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Adrian Emch, Gregory Leonard, May 27, 2009
On April 2, 2009, the European Court of Justice (“ECJ”) issued its decision in the Wanadoo case. This judgment is just the last of a series of developments in the field of predatory pricing on both sides of the Atlantic. In the United States, beginning with the Matsushita decision in 1986, the Supreme Court has required plaintiffs in predatory pricing cases to meet stringent conditions to prevail on their claims. As a result, in the United States, predatory pricing cases have become “rarely tried and even more rarely successful, to paraphrase Matsushita. The Supreme Court’s point of view appears to have been motivated by a concern with the chilling effects on price competition that “false positives†in predatory pricing cases would have, combined with a strong skepticism, from both a theoretical and practical point of view, about whether predatory pricing is a rational business strategy. More recently, in September 2008, the U.S. Department of Justice (“DOJ”) published a report on single-firm conduct under Section 2 of the Sherman Act (“Monopolization Report”) which dedicates a chapter to price predation. In the report, the DOJ takes a skeptical view regarding the rationality and frequency of predatory pricing, much in line with the U.S. Supreme Court’s view. The European Union (“EU”) has generally followed a different path with regard to predatory pricing. The traditional EU case law on predatory pricing, based on the AKZO case, has set a substantially lower bar to prevail on a predatory pricing claim than has the U.S. Supreme Court. For example, under EU case law, a price could be found to be predatory, even if it were above average variable cost (“AVC”), where the defendant had a “plan to eliminate a competitor.” This stood in contrast to the United States, where generally a price above AVC is lawful without condition. In the recent decision in Wanadoo, the ECJ largely opted to continue along the lines of the previous case law. This raises the question: When it comes to predatory pricing, is the EU from Venus, and the United States from Mars? The answer is not as simple as it may seem.
