about different views of cost in US and EU.
compcom.co.za
Fidelity rebates are rewards or discounts given to customers who purchase all, or a specified portion of, their goods from dominant firms. In the EU, fidelity rebates by dominant firms are regarded as a per se violation, except for short-term discounts and volume discounts that are justified by costs, and those that are open to all customers on equal terms. In the US, any reduction in price is viewed as a positive move towards the competitive price, as long as the resulting price is not below costs.
In terms of predatory pricing, the US follows a two-part test to determine that a practice is predatory in nature. Firstly, the alleged predatory price must be below an appropriate measure of cost (below cost pricing), and secondly, the alleged predator must be able to recoup its losses through monopoly pricing strategies once its rivals exit the market. Under the European Court of Justice, the first part of the test is also applied.
However, it views the recoupment of profits as an unnecessary element of predation. In addition, while the US has tended to use the average variable cost as appropriate measure, the European courts have tended to look at prices above average variable costs but below average total cost as predatory. |
