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Post Danmark did not abuse a dominant position by predatory pricing

24. november 2004

3/1120-0100-1205/ISA/CHJ/TWA The Council meeting 24th November 2004

On 24th November 2004, the Danish Competition Council adopted a decision concerning the alleged abuse (predatory pricing) by Post Denmark A/S of its dominant position on the market for unaddressed items and local weeklies. The Competition Council concluded that Post Danmark had not abused its dominant position by engaging in predatory pricing in 2003 and the first half of 2004.

The decision was based on a complaint submitted by the main competitor, Forbruger-Kontakt, as the undertaking in 2003 lost three significant retail chains as customers to Post Danmark. Forbruger-Kontakt had alleged that Post Danmark was abusing its dominant position on the relevant market by the following four conducts:

  • discriminating prices and loyalty rebates
  • predatory pricing
  • agreements of unreasonable long duration
  • cross subsidies restricting competition and state aid

The allegation of discriminating prices and loyalty rebates was treated by the Competition Council in a separate decision of 29th September 2004, where the two last allegations mentioned above was rejected (separate summary of that decision can also be found on this web-page). In that decision, the Competition Authority concluded that Post Danmark has a dominant position on the marked for unaddressed items and local weeklies and that the undertaking had abused its dominant position by using discriminating prices towards its own customers and towards the customers of its only competitor, Forbruger-Kontakt. In addition, Post Danmark had also used discriminating prices amongst its own customers. At that stage, the Competition Council also decided to issue a separate decision concerning the analysis of whether Post Danmark had abused its dominant position by predatory pricing as this topic proved to be particular complicated and required further analysis. Therefore, the initial complaint resulted in two separate decisions.

Consequently, the decision of 24th November 2004, focus on the analysis of predatory pricing. This analysis showed that it was necessary for the Competition Authority to adjust the calculations made by Post Danmarks of the cost for the undertaking connected to the service of distributing unaddressed items and local weeklies. Following these corrections of the cost calculations, the analysis by the Competition Authority shows, that the average prices in 2003 and the first half of 2004 were not below the relevant cost measure, average incremental costs (AIC), connected to distributing unaddressed items and local weeklies. Moreover, the lowest price offered by Post Danmark to any single customer is at the same level as the AIC.

In summary, the Competition Council concluded that Post Danmark had not abused its dominant position by engaging in predatory pricing. However, the Competition Council will make an assessment of the full year of 2004 at a later stage in 2005.

It should be noted that the decision of 24th September 2004 has been brought before the Danish Appeals Tribunal by Post Denmark, whereas the decision of 24th November 2004 was brought before this Tribunal by the competitor, Forbruger-Kontakt. Therefore, both appeals are currently pending and judgements by the Appeals Tribunal can be expected later in 2005.