A Study of Competition Law and Policy on Predatory Pricing －Comparative Perspectives－

There are a number of controversial issues in competition law and policy on abuse of market dominance, and one of them is predatory pricing. However,examining price in the market is almost always a challenging task to competition authorities, especially when diverse theories do not give a clear answer. In particular, predatory pricing is one of the most difficult subjects in competition law enforcement. It may result in harms to competition and consumers after raising prices. However, this type of practice can be somewhat costly and difficult to achieve its exclusionary purpose, particularly where its competitors survive in the market. Predatory pricing can be defined as the practice for excluding competitors on the basis other than efficiency. Nonetheless, competition law normally does not simply prevent a firm from practising this type of exclusionary practice, especially when its rivals successfully compete with it on the merits. To summarise,competition law prohibits firms with sufficient market power from misusing it to eliminate market players. The debates over predatory pricing are diverse, and it is not surprising that the divergent theories over it have introduced a number of standards for competition law and policy. Therefore, some argue that the debate about predation theory has been distorted by a number of imprecise interventions in the market. In particular,each competition law jurisdiction has different standards from each other. Furthermore, it is almost impossible to apply a theory of one school for all cases since there is no one-fits-all type model for predatory pricing. Similar to the substantive competition law provisions in other countries, the Korean competition act, the Monopoly Regulation and Fair Trade Act (MRFTA),prohibits predatory pricing under Article 3-2 or Article 23. The Korean competition authority, the Korea Fair Trade Commission (KFTC), considers this type of business practice as an exclusionary one. Exclusion of competitors according to Article 23MRFTA refers to an unfair business practice for excluding rivals in the relevant market. However, there are some contentious issues in its application. Some may argue that Article 3-2 MRFTA, the provision of prohibiting abuse of market dominance, rather than Article 23 should apply to the predatory pricing because it is impossible for a firm without market dominant position successfully to achieve its goal of predation. It is not plausible that a competition authority can scrutinise predatory pricing by a firm without market power. Competition law analysis on predatory pricing requires an assessment of market power, and economics is essential for such assessment. This article aims to provide a better analysis on predatory pricing. This article thus discusses economic debates and current approaches in other competition jurisdictions and their different levels of enforcement, including standards of predatory pricing. It also explains the legal provisions on predatory pricing in Korea and its existing problems in competition law implementations through discussing the case law and KFTC’s decisions. Finally, this article proposes a competition law amendment and suggest criteria on predatory pricing for better and effective enforcement.