Long run average incremental costs definition

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Competition law risk management guide—dominant companies

Competition law risk management guide—dominant companies Why you need to manage this risk Article 102 of the Treaty on the Functioning of the European Union (TFEU), which concerns EU competition law, and Chapter II of the Competition Act 1998, which concerns UK competition law, each prohibit conduct on the part of an undertaking that constitutes an abuse of a dominant position. Dominant businesses, ie businesses with a high degree of market power or economic strength, have a special responsibility. This means behaviour which was perfectly acceptable whilst that business did not have market power, suddenly becomes problematic once the business does have the requisite degree of market power. As a rough rule of thumb, once a business consistently has a market share in excess of 40%, it is likely to enjoy a dominant position. That market share typically needs to have been maintained for at least two years. However, market shares are not the only factor in determining whether a business is dominant—the market position of the company and...

The legal development of margin squeeze

The legal development of margin squeeze Margin squeeze is an example of ‘exclusionary' conduct that targets competitors with the aim of eliminating or weakening their position as viable rivals—either by forcing them out of the market or by making entry unattractive in the first instance. In particular, where a vertically-integrated undertaking holds a dominant position in an upstream market for the supply of an essential input and supplies this input to wholesale customers who are also retail competitors, it may have the ability and incentive to exclude these competitors from the downstream (retail) market. In effect, the dominant undertaking ‘squeezes’ the downstream competitors’ margins (ie the gap between the cost of its required inputs and the price it can achieve on the downstream market) by charging a high wholesale price, a low retail price, or a combination of both. The resulting ‘spread’ between the price at which the dominant undertaking sells the good/service on the retail market and the price at which it sells the upstream input to...