In network industries, a Universal Service Obligation (USO) is often seen as a burden on an incumbent, which requires compensation for the net cost of such service provision. This paper estimates the effects of consumer loyalty as an intangible benefit of USO in the postal sector. In doing so, the agent-based modelling (ABM) approach is applied, which makes it possible to model the behaviour of boundedly rational consumers and is thus particularly appropriate for taking into account intangibles considerations. The analysis shows that loyalty is crucial to whether the USO uniform pricing constraint results in loss-making or profitability. Under certain conditions and in the presence of a loyalty parameter, uniform pricing gives a USO provider an advantage, when the size of the rural area is sufficiently big and a disadvantage, if its size is too small. This finding is counterintuitive as USO providers in countries with sparsely populated areas are typically expected to incur a significant net cost of USO.
{"title":"Universal Service Obligation and Loyalty Effects: An Agent-Based Modelling Approach","authors":"Dilyara Bakhtieva, Kamil Kiljanski","doi":"10.2139/ssrn.2296674","DOIUrl":"https://doi.org/10.2139/ssrn.2296674","url":null,"abstract":"In network industries, a Universal Service Obligation (USO) is often seen as a burden on an incumbent, which requires compensation for the net cost of such service provision. This paper estimates the effects of consumer loyalty as an intangible benefit of USO in the postal sector. In doing so, the agent-based modelling (ABM) approach is applied, which makes it possible to model the behaviour of boundedly rational consumers and is thus particularly appropriate for taking into account intangibles considerations. The analysis shows that loyalty is crucial to whether the USO uniform pricing constraint results in loss-making or profitability. Under certain conditions and in the presence of a loyalty parameter, uniform pricing gives a USO provider an advantage, when the size of the rural area is sufficiently big and a disadvantage, if its size is too small. This finding is counterintuitive as USO providers in countries with sparsely populated areas are typically expected to incur a significant net cost of USO.","PeriodicalId":130313,"journal":{"name":"ERN: Antitrust (European) (Topic)","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-07-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132301843","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Competition authorities and regulatory bodies have increasingly made use of econometric and statistical methods in their analysis. Due to limitations of time and data, so-called screening methods have become more and more important in order to decide whether an in-depth inquiry is warranted. This paper uses a new econometric approache to screen selected European mobile telecommunications markets for collective dominance. First, we examine the dynamics of market structure by checking the stationarity of corresponding Her ndahl- Hirschman-indices. Second, we estimate Vector-Autoregressive models (VAR) taking entry or exit of competitors into account. If the market as characterized by collective dominance, the dominant operators should be able (by de nition) to act independently from their rivals. Hence, we should only nd Granger-causality from the dominant operators' series on their non-dominant rivals in that (hypothetical) case. However, we provide evidence that most operators' subscriber series cause each other. This can be interpreted as a sign of e ective competition between those operators. An examination of the Impulse-Response-functions supports the indication of the direction of causality.
{"title":"Screening for Collective Dominance: The Case of the European Mobile Telecommunications","authors":"Veit Boeckers, Justus Haucap, Ulrich Heimeshoff","doi":"10.2139/ssrn.1909545","DOIUrl":"https://doi.org/10.2139/ssrn.1909545","url":null,"abstract":"Competition authorities and regulatory bodies have increasingly made use of econometric and statistical methods in their analysis. Due to limitations of time and data, so-called screening methods have become more and more important in order to decide whether an in-depth inquiry is warranted. This paper uses a new econometric approache to screen selected European mobile telecommunications markets for collective dominance. First, we examine the dynamics of market structure by checking the stationarity of corresponding Her ndahl- Hirschman-indices. Second, we estimate Vector-Autoregressive models (VAR) taking entry or exit of competitors into account. If the market as characterized by collective dominance, the dominant operators should be able (by de nition) to act independently from their rivals. Hence, we should only nd Granger-causality from the dominant operators' series on their non-dominant rivals in that (hypothetical) case. However, we provide evidence that most operators' subscriber series cause each other. This can be interpreted as a sign of e ective competition between those operators. An examination of the Impulse-Response-functions supports the indication of the direction of causality.","PeriodicalId":130313,"journal":{"name":"ERN: Antitrust (European) (Topic)","volume":"82 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-08-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114339949","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We estimate the deterrence effects of U.S. merger policy instruments with respect to the composition and frequency of future merger notifications. Data from the Annual Reports by the U.S. DOJ and FTC allow industry based measures over the 1986-1999 period of the conditional probabilities for eliciting investigations, challenges, prohibitions, court-wins and court-losses: deterrence variables akin to the traditional conditional probabilities from the economics of crime literature. We find the challenge-rate to robustly deter future horizontal (both relative and absolute) merger activity; the investigation-rate to slightly deter relative-horizontal merger activity; the court-loss-rate to moderately affect absolute-horizontal merger activity; and the prohibition-rate and court-win-rate to not significantly deter future horizontal mergers. Accordingly, the conditional probability of eliciting an antitrust challenge (i.e., remedies and prohibitions) involves the strongest deterrence effect from amongst the different merger policy instruments.
{"title":"The Deterrence Effects of U.S. Merger Policy Instruments","authors":"Joseph A. Clougherty, J. Seldeslachts","doi":"10.2139/ssrn.1888168","DOIUrl":"https://doi.org/10.2139/ssrn.1888168","url":null,"abstract":"We estimate the deterrence effects of U.S. merger policy instruments with respect to the composition and frequency of future merger notifications. Data from the Annual Reports by the U.S. DOJ and FTC allow industry based measures over the 1986-1999 period of the conditional probabilities for eliciting investigations, challenges, prohibitions, court-wins and court-losses: deterrence variables akin to the traditional conditional probabilities from the economics of crime literature. We find the challenge-rate to robustly deter future horizontal (both relative and absolute) merger activity; the investigation-rate to slightly deter relative-horizontal merger activity; the court-loss-rate to moderately affect absolute-horizontal merger activity; and the prohibition-rate and court-win-rate to not significantly deter future horizontal mergers. Accordingly, the conditional probability of eliciting an antitrust challenge (i.e., remedies and prohibitions) involves the strongest deterrence effect from amongst the different merger policy instruments.","PeriodicalId":130313,"journal":{"name":"ERN: Antitrust (European) (Topic)","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134045676","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Governments throughout the world responded to the financial crisis of 2008-2009 by granting massive bailouts to their largest and most interconnected banks. In most jurisdictions, financial stability took precedence over all other policy concerns, which meant that competition policy was relegated to the position of a distant spectator in the proceedings. This was not the case in the EU, however, where competition policy and competition enforcers played a lead role in shaping the European response to the crisis. This paper evaluates the EU’s exercise of its State aid authority to prevent bailouts from distorting competition in the financial sector. In doing so, this paper explores (a) the importance of competition policy during a financial crisis, and (b) the ability of competition enforcers to coordinate with banking authorities in order to form an effective response. As lawmakers assess the outcomes of the crisis, and consider what might be done differently to prevent or respond to a future crisis, they should draw upon the most effective aspects of the EU model, and incorporate competition policy and competition officials in future crisis proceedings.
{"title":"The Role of Competition Policy and Competition Enforcers in the EU Response to the Financial Crisis: Applying the State Aid Rules of the TFEU to Bank Bailouts in Order to Limit Distortions of Competition in the Financial Sector","authors":"Jonathan M. DeVito","doi":"10.2139/SSRN.1809772","DOIUrl":"https://doi.org/10.2139/SSRN.1809772","url":null,"abstract":"Governments throughout the world responded to the financial crisis of 2008-2009 by granting massive bailouts to their largest and most interconnected banks. In most jurisdictions, financial stability took precedence over all other policy concerns, which meant that competition policy was relegated to the position of a distant spectator in the proceedings. This was not the case in the EU, however, where competition policy and competition enforcers played a lead role in shaping the European response to the crisis. This paper evaluates the EU’s exercise of its State aid authority to prevent bailouts from distorting competition in the financial sector. In doing so, this paper explores (a) the importance of competition policy during a financial crisis, and (b) the ability of competition enforcers to coordinate with banking authorities in order to form an effective response. As lawmakers assess the outcomes of the crisis, and consider what might be done differently to prevent or respond to a future crisis, they should draw upon the most effective aspects of the EU model, and incorporate competition policy and competition officials in future crisis proceedings.","PeriodicalId":130313,"journal":{"name":"ERN: Antitrust (European) (Topic)","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-04-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114925592","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Conventional hedonic analysis measures willingness to pay for attributes on the basis of marginal fixed costs. We argue that in many cases variable costs are also affected by these attributes and that this should be taken into account. We develop a simple model to show that the marginal willingness to pay for a quality attribute has to be equal to the full marginal cost, which includes marginal fixed as well as variable costs. The model is applied to Danish data on car ownership and use. We use a nonparametric estimation procedure to estimate hedonic price functions for fixed and variable costs. We recover each consumer's marginal willingness to pay, the marginal fixed costs, and the marginal variable costs for car attributes using first-order conditions for utility maximization. We show that the marginal fixed and variable costs have the same (positive) sign and that both contribute substantially to the marginal willingness to pay. Estimation results suggest that marginal variable costs are on average about 20% of the full marginal costs. Finally, we estimate the distribution of the marginal rate of substitution between quality attributes and variable costs, which can be interpreted as a structural parameter, and we investigate how this marginal rate of substitution varies with household characteristics.
{"title":"The Willingness to Pay for Quality Aspects of Durables: Theory and Application to the Car Market","authors":"I. Mulalic, J. Rouwendal","doi":"10.2139/ssrn.1737771","DOIUrl":"https://doi.org/10.2139/ssrn.1737771","url":null,"abstract":"Conventional hedonic analysis measures willingness to pay for attributes on the basis of marginal fixed costs. We argue that in many cases variable costs are also affected by these attributes and that this should be taken into account. We develop a simple model to show that the marginal willingness to pay for a quality attribute has to be equal to the full marginal cost, which includes marginal fixed as well as variable costs. The model is applied to Danish data on car ownership and use. We use a nonparametric estimation procedure to estimate hedonic price functions for fixed and variable costs. We recover each consumer's marginal willingness to pay, the marginal fixed costs, and the marginal variable costs for car attributes using first-order conditions for utility maximization. We show that the marginal fixed and variable costs have the same (positive) sign and that both contribute substantially to the marginal willingness to pay. Estimation results suggest that marginal variable costs are on average about 20% of the full marginal costs. Finally, we estimate the distribution of the marginal rate of substitution between quality attributes and variable costs, which can be interpreted as a structural parameter, and we investigate how this marginal rate of substitution varies with household characteristics.","PeriodicalId":130313,"journal":{"name":"ERN: Antitrust (European) (Topic)","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-12-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125922663","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
By the 2008 Pricing of Pasta decision the Italian Competition Authority (ICA) condemned 26 pasta makers and two industry associations for carrying out price-fixing practices in the market for durum semolina pasta. In order to establish the cartel, the ICA relied on economic evidence indicating that the pasta producers had an incentive to collude because of the retailers’ buyer power. This was rather a controversial finding. Firstly, the retailers’ buyer power have been generally considered as a factor which is not conducive to collusion. Secondly, there were asymmetries between cartelists, as some of them were branded producers whereas the others were small undertakings or private labels. Thus the branded suppliers had a relevant seller power, and for them it was more rationale to opt for an aggressive pricing policy instead of colluding with their weaker competitors.
{"title":"New Kids on the Block: Is Retailers’ Buyer Power a Factor Conducive to Collusion?","authors":"M. Giannino","doi":"10.2139/ssrn.1719648","DOIUrl":"https://doi.org/10.2139/ssrn.1719648","url":null,"abstract":"By the 2008 Pricing of Pasta decision the Italian Competition Authority (ICA) condemned 26 pasta makers and two industry associations for carrying out price-fixing practices in the market for durum semolina pasta. In order to establish the cartel, the ICA relied on economic evidence indicating that the pasta producers had an incentive to collude because of the retailers’ buyer power. This was rather a controversial finding. Firstly, the retailers’ buyer power have been generally considered as a factor which is not conducive to collusion. Secondly, there were asymmetries between cartelists, as some of them were branded producers whereas the others were small undertakings or private labels. Thus the branded suppliers had a relevant seller power, and for them it was more rationale to opt for an aggressive pricing policy instead of colluding with their weaker competitors.","PeriodicalId":130313,"journal":{"name":"ERN: Antitrust (European) (Topic)","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-12-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128882734","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper presents the conceptual path followed by European Union, European Commission and European Competition Network, after the Energy Sector Inquiry (2007) towards the realisation of the objective of an Energy Internal Market, fully functional and open to competition. Firstly, we examine the findings of Sector Inquiry and then we describe how the Third Energy Package - that followed - tried to address the issues highlighted by the Inquiry and how Third Energy Package introduces a promising but complex system, in order to develop sector rules. Following the above, we proceed to a brief but close examination of 10 recent -during or after Inquiry and the proceedings towards Third Energy Package - European antitrust decisions, which focused on several issues demonstrated by the Inquiry, such as: long-term energy supply contracts, market manipulation, vertical foreclosure, market partitioning, refusals to supply, discrimination between different categories of customers, strategic underinvestment, capacity hoarding and margin squeeze. All these cases except E.ON/GDF- were resolved under the commitments procedure of - Art. 9 of EU Regulation 1/2003 and the commitments mainly involved far-reaching structural remedies, such as ownership unbundling. Furthermore, we also investigate some recent mergers cases and some initiatives from selected European NRAs, in order to show the consistent character of competition policy in European Energy Markets.Following this analysis, we then proceed to Trinko case, in order to focus on two crucial and relevant to our analysis issues: essential facilities doctrine and the relation between sector regulation and competition law. After showing how Trinko case addressed these issues, we return to European Law and we examine the relevant point of view of European Competition Authorities. One major conclusion is that in EU, Commission applies competition law, in order to address issues fitting to sector regulation in a possibly stricter way than sector regulation does - for example Third Energy Package offers many alternatives to full ownership unbundling, while Commission's decisions actually present it as a single option; thus Commission tries to implement a sector specific policy by competition law means and methodology and especially by commitments procedure - a procedure that allows Commission to avoid ECJ investigation. We seek the reasons that lead to this approach and we highlight the weak points of it. Finally, we conclude that this approach may eventually lead to a dualistic system - possibly dangerous and inefficient as well - of addressing energy market's issues; a dualistic system that will fully reveal its possibly negative consequences after the Third Energy Package comes into force.
{"title":"From Energy Sector Inquiry to Recent Antitrust Decisions in European Energy Markets: Competition Law as a Means to Implement Sector Regulation","authors":"Michael D. Diathesopoulos","doi":"10.2139/ssrn.1639883","DOIUrl":"https://doi.org/10.2139/ssrn.1639883","url":null,"abstract":"This paper presents the conceptual path followed by European Union, European Commission and European Competition Network, after the Energy Sector Inquiry (2007) towards the realisation of the objective of an Energy Internal Market, fully functional and open to competition. Firstly, we examine the findings of Sector Inquiry and then we describe how the Third Energy Package - that followed - tried to address the issues highlighted by the Inquiry and how Third Energy Package introduces a promising but complex system, in order to develop sector rules. Following the above, we proceed to a brief but close examination of 10 recent -during or after Inquiry and the proceedings towards Third Energy Package - European antitrust decisions, which focused on several issues demonstrated by the Inquiry, such as: long-term energy supply contracts, market manipulation, vertical foreclosure, market partitioning, refusals to supply, discrimination between different categories of customers, strategic underinvestment, capacity hoarding and margin squeeze. All these cases except E.ON/GDF- were resolved under the commitments procedure of - Art. 9 of EU Regulation 1/2003 and the commitments mainly involved far-reaching structural remedies, such as ownership unbundling. Furthermore, we also investigate some recent mergers cases and some initiatives from selected European NRAs, in order to show the consistent character of competition policy in European Energy Markets.Following this analysis, we then proceed to Trinko case, in order to focus on two crucial and relevant to our analysis issues: essential facilities doctrine and the relation between sector regulation and competition law. After showing how Trinko case addressed these issues, we return to European Law and we examine the relevant point of view of European Competition Authorities. One major conclusion is that in EU, Commission applies competition law, in order to address issues fitting to sector regulation in a possibly stricter way than sector regulation does - for example Third Energy Package offers many alternatives to full ownership unbundling, while Commission's decisions actually present it as a single option; thus Commission tries to implement a sector specific policy by competition law means and methodology and especially by commitments procedure - a procedure that allows Commission to avoid ECJ investigation. We seek the reasons that lead to this approach and we highlight the weak points of it. Finally, we conclude that this approach may eventually lead to a dualistic system - possibly dangerous and inefficient as well - of addressing energy market's issues; a dualistic system that will fully reveal its possibly negative consequences after the Third Energy Package comes into force.","PeriodicalId":130313,"journal":{"name":"ERN: Antitrust (European) (Topic)","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-07-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126465850","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Stefan C. Weber, Stefan Arnold, Katharina Oberhofer
This paper investigates the effect of the rules contained in the Takeover Bids Directive on the supervisory practice of the Austrian Takeover Commission as part of the European takeover authorities’ network. The Takeover Bids Directive created a system of cooperation of national takeover authorities. It did not establish a centralized European regulator and/or supervisor, i.p. for cross border takeover bids. By evaluating and categorizing the takeover cases handled by the Austrian Takeover Commission, the paper aims to prepare the ground for a focused policy debate in view of the upcoming revision of the Takeover Bids Directive, to be proposed by the European Commission. It does not analyze the still ongoing policy debate, in particular, with respect to anti takeover defense measures. The paper ascertains certain procedural and substantive elements of European takeover law. It provides (i) an empirical study of the cases decided by the Austrian Takeover Commission between its establishment in 1999 and 2008, based on (ii) an outline of the Takeover Bids Directive as transposed into Austrian law and (iii) an outline of the structure of the Austrian Takeover Commission.
{"title":"The Supervision of Takeover Matters in the European Union - The Austrian Part","authors":"Stefan C. Weber, Stefan Arnold, Katharina Oberhofer","doi":"10.2139/SSRN.1472419","DOIUrl":"https://doi.org/10.2139/SSRN.1472419","url":null,"abstract":"This paper investigates the effect of the rules contained in the Takeover Bids Directive on the supervisory practice of the Austrian Takeover Commission as part of the European takeover authorities’ network. The Takeover Bids Directive created a system of cooperation of national takeover authorities. It did not establish a centralized European regulator and/or supervisor, i.p. for cross border takeover bids. By evaluating and categorizing the takeover cases handled by the Austrian Takeover Commission, the paper aims to prepare the ground for a focused policy debate in view of the upcoming revision of the Takeover Bids Directive, to be proposed by the European Commission. It does not analyze the still ongoing policy debate, in particular, with respect to anti takeover defense measures. The paper ascertains certain procedural and substantive elements of European takeover law. It provides (i) an empirical study of the cases decided by the Austrian Takeover Commission between its establishment in 1999 and 2008, based on (ii) an outline of the Takeover Bids Directive as transposed into Austrian law and (iii) an outline of the structure of the Austrian Takeover Commission.","PeriodicalId":130313,"journal":{"name":"ERN: Antitrust (European) (Topic)","volume":"106 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128515837","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the use of market-share thresholds (safe harbors) in evaluating whether a given vertical practice should be challenged. Such thresholds are typically found in vertical restraints guidelines (e.g., the 2000 Guidelines for the European Commission and the 1985 Guidelines for the U.S. Department of Justice). We consider a model of resale price maintenance (RPM) in which firms employ RPM to dampen downstream price competition. In this model, we find that restrictions on the use of RPM by a dominant firm can be welfare improving, but restrictions on the extent of the market that can be covered by RPM (i.e., the pervasiveness of the practice among firms in the industry) may lead to lower welfare and higher consumer prices than under a laissez-faire policy. Our results thus call into question the indiscriminate use of market-share thresholds in vertical cases.
{"title":"Resale Price Maintenance and Restrictions on Dominant Firm and Industry-Wide Adoption","authors":"Øystein Foros, Hans Jarle Kind, G. Shaffer","doi":"10.2139/ssrn.1664937","DOIUrl":"https://doi.org/10.2139/ssrn.1664937","url":null,"abstract":"This paper examines the use of market-share thresholds (safe harbors) in evaluating whether a given vertical practice should be challenged. Such thresholds are typically found in vertical restraints guidelines (e.g., the 2000 Guidelines for the European Commission and the 1985 Guidelines for the U.S. Department of Justice). We consider a model of resale price maintenance (RPM) in which firms employ RPM to dampen downstream price competition. In this model, we find that restrictions on the use of RPM by a dominant firm can be welfare improving, but restrictions on the extent of the market that can be covered by RPM (i.e., the pervasiveness of the practice among firms in the industry) may lead to lower welfare and higher consumer prices than under a laissez-faire policy. Our results thus call into question the indiscriminate use of market-share thresholds in vertical cases.","PeriodicalId":130313,"journal":{"name":"ERN: Antitrust (European) (Topic)","volume":"58 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131438717","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
As the old millennium was coming to an end, European Competition law began a massive reform project aimed at modernizing each and every of its constituent parts. As well known, this ambitious project started with the introduction of Regulation n. 2790/1999 on vertical restraints, and its accompanying Guidelines, it followed with the Guidelines on horizontal cooperation agreements, and made all its way up till the review of the Merger Regulation. The underlying leitmotif of these reforms has been to introduce a more economics-oriented approach to the assessment of competition cases. In practice, these reforms have resulted in a progressive erosion of per se rules in favour of the more flexible rule of reason which leaves the floor open to case by case considerations and seems better suited to take into account the appropriate circumstances (especially of economic nature) of the controversy at issue. The turn has come now for abuses of a dominant position to go under review to determine the extent it should conform to the new mainstream trend which calls for a more substantive recourse to economics insights into the assessment of unilateral practices. As we are about to see, European Commission's (and European competition authorities' in general) treatment of abuse cases has attracted a good deal of criticism for being rather formalistic and rigid and hence inapt to sufficiently take into consideration the economic circumstances of the cases, in particular to weigh the anticompetitive effects apparently caused by the conduct against the likely positive pro-competitive (or, more precisely, pro-consumer) efficiencies which, in the end, could tilt the balance and reverse an initial finding of abuse. In order to do justice to these points of criticism, the European Commission has drafted a Discussion Paper on the application of Article 82 to exclusionary abuses and has called for open discussion on it. Unfortunately, the document, mainly because of its guideline style, is rather confusing and obscure. A coherent suggestion for a new approach, however, can be more easily inferred by reference to the report presented by the Economic Advisory Group for Competition Policy (hereinafter EAGCP) which the Commission has surely considered in the course of preparing its Discussion Paper. The effects-based approach (so called to differentiate itself from the current formalistic one) apparently carries a strong economic imprint and seems aimed at correcting the early methodology adopted by European agencies and courts by introducing two substantive changes. On the one hand, the competition authorities would be asked to prove, with strong economics-based analysis and studies, the anticompetitive harm produced by the presumably abusive conduct. This with specific regard to the ultimate effect that the practice will assert on consumer welfare. On the other hand, because it is extremely complex to discern the pro- from the anti-competitive aspects within the same cond
{"title":"Is There a Role for Market Definition and Dominance in an Effects-Based Approach?","authors":"Emanuela Arezzo","doi":"10.2139/ssrn.964199","DOIUrl":"https://doi.org/10.2139/ssrn.964199","url":null,"abstract":"As the old millennium was coming to an end, European Competition law began a massive reform project aimed at modernizing each and every of its constituent parts. As well known, this ambitious project started with the introduction of Regulation n. 2790/1999 on vertical restraints, and its accompanying Guidelines, it followed with the Guidelines on horizontal cooperation agreements, and made all its way up till the review of the Merger Regulation. The underlying leitmotif of these reforms has been to introduce a more economics-oriented approach to the assessment of competition cases. In practice, these reforms have resulted in a progressive erosion of per se rules in favour of the more flexible rule of reason which leaves the floor open to case by case considerations and seems better suited to take into account the appropriate circumstances (especially of economic nature) of the controversy at issue. The turn has come now for abuses of a dominant position to go under review to determine the extent it should conform to the new mainstream trend which calls for a more substantive recourse to economics insights into the assessment of unilateral practices. As we are about to see, European Commission's (and European competition authorities' in general) treatment of abuse cases has attracted a good deal of criticism for being rather formalistic and rigid and hence inapt to sufficiently take into consideration the economic circumstances of the cases, in particular to weigh the anticompetitive effects apparently caused by the conduct against the likely positive pro-competitive (or, more precisely, pro-consumer) efficiencies which, in the end, could tilt the balance and reverse an initial finding of abuse. In order to do justice to these points of criticism, the European Commission has drafted a Discussion Paper on the application of Article 82 to exclusionary abuses and has called for open discussion on it. Unfortunately, the document, mainly because of its guideline style, is rather confusing and obscure. A coherent suggestion for a new approach, however, can be more easily inferred by reference to the report presented by the Economic Advisory Group for Competition Policy (hereinafter EAGCP) which the Commission has surely considered in the course of preparing its Discussion Paper. The effects-based approach (so called to differentiate itself from the current formalistic one) apparently carries a strong economic imprint and seems aimed at correcting the early methodology adopted by European agencies and courts by introducing two substantive changes. On the one hand, the competition authorities would be asked to prove, with strong economics-based analysis and studies, the anticompetitive harm produced by the presumably abusive conduct. This with specific regard to the ultimate effect that the practice will assert on consumer welfare. On the other hand, because it is extremely complex to discern the pro- from the anti-competitive aspects within the same cond","PeriodicalId":130313,"journal":{"name":"ERN: Antitrust (European) (Topic)","volume":"42 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131588082","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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