Predatory Pricing: A Proposed Structured Rule of Reason

"Exclusionary practices are at the core of abuses of dominance or monopolisation under both EU and US law. Predatory pricing is one of the most important exclusionary practices."

"The first section of this paper (section B) addresses the modern economic theories of predation bringing out the main ideas for the predation tests. Section C summarises some of the most important flaws that have been pointed out in past commentary of the methods used for detecting predatory pricing strategies. Section D considers using discounted cash flow (DCF) and options theory in competition analysis. Section E refers the structured rule of reason proposed by the European Commission Office of the Chief Economist. Section F presents a new structured rule of reason. Section G simplifies the test for emerging industries or industries subject to certain types of economies. Section H shows how the Brooke–Akzo doctrine is a special case of my proposed case, in mature industries without those types of economies. Section I discusses some refinements in the application of the tests. Section J shows that the analysis of margin squeeze is a trivial extension of the structured test. Section K concludes."