COMPETITION • EUROPEAN LAW• ABUSE OF DOMINANT POSITION
Margin squeezes, which are practices by undertakings intervening simultaneously at two levels of the same economic process, are mainly found in cases relating to the telephony sector. An undertaking abuses its dominant position by a margin sqeeeze when it charges prices for intermediary services which are higher than its own retail prices charged to its own subscribers, making it impossible for its competitors, which also have other costs such as marketing, billing debt collection etc., to make any profit. Such margin squeezes can lead to the elimination of competitors of the dominant undertaking on the downstream market whereas they are likely to be just as efficient.
Applying margin squeezes is thus anticompetitive where a potential competitor, who is just as efficient as the vertically integrated incumbent operator, would not be able to enter the downstream market without suffering losses. An abusive margin squeeze exists where the difference between the retail prices charged by the dominant undertaking and the prices charged for intermediary services is either negative or insufficient to cover the product-specific costs of providing its own services to subscribers on the downstream market.
The supervisory authorities use the “as-efficient-competitor” test, relying principally on prices and costs incurred by the dominant undertaking and not on the specific situation of its actual or potential competitors, as “the use of such analytical criteria can establish whether that undertaking would have been sufficiently efficient to offer its retail services to end users otherwise than at a loss if it had first been obliged to pay its own wholesale prices for the intermediary services”. Lastly, to constitute abuse of dominant position, a margin squeeze must produce an anticompetitive effect, which does not need to be actual. Proof of a potential anticompetitive effect likely to eliminate competitors that are at least as efficient as the dominant undertaking is sufficient.
