Why would this law apply?

Question

An Extract from Article 102 of the Treaty on the Functioning of the European Union (TFEU) prohibits:

(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

From my research it has been implemented mainly in pharmaceutical(Pfizer/Flynn) and food industry(United brands). But it has also been implemented in the non-essential industries - technology(Rambus & IMAX).

Doesn't this goes against the core of the free market and why does the CJEU believe it is fair to limit how much can be made for non-essential goods or services, especially when the customer has a choice not to buy those goods?

Furthermore, wouldn't this automatically bring luxury brands such as Louis Vuitton under fire because they naturally have very large markups, which are not at all relative to the risk?

Answer 1

Unfair trading usually means selling below cost or engaging in cartel behaviour

LV is not captured because they sell well above the cost of production, distribution, and retail.

The type of behaviour that is captured is known as predatory pricing where a large competitor sells below cost in a market to drive smaller competitors out of business either by cross-subsidies from other markets or by simply absorbing the losses from greater capital reserves. A large North American coffee company has been accused of doing this when expanding into new markets.

Another type of unfair practice is actively conspiring with your competitors to agree a market price, or to not compete in other dimensions - perhaps by agreeing not to advertise in certain markets. This deprives consumers of choice because there is no price differentiation or there is no opportunity to learn about competition.

Other types of (arguable) unfair practices is buying up your competitors or refusing to supply certain markets (i.e. tacit or explicit agreements not to compete).