Is a Margin Squeeze an Antitrust or a Regulatory Violation?

By Alberto Heimler (Government of the Italian Republic, National School of Administration)

Margin squeezes can be evaluated under a predation or a refusal-to-deal standard. Both Carlton and Sidak argue in favor of using the predation standard. However, should the conditions for an abusive refusal to deal be satisfied, then margin squeezes should be prohibited even when prices are not predatory. It is sufficient that they are exclusionary. According to the U.S. Supreme Court decision in linkLine, when a vertically integrated company is not subject to an obligation to supply, there cannot be a margin-squeeze case. However, the Court does not establish how to define a margin squeeze when there is an antitrust duty to supply. In those circumstances, the EC approach in the Deutsche Telekom case helps to identify a standard. In any event, remedies in margin-squeeze cases should make sure that incentives to eliminate double-marginalization are maintained.

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