From Regulatory Tool to Competition Law Rule: The Case of Margin Squeeze under EU Competition Law

Abstract

The concept of margin squeeze has recently emerged into a stand-alone abuse of dominance under EU competition law. It is no coincidence that this development was triggered by a series of high-profile cases involving former statutory monopolists in newly liberalized telecommunication markets. As this paper shows, the concurrent application of competition law and regulation in these cases had a ‘feedback effect’ on the competition law concept of margin squeeze itself. It has been continually broadened to pursue regulatory goals and impose quasi-regulatory remedies. In the process, imputation tests designed to help regulators determine entry-inducing access prices have become competition law standards applicable beyond the realm of regulated network industries and bottleneck facilities. While this may facilitate the scaling back of sector-specific regulation it does not come without risks to legal and economic coherence. Against this background, this paper reviews the evolution of the margin squeeze doctrine under EU competition law and asks whether it should serve as a blueprint for the transition from regulation to competition. Note: This paper was presented at the 4th Annual Conference on Competition and Regulation in Network Industries, Brussels, November 25, 2011. A revised version has been published in the Journal of European Competition Law & Practice (2012) 3 (2), 149-162.