Excessive Pricing – how much is too much?!
The EU Competition Commissioner, Margrethe Vestager, recently announced that the European Commission would be placing focus on exploitative conducts, in particular excessive pricing within EU competition law. This focus on excessive pricing is unusual as competition authorities have historically been reluctant to intervene in pricing issues as competition authorities generally lack the proper resources and expertise to define what a fair price would be in individual markets. The European Commission has also had limited success in this area, many of its attempts to regulate prices being overturned by the European Court.
Despite the historic reluctance of competition authorities to intervene in pricing issues, the European Commission, recently, has shown a renewed focus on excessive pricing by launching an investigation into Aspen Pharma’s alleged excessive pricing in May 2017. The Italian Competition Authority had previously fined Aspen Pharma €5.2 million for the excessive pricing of four cancer treatment drugs and the European Commission has now launched an investigation in Aspen Pharma’s pricing.
In relation to another matter, last week the European Court of Justice (ECJ) delivered its judgment in a preliminary ruling referred by the Latvian Supreme Court. The Latvian Competition Authority had fined the Latvian collecting society (AKKA/LAA) as a legal monopolist in charge of granting licences for public performances of musical works in commercial premises for charging excessive prices. The Latvian Competition Authority considered the prices charged by AKKA/LAA to be excessively high after comparing them to the prices charges by collective societies in other EU countries.
During the preliminary ruling, the ECJ considered the judgment in United Brands where it was determined that an unfair price would be a price where there was a significant and persistent difference between the price charged by the dominant undertaking and the price that would have been charged in a competitive market (this was termed the “benchmark price”).
The ECJ recognised that there was no single way of determining unfair prices, however, one way would be (as was done by the Latvian Competition Authority) to consider the prices charged in other Member States. The ECJ also explained that for an undertaking to have abused its dominant position (and therefore breached Article 102 of the TFEU) the prices must be “appreciably higher” than those in other Member States. There is no minimum threshold and what is appreciably higher will be left to be determined by National Courts.
Although the ECJ has now waded into the arena of excessive pricing, it has not determined the critical question – how much is too much? The ECJ has set out criteria for National Courts to determine whether prices charged by a dominant undertaking are excessive – perhaps the Aspen Pharma case before the Commission will be the first test and shed more light on what constitutes excessive pricing!
This update was co-written by Rebecca Ferguson