Margin Squeeze: Theory, Practice, Policy

Dunne, Niamh (2011) Margin Squeeze: Theory, Practice, Policy. [Conference Proceedings] (Submitted)

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Abstract

Margin squeeze occurs where the margin between the price charged by a vertically integrated firm for a wholesale input, and its own retail price for the end product incorporating the input, is so low as to foreclose one or more affected markets. The extent to which margin squeeze should constitute a discrete competition law offence, distinct from predation or refusal to deal, is a disputed question. A jurisprudential chasm between the approaches to margin squeeze under European Union competition law and United States antitrust has emerged, following the Court of Justice of the European Union’s judgments in Deutsche Telekom and TeliaSonera and the US Supreme Court’s decision in LinkLine. The EU recognises a broad concept of margin squeeze, applicable in any sector; the US does not recognise margin squeeze as a standalone abuse, and moreover, the presence of sector-specific regulation excludes the application of antitrust to the price levels that comprise the squeeze. This paper explores the margin squeeze concept, with particular attention to both areas of contention.

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