Advocate General Mengozzi recently gave an interesting opinion (in case C-209/10) on whether selective price reductions in the mail distribution market by Post Danmark amounts to an abuse of a dominant position. The postal delivery service market in Denmark is now fully liberalised but between 2003 and 2004 Post Danmark still retained the traditional postal monopoly on the distribution of letters and packages within certain weight limits and operated a delivery network covering the whole country. A rival delivery company FK made a complaint to the national competition authority that Post Danmark had entered into contracts for mailshot deliveries for three major supermarket chains. All three companies were previously FK clients. FK complained that Post Danmark had offered reduced prices and larger discounts which did not cover the cost of delivery. Following a series of appeals before the national courts on the question of whether Post Danmark had engaged in predatory pricing, the Danish Supreme Court referred several questions to the European Court of Justice. In essence, the questions related to whether selective pricing on the part of a dominant undertaking which is subject to universal service obligations can amount to an abuse. On 24 May 2011, the Advocate General reached the view that, in a situation where prices are not set to eliminate a competitor, it may still be an exclusionary abuse under Article 102 TFEU for a dominant undertaking to grant selective price reductions to a level below overall costs but higher than average incremental costs, to the principal clients of its main competitor. In reaching this conclusion, the Advocate General took into account the fact that the selective pricing could be cross-subsidised by income from the activities where the dominant company provided universal services under a statutory monopoly. He concluded that it is for the national court to identify the existence and extent of cross-subsidisation in practice.
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