| Summary: | Over the last decade the market-driven economic philosophies of successive
New Zealand governments have transformed the structure of the economy. These
changes have established favourable market conditions for the success of a particular
type of anticompetitive organisational behaviour, predatory pricing. From the mid1950s
to the early 1980s, economic analyses of predatory pricing theories frequently
concluded that this behaviour constituted economically irrational behaviour. This
conclusion generated a widespread scepticism among antitrust commentators, policymakers
and judges towards the prevalence of such behaviour. Recently, however, the
basis for this conclusion has been undermined by the application of Game Theory to
predatory pricing. Game-theoretic analysis has proven that predatory pricing is rational
under a range of market conditions and consequently, issues regarding the need for
prohibition and the optimal method of proscription have again become relevant.
This research investigates the contemporary developments in economic and
judicial analysis of predatory pricing in order to evaluate the efficacy of section 36 of
the Commerce Act 1986 in prohibiting this behaviour. A comprehensive survey of the
game-theoretic predatory pricing models concludes that these models refute a number
of well-known irrationality arguments and that predatory pricing cannot be regarded as
irrational organisational behaviour. Prominent standards proposed in the literature for
the existence of predatory pricing are then shown to be deficient in light of the insights
provided by the application of game theory. A critique of the most recent predatory
pricing cases decided by the United States Supreme Court, the Court of Justice of the
European Economic Community and the Australian Full Federal Court is then
conducted and it is found that the form and content of the standard for any jurisdiction
must be dictated by the specific objectives of the competition law legislation. Finally,
the research concludes that, in all but one respect, the current drafting and judicial
interpretation of section 36 enables the section to be effective in proscribing those types
of predatory pricing which are inimical to the attainment of the objectives of the
Commerce Act.
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