Relevant Market: The European Commission - Essay Example

Being the single dominating undertaking in the market, Gordan Ltd enjoys certain advantageous over the two smaller companies. Gordan Ltd because of its dominance in the bagpipe market is able to bear influence on the market, consumers and its competition. The two smaller companies set up a joint staffed and joint owned company- Edinburgh Wind Company Ltd, with the eventual idea of capturing part of the market share by selling cheaper bagpipes. Gordan Ltd, in response to this threat to its monopoly in the bagpipe market counters by withdrawing credit facilities for Aberdeen Ltd and by stopping sales of spares to Dundee Ltd citing certain reasons.

Gordan Ltd by stopping the supply of spares to Dundee Ltd is seen as stopping its competitors from having trade outlets. This is similar to the case involving a medical company named Commercial Solvents. When it set up its own rival in the tuberculosis drugs market, Commercial Solvents were forced to continue supplying a company named Zoja with the raw materials for the drug. Zoja was the only market competitor, so without the court forcing supply, all competition would have been eliminated. (European Community competition law, 2007) Devoid of competition, Gordan Ltd will be able to take advantage of its monopoly in the bagpipe trade and make up for its short-term loss by increasing prices in the long term.

The act of lowering prices by the dominating undertaking with the intention of eliminating or weakening the competitors is called predatory pricing. Predatory pricing on the part of Gordan can be confirmed, if the company incurs a loss which would have been absent had it not been for the production of the bagpipes itself. However, predatory pricing should not be mistaken for lowering of prices, discounts etc offered by companies to further themselves in a competitive market. Predatory pricing or by the dominating company is prohibited by the Article 82 of the EC Treaty or of section 18(1) in the UK Competition Act.

Gordan Ltd, by cutting off the supply of spares and by withdrawing the credit system along with lowering its prices considerably has dealt a serious blow to Edinburgh Wind Company Ltd's initial performance. This is because Edimburgh Wind Company Ltd's initial performance in the market depends on external financing got from the replacing and repairing of bagpipes. As the dominant undertaking in the market, one of Gordan s main obligations is to serve the customers better. By nullifying the competition it is effectively reducing the customer's choice in product variety, innovation and also cost.

Gordan Ltd is guilty of abusing behavior towards its competition resulting in limiting the prejudice of the consumers