On 5 November 2012, the German Federal Cartel Office announced an investigation into Deutsche Post for predatory pricing.
It has been alleged by independent letter service providers that Deutsche Post charged rates which were below cost for some services. The prices the regulator is scrutinising are those charged to large businesses which received discounts as high volume customers. The investigation does not include rates charged to small or medium sized businesses. The inquiry will consider whether these prices were an attempt to squeeze its competitors out of the market or prevent competition and whether this could be an abuse of Deutsche Post’s market power.
What is predatory pricing?
In Australia, predatory pricing can breach the Competition and Consumer Act 2010 (CCA) in two situations. The first (also known as the Birdsville Amendment) is where a business with substantial market share (as opposed to market power) supplies goods or services at prices below cost for a sustained period for an anticompetitive purpose.
The second situation can arise under the general prohibition on a business with market power taking advantage of that power for an anti-competitive purpose. This can apply to the supply goods or services below cost for a sustained period. In Australia it does not matter if the business cannot, and might not ever be able to, recoup losses incurred by supplying the goods or services below cost.
To distinguish predatory pricing from normal competitive activity, the prohibition hinges on a business having substantial degree of market power and an anticompetitive purpose.
Tim Gargett and Jim Tapp
Photo credit: Debarshi Ray / Foter / CC BY-SA
