Term margin squeeze describes a pricing policy of a vertically integrated undertaking, which sets its prices on the upstream market so high and its prices on the downstream market so low that it disables its competitors to earn any margin on the downstream market. According to the European Commission and to the Court of Justice of the EU (CJEU), margin squeeze is a type of exclusive unilateral conduct contrary to Article 102 of the Treaty on the Functioning of the EU (TFEU). This dissertation aims to answer the question, whether this European assessment of the margin squeeze phenomenon is correct, or shall margin squeeze rather be considered as a measure of competition-on-merits in line with Article 102 of the TFEU. This is a particularly intriguing topic, since the number of margin squeeze cases in the telecommunications sector has risen dramatically and since the CJEU and the Supreme Court of the US have taken diametrically diverging approaches to margin squeeze in their latest case law. Contrary to the CJEU, the Supreme Court of the US has, while deciding cases with almost the same factual background and applying very similar provisions on abusive unilateral conduct, considered margin squeeze to be a legal measure of exercising price-based market pressure on competitors on the downstream market.
The hypothesis set in this dissertation is that the ban of margin squeeze protects less efficient competitors and is detrimental to the welfare of consumers. Namely, by applying this pricing policy, a dominant vertically integrated undertaking can drive out of the downstream market only those competitors which are less cost efficient and which cannot compete with the dominant`s prices on the downstream market. The diverging approaches of the two most developed antitrust legal systems to such pricing policy indicate different objectives of competition law in both legal systems. While antitrust in the US forbids only exclusionary conduct which is detrimental to consumers` welfare, the European Commission and the CJEU interpret Article 102 of the TFEU in a way that it prohibits also exclusionary conduct which is detrimental solely to the welfare of competitors. With such interpretation, concepts of ex ante market regulation, which aim to lower the entry barriers to internal market, are being introduced to EU competition law. The latest case law of the CJEU on margin squeeze clearly shows that such “regulatory” interpretation of Article 102 TFEU interferes with the basic principle of legal certainty and reduces the consumers` welfare.
Based on the criticism of the current CJEU case law on margin squeeze, the dissertation seeks to provide an outline of a reform approach to margin squeeze in EU competition law.