Mødedato: 09-09-2010

Margin Squeeze

Resumé

A margin squeeze occurs when there is such a narrow margin between an integrated provider’s price for selling essential inputs to a rival and its downstream price that the rival cannot survive or effectively compete. A first step in margin squeeze investigations is a detailed inquiry into the nature of competition in both the upstream and downstream markets. A common requirement is that the firm allegedly squeezing margins has market power in the upstream market. In most jurisdictions, a negative margin (a downstream price below the price at which the incumbent sells the essential input to its rivals) would constitute a breach of competition law. But how large should the margin be? Most jurisdictions broadly require the margin to be large enough to allow an equally-efficient competitor to compete. The roundtable illustrates the complexity of margin squeeze cases. Failure to restrict margin squeeze behaviour can result in large harms to consumers.

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OECD

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Margin squeeze

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