Predatory Foreclosure

Competition law and policy on predatory foreclosure should be used to protect competition, not to protect competitors. There is no consensus on the best cost benchmark to use in predatory pricing cases, or even on whether an ideal measure exists. Although the average avoidable cost test is gaining support among scholars and practitioners, several delegates expressed a preference for maintaining enough flexibility to tailor the cost measure used to the facts of each case. A dominant firm’s price may be considered predatory in some jurisdictions even if it is above all measures of the firm’s own cost. On the other hand, below-cost pricing – even by dominant firms – is not always predatory. Competition authorities should take into account any legitimate business justifications offered by alleged predators. The “meeting competition” defence is recognised in many jurisdictions, but its rationale is not entirely sound and it can be difficult to apply in the presence of non-price competition. Several lessons about law enforcement methods against predation may be learned from recent cases brought against airlines. Not all predatory behaviour involves pricing strategies. Companies may also use “cheap exclusion” tactics to eliminate and deter competition.