A critical evaluation of the proposed treatment of special cost advantages in excessive prices law

Firms have a special cost advantage when they receive a discount or subsidy without assuming any risk or without being innovative. It is thus a received benefit, rather than an earned benefit, which results in a cost below the normal competitive level. The treatment of these special cost advantages...

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Main Author: Andrew Sylvester
Format: Article
Language:English
Published: AOSIS 2014-09-01
Series:Journal of Economic and Financial Sciences
Subjects:
Online Access:https://jefjournal.org.za/index.php/jef/article/view/387
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spelling doaj-5cf1df9744914db08996a14d43baccbd2021-02-02T07:53:13ZengAOSISJournal of Economic and Financial Sciences1995-70762312-28032014-09-017460761810.4102/jef.v7i4.387328A critical evaluation of the proposed treatment of special cost advantages in excessive prices lawAndrew Sylvester0University of JohannesburgFirms have a special cost advantage when they receive a discount or subsidy without assuming any risk or without being innovative. It is thus a received benefit, rather than an earned benefit, which results in a cost below the normal competitive level. The treatment of these special cost advantages has been a complicating factor when the firm in question is a dominant firm accused of charging an excessive price. The relevant benchmark against which to assess the price charged by the firm is the notional competitive market price, which in turn is linked to the cost of production under competitive conditions. This led to the Competition Appeal Court recommending that special cost advantages should be excluded from the cost build-up of the dominant firm when assessing excessive prices allegations. This would artificially inflate the dominant firm’s costs and reduce the likelihood of a finding against the firm. This recommendation by the CAC has a number of theoretical and practical problems, and it remains unclear how special cost advantages should be treated in South African competition law cases.https://jefjournal.org.za/index.php/jef/article/view/387excessive pricesspecial cost advantagescompetition lawabuse of dominancemonopolyexploitative abuse
collection DOAJ
language English
format Article
sources DOAJ
author Andrew Sylvester
spellingShingle Andrew Sylvester
A critical evaluation of the proposed treatment of special cost advantages in excessive prices law
Journal of Economic and Financial Sciences
excessive prices
special cost advantages
competition law
abuse of dominance
monopoly
exploitative abuse
author_facet Andrew Sylvester
author_sort Andrew Sylvester
title A critical evaluation of the proposed treatment of special cost advantages in excessive prices law
title_short A critical evaluation of the proposed treatment of special cost advantages in excessive prices law
title_full A critical evaluation of the proposed treatment of special cost advantages in excessive prices law
title_fullStr A critical evaluation of the proposed treatment of special cost advantages in excessive prices law
title_full_unstemmed A critical evaluation of the proposed treatment of special cost advantages in excessive prices law
title_sort critical evaluation of the proposed treatment of special cost advantages in excessive prices law
publisher AOSIS
series Journal of Economic and Financial Sciences
issn 1995-7076
2312-2803
publishDate 2014-09-01
description Firms have a special cost advantage when they receive a discount or subsidy without assuming any risk or without being innovative. It is thus a received benefit, rather than an earned benefit, which results in a cost below the normal competitive level. The treatment of these special cost advantages has been a complicating factor when the firm in question is a dominant firm accused of charging an excessive price. The relevant benchmark against which to assess the price charged by the firm is the notional competitive market price, which in turn is linked to the cost of production under competitive conditions. This led to the Competition Appeal Court recommending that special cost advantages should be excluded from the cost build-up of the dominant firm when assessing excessive prices allegations. This would artificially inflate the dominant firm’s costs and reduce the likelihood of a finding against the firm. This recommendation by the CAC has a number of theoretical and practical problems, and it remains unclear how special cost advantages should be treated in South African competition law cases.
topic excessive prices
special cost advantages
competition law
abuse of dominance
monopoly
exploitative abuse
url https://jefjournal.org.za/index.php/jef/article/view/387
work_keys_str_mv AT andrewsylvester acriticalevaluationoftheproposedtreatmentofspecialcostadvantagesinexcessivepriceslaw
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