PRICE DISCRIMINATION UNDER ARTICLE 86: POLITICAL ECONOMY IN THE EUROPEAN COURT
| Published date | 01 May 1981 |
| Date | 01 May 1981 |
| Author | W. Bishop |
| DOI | http://doi.org/10.1111/j.1468-2230.1981.tb01630.x |
PRICE DISCRIMINATION UNDER ARTICLE
86:
POLITICAL ECONOMY IN THE EUROPEAN
COURT
I.
INTRODUCTION
IN
its
"
Bananas
"
judgments the European
Court said many things about pricing policies of firms-some wise,
some foolish, some obscure.
A
quantity of legal literature has arisen
discussing these judgmentsY3 and their implications for firms. Here
the effects of the more important decision,
United Brands4
will be
analysed. It will be argued that, if followed, the legal rule created
by the judgment,,first, will work to the disadvantage of the poor
regions of the EEC and to the advantage
of
wealthy regions and,
secondly, will induce inefficiencies into the marketing structure of
EEC
firms that were not there before. Many issues in modern law,
economics and politics turn on an alleged trade-off between equity
and efficiency; the European Court has managed to create both
inefficiency and inequity at the same time.
For practical purposes price discrimination
is
the charging of
different prices to different customers
for
similar goods where these
prices are not based on different costs to the firm in supplying those
customer^.^
Where the costs
of
marketing in one place are higher
than those in another, and the retail price is correspondingly higher,
then this is not price discrimination as economists use that term.O
Here this phenomenon will be called
"
price divergence
"
to distin-
guish it from price discrimination properly
so
called. The court
clearly held that price divergence is not illegal, and indeed any other
decision would be absurd. But price discrimination, properly
so
called, the court condemned.
and
"
Vitamins
"
11.
THE
REASONING
IN
UNITED
BRANDS
A.
The Judgment
In
United Brands
v.
The Commission
the crucial facts were these.
United Brands Ltd. (UBC) shipped bananas to Europe from Central
America. Some bananas it branded
"
Chiquita." These were subject
t
I
wish to thank Professor
B.
S. Yamey and Dr. Valentine Korah for valuable
assistance. They are responsible neither for the views expressed here nor for any
remaining errors or other shortcomings.
1
United Brands
v.
E.C. Commission
[1978] C.M.L.R. 429.
Hoflmann-La Roche
v.
E.C.
Commission
[1979] C.M.L.R. 211.
3
M.
Siragusa (1967) 61 C.M.L.R. 179. C. Baden-Fuller (1979) 4 E.L.Rev. 423.
4
[19781 C.M.L.R. 429.
5
Strictly, by a more rigorous definition, that
of
Stigler, price discrimination is
"
the sale of two or more similar goods at prices which are in different ratios to
marginal cost." Price equality does not entail the absence
of
discrimination where
costs differ. See George
J.
Stigler,
The Theory
of
Price
(3rd ed., 1966), pp. 209-215.
6
See generally F. M. Scherer,
Industrial Morket Structure ond Economic Perjorrn-
once
(1970), Chap. 10 and Stigler,
loc.
cit.
282
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