Margin squeeze

Contents. Introduction. The Case of Margin Squeeze under EU Competition Law. Vertical price squeeze. Margin Squeeze in Spain. The diverging approach to price squeezes in Europe. The margin squeeze accordance with Article. The Price Squeeze as a theory of antitrust liability. The case of Margin Squeeze abuses in the Telecommunications Sector. Conclusion.

In the telecommunications sector, wholesale or retail markets may be subject to price regulation. While wholesale price controls essentially seek to prevent exclusionary abuses by the incumbent, retail price controls seek to prevent exploitative abuses or, in some cases, to ensure wide availability to the service in question. The following sections evaluate how the various price control mechanisms can affect the ability or the incentives of vertically integrated operators to engage in margin squeeze. In this regard, an important distinction should be made depending on the scope of regulation of the incumbent’s prices. In conclusion, it seems that price caps offer greater scope for incumbents to engage in margin squeeze strategies, at least when price caps are imposed on baskets of services. By contrast, rate-of-return regulation does not allow the incumbent to lower its prices below the regulated rate as part of a margin squeeze strategy.

There is also a difference between a regulator and an antitrust authority with respect to margin-squeeze claims. A regulator could well define the average avoided costs in the supply of the liberalized portion of the service by referring to a long-run perspective, promoting the entry of higher-cost competitors that eventually would become more efficient than the incumbent. This is not the role of an antitrust authority that, in the name of efficiency, should consider the short-run avoided costs only.

Finally, in the case of a regulated price of access, remedies for a margin squeeze case need to be evaluated with great care. The incentives to eliminate double-marginalization on the part of the vertically integrated company should not be weakened by recognizing a margin-squeeze claim. Because the price of access is never a minimum rule, but rather a maximum rule, whether it is imposed by the regulator or by the competition authority, the authority could make sure that, whenever the vertically integrated firm wishes to reduce retail prices, it must correspondingly reduce the access charges, to the point that its competitors are not unjustifiably excluded.

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Margin squeeze. (2013 m. Birželio 10 d.). Peržiūrėta 2018 m. Vasario 26 d. 01:53