EXCLUSIONARY PRICING AND CONSUMERS HARM: THE EUROPEAN COMMISSION'S PRACTICE IN THE DSL MARKET

The assessment of exclusionary abuses by dominant firms is byno means an easy task. This is particularly true for pricingabuses, as there is no clear-cut way of distinguishing a pricecut that is abusive from one that instead is pro-competitive.We argue that there are several shortcomings in the way theEuropean Commission as assessed exclusionary pricing abusesin two important decisions concerning Internet access servicemarkets: Deutsche Telekom AG and Wanadoo Interactive. Firstof all, in computing downstream costs to apply the price squeezetest the incumbent's economies of scale and unavoidable costsshould be factored in, as the test is only meant to establishwhether an as-efficient competitor has been unlawfully foreclosed.Secondly, since the price squeeze test provides only for a necessarycondition for predation to occur, it is also necessary to provethat the recoupment of initial losses is a plausible scenarioso that the conduct under examination may indeed turn out tobe harmful to consumers. This is all but a trivial task, asthere are some sources of endogeneity that may cause a radicalchange in the underlying market structure. Particularly, inmarkets at early stage of development, entry barriers that mayfacilitate the recoupment of initial losses ex-ante may causea change such that market structure no longer supports recoupmentex-post.