Considering the Counterfactual in Predation Cases

Abstract

In order to distinguish predatory pricing from competition on the merits, the courts in the United States and in the European Union have established cost-based tests. In contrast, Australia and New Zealand make use of a counterfactual analysis - which has proved controversial when applied in telecommunications cases in New Zealand. The new European effects-based approach advocated by the European Commission entails a counterfactual analysis which is related to the profitability of the conduct. In this presentation it is suggested that such a counterfactual test could be useful in predation cases if it establishes a causal link between the profitability of the conduct and foreclosure effect.