by attracting new entrants, as high profits signal market opportunities However, when barriers to entry are high, authorities may need to intervene as price regulators to prevent unfair pricing practices The European Commission largely avoids regulating excessive prices, believing that interference with high profits discourages innovation and investment Consequently, price regulation is typically reserved for natural or legal monopolies, with only a few notable cases in the EU, such as United Brands.
General Motors 136 , British Leyland 137 and the Port of Helsingborg 138
The leading case on excessive pricing is United Brands, where the CJEU first defined what constitutes an excessive price The European Commission condemned United Brands Company (UBC) for charging excessive prices for Chiquita® bananas in Luxembourg and Germany, setting a key precedent in competition law.
In a competitive market, the equilibrium price is determined by the free interaction of demand and supply According to ordoliberals, a fair price is one that results from “free and honest” competition, ensuring that dominant firms set prices as if they were operating in a truly competitive environment This approach emphasizes the importance of market conditions where prices reflect genuine market forces rather than monopoly power.
133 EU Commission, XXIVth Report on Competition Policy, 1994, para 207
134 See Jones, Alison and Sufrin, Brenda, supra note 28, p 586
135 United Brands Company v Commission , supra note 61
136 General Motors Continental NV v Commission , Case 26/75 [1975] ECR 1367
137 British Leyland Plc v Commission ,Case 226/84 [1986] ECR 3263
138 Scandlines Sverige AB v Port of Helsingborg, Case COMP/A.36.568/D3, Commission
Decision of July 23, 2004, para 102 and Sundbusserne v Port of Helsingborg, Case
COMP/A.36.568/D3, Commission Decision of July 23, 2004, para 85
139 United Brands Company v Commission , supra note 61
The CJEU annulled the Commission’s decision regarding unfair pricing due to insufficient evidence and lack of cost analysis of UBC However, the Court acknowledged that excessive pricing can constitute an abuse, specifically when charging a price that bears no reasonable relation to the product’s economic value While the Court recognized that excessive profits could be identified by comparing selling prices to production costs, it did not specify the threshold at which profits become abusive Moreover, the Court emphasized that determining an “excessive” profit margin is only part of the assessment; it is also essential to evaluate whether the price itself is abusive.
The Court acknowledged the existence of various methods devised by economists to identify unfair prices but did not specify these methods in detail It emphasized that comparing the prices of competing products is a valid and reliable methodology for determining whether a price is unfair.
Determining the “economic value” of a product is a key challenge when assessing excessive pricing under the CJEU’s guidelines Competition authorities and courts must establish clear criteria to differentiate between prices that genuinely reflect a product’s economic value and those that are artificially inflated The critical task is to identify when a high price is still competitive versus when it constitutes an exploitative or abusive pricing strategy This distinction is essential for effective market regulation and consumer protection, ensuring that pricing practices remain fair and justified by the actual economic worth of the products.
High prices are often viewed as unfair, but they can be welfare-enhancing when they incentivize investment and innovation Industries that involve heavy investment and significant expenses on long-term research and development rely on high returns to attract funding Consequently, elevated prices in such sectors support sustainable growth and technological progress.
According to standard economic theory, the economic value of a product or service is determined by consumers' willingness to pay and the cost of supply However, the initial use of the term "economic value" in United Brands lacks clarity As a result, the meaning of "economic value" has remained ambiguous in subsequent legal cases.
Commission has interpreted the term indirectly General Motors and British
Leyland seem to relate the “economic value” of a product only to its costs
146 O'Donoghue, Robert and Padilla, A Jorge, supra note 2, p 612
Remedies to abusive pricing in EU and US laws
Effective measures to address abuses, especially abusive pricing, are crucial for fair competition The US Department of Justice emphasizes the importance of appropriate remedies, comparing the absence of such remedies to winning a battle but losing the war in Section 2 violations This highlights that without proper enforcement actions, the overall goal of maintaining market fairness may be compromised.
Objectives of remedies: In the US, three central goals of Sherman Act
Section 2 remedies are; terminating the defendant's wrongful conduct, preventing its recurrence, and re-establishing the opportunity for competition in the affected market 412 In addition through private actions and actions brought by the government as a victim, compensation by means of damage awards is also an important tool As the Supreme Court has stated,
In monopolization cases, adequate relief should end the illegal combination, deprive defendants of benefits from their conduct, and eliminate or weaken the monopolistic power in violation of the law Under EU law, remedies under Article 102 TFEU aim to terminate the infringement, prevent future abuses through repeated or similar conduct, eliminate the consequences of the abuse to restore effective competition, and establish legal precedents to guide third parties.
411 DOJ, Competition and Monopoly: single firm conduct under Section 2 of the Sherman
Act (2008), available at http://www.justice.gov/atr/public/reports/236681.htm , (withdrawn
412 United States v Microsoft Corp., 253 F.3d 34, 103 (D.C Cir 2001) (en banc) (per curiam)
413 United States v Grinnell Corp., supra note 3, at 577
414 See O'Donoghue, Robert and Padilla, supra note 2, pp 677-680
Effective enforcement in both the EU and US requires carefully selecting remedial measures for abusive conduct that balance addressing the problem without discouraging legitimate competition Remedies must be targeted, effective, and proportionate to ensure they mitigate abuse while maintaining healthy market incentives.
Measures applied to dominance abuses in the US and the EU may be classified into conduct and structural remedies, monetary remedies and incarceration
Competition remedies are strategic measures designed to influence the behavior of violators and restore or safeguard a competitive market environment These remedies are primarily classified into conduct remedies, aimed at changing specific business practices, and structural remedies, which involve altering market structures However, some remedies encompass both aspects, blurring the traditional categories; for instance, licensing requirements serve as conduct remedies yet also possess structural features, reflecting their multifaceted nature in maintaining market competition.
Conduct remedies, including behavioral measures in the EU, aim to stop unlawful conduct such as below-cost pricing and ensure market fairness Affirmative obligations may be mandated to promote competition, like requiring a company to sell to rivals or provide interconnection, thereby reducing market entry barriers and fostering a competitive environment.
Structural remedies are permanent changes to a company's structure, rather than commitments regarding future conduct These remedies aim to restore fair competition by mandating the divestiture of assets or even dissolving the infringing firm, ensuring a long-term solution to anti-competitive practices.
Conduct and structural remedies need not be mutually exclusive In some instances, remedies with both conduct and structural aspects may be needed
In the US and the EU, injunctive relief to terminate violations is the primary prohibitory remedy used by government agencies and courts This form of legal action is fundamental in addressing abusive practices, emphasizing the importance of swift and effective enforcement measures to prevent ongoing harm.
415 See, e.g., Massachusetts v Microsoft Corp., 373 F.3d 1199, 1233 (D.C Cir 2004) (en banc) (describing a proposal to require Microsoft to offer royalty-free licenses as a
Provisions on the termination of unlawful conduct, such as FTC orders and consent pricing, are essential and effective tools for achieving remedies in both the US and the EU In the US, these are often referred to as "cease and desist" or "sin no more" provisions, designed to prohibit specific unlawful practices Similarly, in the EU, the European Commission issues "cease and desist orders" to mandate the termination of competition rule infringements, ensuring fair market practices and effective enforcement of competition laws.
In the US, the FTC is empowered to issue cease and desist orders The
The Supreme Court has affirmed that the Federal Trade Commission (FTC) is the expert authority to determine the appropriate remedies to eliminate unfair or deceptive trade practices, with significant discretion in its decisions Courts typically do not interfere with the FTC’s chosen remedies unless they are unreasonable or unrelated to the unlawful conduct identified These orders primarily function as judicial injunctions, aiming to undo ongoing violations and prevent future unlawful actions, without imposing criminal or civil penalties or awarding damages for past conduct.
Federal courts have the authority under Sherman Act Section 4 and Clayton Act Section 15 to prevent and restrain antitrust violations These laws empower courts to issue orders that prohibit the continuation of illegal practices, ensuring effective enforcement and protection of competition.
Under Article 7 of Regulation 1/2003, the European Commission has the authority to impose remedies for infringements of Article 102 TFEU, provided two main conditions are met: first, a confirmed infringement of Article 102 TFEU must exist, and second, the remedy must be designed to end such infringement The primary goal of any remedy for abusive conduct under Article 102 TFEU is to effectively terminate the anti-competitive behavior, ensuring market fairness and competition law enforcement.
“cease and desist” order may be sufficient to achieve this
In both the US and the EU, authorities can prohibit not only specific prior unlawful acts but also other conduct that may lead to future violations DOJ consent decrees and EU Commission commitment decisions serve as agreements where firms commit to avoid certain behaviors, helping to prevent litigation while not constituting an admission of infringement These measures benefit both regulators and companies by effectively terminating or preventing unlawful conduct without a formal finding of guilt.
418 See Jones, Alison and Sufrin, Brenda,, supra note 28, p.1202
In the United States, these measures are commonly known as "fencing in" provisions, exemplified by the case 419 Jacob Siegel Co v FTC, 327 U.S 608, 612-613 (1946), which highlights their role in restricting potentially anti-competitive conduct Similarly, in the European Union, these measures are referred to as "like effects orders," which prohibit infringing undertakings from engaging in any agreement or concerted practice that may have the same object or effect of restricting competition or violating legal standards.
Designing and implementing effective remedies can be challenging when a defendant's conduct substantially alters the market, eliminating opportunities for competition In such cases, simply prohibiting exclusionary or similar conduct may not be enough to restore competitive conditions Instead, affirmative relief may be necessary to re-establish fair competition and ensure a level playing field.
In those situations, a remedy requiring a defendant to take affirmative steps may be necessary to re-establish open competition 422