Ex Ante and Ex Post Access Regime in the Postal Sector: A Revival of Margin Squeeze?

Abstract

Third-party access is one of the key tools used by regulators to stimulate competition in network industries. However, in the postal sector, incumbent operators could refuse to provide access to their networks on competitive terms. As the experience from the electronic communications sectors shows, constructive refusals to deal, caused by unreasonable or onerous terms, are far more frequent than outright refusals. These could be implemented through a margin squeeze, where a dominant firm offers wholesale access at a price greater than the difference between its retail price and its wholesale cost. Such combination of retail and wholesale prices allows the dominant firm to leverage its upstream position and to make downstream competitors unprofitable. Only a vertically integrated company can engage in a price squeeze as it needs to be able to influence prices, or better the margin between the prices, in two related markets. Without a simultaneous presence in two vertically integrated markets, a company can still engage in predatory or excessive pricing, discrimination, or refusal to deal, but only in one market.