§8.6 Some further factors impacting passing-on

(184) In some markets firms sell multiple products, e.g. in grocery retail markets. In such markets products may be interrelated through their demand, for instance if a retailer sells competing brands of many product categories. If the products are substitutes, a cost shock on one product may also affect the prices of other products sold by the retailer. A change in the price of other products may also change the price of the product directly affected by the cost shock. Hence, such feedback effects from other products may increase the initial passing-on of costs in markets where firms sell multiple products. (185) To which extent a passing-on effect is observed may also depend on the time horizon taken into account when estimating such effect. Particularly, the passing-on of an overcharge down the supply chain may be delayed for a number of reasons. Firstly, the initial overcharge may only affect the fixed costs of the firms facing the overcharge. Even though the relevant starting point for the assessment of passing-on effects is the impact of the overcharge on the purchaser's marginal or variable costs, an increase in fixed costs could affect the strategic decisions of a firm and hence also the passing-on effects. (186) Moreover, as mentioned in paragraph 56, firms may incur so-called price adjustments costs, i.e. costs associated with the process of price adjustment. If this is the case, a firm will prefer to limit the number of price changes it makes and may pass on an overcharge only after some time. For instance, such firm would wait until the marginal costs increase accumulate beyond a certain threshold and adjust the price only when this threshold is reached. In certain cases, the overcharge may constitute such a small increase in the marginal costs that the affected purchaser may not find it profitable to pass on the overcharge at all. Conversely, the existence of price adjustment costs may also lead to a passing-on that is larger than the initial overcharge (118). This can be the case if the direct purchaser would be on the verge of changing its prices in the absence of any overcharges. Hence, a small overcharge itself may trigger a large price increase that reflects not only the overcharge but all other cost increases accumulated after the last price adjustment. Whereas such other cost increases may not be attributable to the infringer, a national court may wish to be aware of the fact that, in such a scenario, even a relatively small overcharge may lead to a significant price increase. (187) Another example of how price adjustment costs may affect the degree of passing-on is related to the existence of so-called ‘psychological pricing’. In many markets, typically retail markets, prices a little less than a round number are common, e.g. EUR 99 or EUR 19 900. The consumers may perceive such prices lower than they actually are. The use of such a pricing strategy may make it more likely that a direct purchaser chooses not to pass on an overcharge, as the change in price, for instance from EUR 19 900 to EUR 20 000, would lead to a significant drop in the direct purchaser's demand. The possible impact on the estimation of passing-on effects from the existence of price adjustment costs is further discussed in section 5.2.1. (188) Further in some circumstances, an indirect purchaser may be able to use its negotiating strength to limit the ability of a direct purchaser to pass on an overcharge. The indirect purchaser's negotiating strength may be referred to as countervailing buyer power (119). Buyer power is not only limited to the ability to switch to other suppliers, but also e.g. to integrate upstream. (189) In general, buyer power will not prevent passing-on if there is an industry-wide overcharge but it will affect the degree of passing-on. On the one hand, one can think of a scenario where strong buyer power forces the direct purchasers to accept the overcharge and thus limit passing-on. On the other hand, one could also think of a scenario where the strong bargaining power of the indirect purchaser forces direct purchasers to make a zero mark-up and to sell at a price only covering their marginal costs, thus resulting in a passing-on rate of 100 percent in case of an overcharge. (190) As the degree of buyer power and its implications for the passing-on effects will depend on the nature of the individual negotiations and the specific context in which they take place, the court may assess this topic on a case-by-case basis. (191) Further, if the direct purchaser facing an overcharge is vertically integrated into a downstream retail market, i.e. also active on the market where the indirect purchasers operate, this may affect the direct purchaser's incentive to pass on the initial overcharge. Moreover, in such a scenario, the direct purchaser facing an overcharge may have an incentive to pass on the entire overcharge within its integrated firm. However, the passing-on rate to non-integrated indirect purchasers would generally differ from this, e.g. depending on the level of costs or profit margins of the different indirect purchasers. (192) In certain industries, the price offered by the direct or indirect purchaser may be subject to regulation, e.g. price regulation by governmental agencies. Price regulation may affect the extent of passing-on. For instance, if the regulated price is set independently of the specific costs of the product subject to an overcharge when setting the price, the passing-on related price effect may be limited or zero. However, as also mentioned in paragraph 48, harm stemming from a violation of EU competition law may also affect non-price factors. Conversely, if the regulator fully takes into account the cost of the product subject to an overcharge when setting the regulated price, the degree of passing-on may be substantial also in regulated markets.

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Source: EUR-Lex (Cellar) · retrieved 2026-09-07