Price-cost test in predatory abuses: treatment of common cost and multiperiod

Predatory prices are a particular type of exclusionary abuse whereby a dominant firm incurs short-term losses by charging a lower price deliberately with the intent to foreclose competitors. The antitrust analysis of predatory conduct entails the application of price-cost tests. These tests are based on the comparison of the retail price of a dominant firm against a suitable cost benchmark. Although these tests appear intuitive, their application in the context of antitrust investigation or of a firm’s compliance analysis is complex and requires accurate economic evaluation. This note describes the crucial aspects that need to be considered in the implementation of the price-cost tests.