Competition and Markets Authority ‘Regulation and Competition – A Review of the Evidence’ (2020)

It is well established that effective competition is a key mechanism for improving outcomes for consumers. There is a concern that regulation can have the effect of stifling competition, and thereby deprive customers of these benefits, for example through raising barriers to entry. At the same time, different forms of regulation have an important role to play in supporting competition, for example by providing the legal and economic frameworks within which competition takes place. It is therefore important to take into account the benefits as well as the costs when considering the impact of regulation. The purpose of this report, available here, is to summarise existing evidence about the impact of regulation on competition, both in terms of the academic research and the way in which regulation is designed and implemented in practice. It does so as follows: Section 2 introduces the topic. Competition and regulation are sometimes portrayed as mutually exclusive; for instance, either you have competition policy to…

Howard Shelanski ‘Antitrust and Deregulation’ (2019) Yale Law Journal 127 1922

The relationship between antitrust enforcement and regulation depends on policy choices which must answer a question: how should antitrust enforcement and regulation relate to each other? This paper, which is available here, looks at this question in the context of deregulated industries. It argues that antitrust enforcement should run countercyclical to regulation, especially during strongly deregulatory cycles. The comparative importance of countering deregulatory shifts arises because, while increased regulation can keep antitrust enforcement out of regulated markets, reduced regulation triggers no such mechanism for pushing antitrust back into deregulated markets. It is argued that good reasons for antitrust enforcement to run counter to deregulation can be found in economics, legal doctrine, and current debates over competition policy. Part I discusses why deregulation can lead to enforcement gaps. A variety of institutions can govern economic competition. Decentralised, capitalist economies generally rely on markets to provide the incentives and discipline necessary to keep prices low, output high, and innovation moving forward. When…

Niamh Dunne ‘Dispensing with Indispensability’ (2020) Journal of Competition Law & Economics 16(1) 74

‘Indispensability’ is the central concept underpinning the treatment of refusal to deal claims under EU competition law. Firms can normally refuse to share their infrastructure with would-be competitors, to supply an input, or to licence their intellectual property. Where the requested access is, however, deemed indispensable to effective competition in an adjacent market—an exceptional circumstance—dominant undertakings may find their default market freedom constrained, the rationale being that control of such an essential facility renders any refusal to deal disproportionately harmful. However, the conventional wisdom that instances of refusal to deal constitute an abuse only in the presence of indispensability has been challenged from multiple directions. This article, available here, surveys the departures from the orthodoxy that can be found in the jurisprudence. Section II introduces refusal to supply as an antitrust theory of harm. It has long been acknowledged that Article 102 TFEU may, in certain instances, proscribe refusals to contract with rivals by dominant undertakings. Yet refusal to deal…

John Kwoka and Tommaso Valletti ‘Scrambled Eggs and Paralyzed Policy: Breaking Up Consummated Mergers and Dominant Firms’

Competition policy has been no obstacle to the rise of dominant firms in e-commerce, social media, online search and other important aspects of the modern digital economy. The well-documented results of these trends are increasing market concentration, entrenched dominance, diminished competition and entry, and harm to consumers and businesses alike. Competition agencies, policymakers, academics, interest groups, and others have proposed various ways of addressing the weaknesses of past policy. Most of these proposed policies involve more vigorous application of conventional tools, which, however, are unable to address current levels of market concentration. However, the most obvious solution – breaking up such firms — is generally dismissed as impractical, the equivalent of trying to unscramble eggs. The authors disagree in this paper, available here. The rationale for breaking up companies is straightforward: where the essential competitive problem with a company is its structure, in the sense that its anticompetitive behaviour flows inexorably from that structure and is otherwise difficult to prevent,…

Frederic Jenny ‘Economic Resilience, Globalization and Market Governance: Facing the Covid-19 Test’

Globalisation contributed to the rapid spread of COVID to all corners of the globe. The economic cost of fighting the virus froze a number of economies and disrupted global value chains, and is likely to be followed by several years of an economic depression that will dwarf the cost of the 2008 financial and economic crisis. The dramatic events of the first quarter of 2020 challenge some of the implicit assumptions underlying the design of our economic systems, and should make us think about some of the dilemmas and trade-offs that this crisis has foisted upon us. This piece, available as a working paper here,  is not mainly about competition – instead, it is a piece that thinks widely about the implications of this pandemic for the economic architecture underpinning globalisation, which also touches on competition. This is because, in the grand scheme of things, competition law and policy plays a relatively limited role when markets are not in equilibrium,…

OECD work on Competition and the Financial Crisis (2009)

This paper can be found here. Systemic crises reopen the question of what is the role of competition policy in such scenarios. The main issues are whether competition is desirable at all in times of systemic crises, and how to limit potential negative effects of state intervention on competition in the medium and long term. The paper investigates these questions, and is particularly interesting because it was written while the aftershocks of the crisis were still being felt. It notes that while the crisis started in the financial sector, it had an important impact on the real economy. Nonetheless, the paper focused mostly on interventions in the financial sphere, which are – at least at present – of limited interest to us. As such, I will focus on the sections of the paper that are likely to prove more relevant to us going forward. Section II provides an overview of the relationship between the financial sector and competition law. Most of…

OECD work on Excessive Pricing (2011), looking also at price gouging

The OECD has ever written anything on competition law and price gouging. It has, however, asked Prof. Frank Maier-Rigaud to write a paper exceeding 80 pages on Excessive Pricing in 2011 (see here). Despite its title, the paper seeks to provide a framework for all exploitative practices. This is well beyond my focus today, so I will review those sections of the paper relevant for sudden price increases and exploitative practices following sudden shocks. The first and second sections discuss ideas of fair prices and economic value, and whether intervention against excessive pricing is justified. The idea of a just, fair or natural price, and with it the concept of economic value and rudimentary equilibrium notions, can be traced back to ancient Greece. They have occupied political philosophers and economists for well over 2000 years. Despite this longstanding debate, the fundamental question of the appropriate benchmark for assessing whether prices are unfair, unjust or excessive remains unresolved to this day….

Viktoria Robertson on ‘Excessive Data Collection: Privacy Considerations and Abuse of Dominance in the Era of Big Data’ (2020) Common Market Law Review 57 161

It is debatable whether EU competition law already contains – or could and should potentially develop – antitrust theories of harm that apply to third-party tracking of personal user data on the web. Focusing on data gathering, this paper – available here – assesses two scenarios under which EU competition law may deem the vast amounts of data gathered by certain digital platforms excessive: excessive data “prices” and unfair data policies. In both cases, the competition law assessment is autonomous from other areas of the law: while a breach of data protection rules is not automatically a breach of competition law, a company adhering to data protection rules may still violate competition laws. The paper finds that EU competition law already possesses the necessary tools to address excessive data collection, while data protection rules provide much-needed context for this type of exploitative abuse. Section II discusses data gathering through third-party tracking. Tracking occurs both on the web and in applications (apps) for electronic…

Marco Botta and Klaus Wiedemann  ‘To Discriminate or not to Discriminate? Personalised Pricing in Online Markets as Exploitative Abuse of Dominance’ (2019) European Journal of Law and Economics 1

The advent of big data analytics has favoured the emergence of forms of price discrimination based on consumers’ profiles and their online behaviour (i.e. personalised pricing). This paper, available here, analyses this practice as a possible exploitative abuse by dominant online platforms. It concludes that such practices can have ambiguous welfare effects, and be subject to a case-by-case analysis. It also argues that competition law is more suitable than omnibus regulation – particularly data protection and consumer law – to tackle the negative effects of personalised pricing, particularly because competition authorities could negotiate with online platforms different kinds of behavioural commitments that could significantly tame the risks of personalised pricing. Section II looks at price discrimination in online markets. Economists typically distinguish between three different types of price discrimination. First-degree price discrimination takes place when a firm is able to discriminate perfectly among its customers. Second-degree price discrimination means that the firm discriminates between its customers by granting discounts once…

Daniele Condorelli and Jorge Padilla ‘Harnessing Platform Envelopment through Privacy Policy Tying’ (working paper)

Entry into platform markets subject to strong network effects and high switching costs can occur in two ways. First, by offering drastically new functionality (i.e. through Schumpeterian innovation). Second, through “platform envelopment” whereby a provider in one platform market – the origin market – enters another platform market – the target market – and combines its own functionality with that of the target in a multi-platform bundle that leverages shared user relationships and/or common components. Envelopers capture market share by foreclosing an incumbent’s access to users; in doing so, they harness the network effects that previously had protected the incumbent. This working paper, available here,  revisits the economics of “platform envelopment”, with a focus on data-related strategies. In particular, it analyses the logic and effects of “privacy policy tying”, a strategy whereby the enveloper requests the consumers’ consent to combining their data in both origin and target markets. This allows the enveloper to fund the services offered to all sides…