Post Danmark A/S v. Konkurrenceradet

Post Danmark (defendant) was a company responsible for distributing mail in Denmark. This included addressed mail and unaddressed mail, such as brochures and fliers sent by businesses like supermarkets. Post Danmark had a contract with the Danish government to distribute all addressed mail under a certain weight and therefore had a national network in place for mail distribution. In the unaddressed-mail space, Post Danmark’s largest competitor was Forbruger-Kontakt, a company that contracted with three major supermarkets to distribute their unaddressed mail. In 2004, Post Danmark announced that it had signed new contracts with those supermarkets and would distribute their unaddressed mail going forward. Forbruger-Kontakt sought relief from the Danish competition council, Konkurrenceradet (plaintiff), alleging that Post Danmark had abused its dominant position in the Danish unaddressed-mail market by selling its mail services to Forbruger-Kontakt’s former supermarket customers at lower prices than Post Danmark’s existing customers. Forbruger-Kontakt argued that Post Danmark did not provide a cost-driven reason for doing so. Konkurrenceradet agreed, finding that Post Danmark abused its dominant market position first by failing to put its customers on equal footing in terms of rates and rebates and second, by not being able to provide a cost-related justification for significantly lower prices to its new supermarket customers. Specifically, Post Danmark had sold its services to one of the three supermarkets at a price set lower than its average costs but higher than its incremental costs. Incremental costs are those that tend to disappear in the three to five years of the firm stopping the business in question. Its prices to the other two competitors were set above its total average costs. The Danish competition appeals tribunal upheld the decision. Post Danmark appealed to the Ostre Landsret, a regional court, which in turn certified a question to the European Court of Justice, asking whether European law permitted a dominant firm to selectively reduce its prices to an amount lower than its average total costs but higher than its average incremental costs if it did so for a purpose other than driving out a competitor.