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In reply to “TFEU competition policy – are we forgetting something?”

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Dear Alan, I would say we have it all under control.

From your blog post, I highlighted the issue of market segmentation and its implications to applied antitrust economics as the main concern, with political economy considerations in between. I here present my view on the matter.

First of all, one cannot speak of “the market” when performing an antitrust analysis, as different products will lead to markets with the most variable sizes. While some markets embody all the characteristics go be contestable internationally, others simply cannot go beyond a local setting, let alone national. It is hard to imagine that hairdresser on the other side of the street complaining of the bureaucracies to open up a saloon in Warsaw or in Barcelona when it wouldn’t even expand to Oporto.

This does not mean that there are no markets which could potentially integrate at the European level. What one can see is that, indeed as pointed out in the original post, economic integration has come short of what politicians made believe upon signing the treaties; whether this is because of the lack of conditions for greater integration (which I disregard) or because markets are in a somewhat natural way segmented (a phenomenon which will tend to dissipate in time) seems like an open discussion.

Being it as it may, one should remember that the ground floor of antitrust investigations is market definition, not only in the product but also in the geographical dimension. The SSNIP test seems capable of embodying the concerns regarding the feasibility of market analysis continent-wide.  If the Commission gets to consider the European market as the relevant one when assessing the antitrust effects of a merger between two Eastern Europe television operators or when assessing predation by Millennium BCP, it would probably be performing a large mistake.

Moreover, economics has come a long way beyond SSNIP to address issues of market segmentation (which is no more than having a set of markets for a given good instead of just one market). One example comes from Frank Verboven – who, interestingly  enough, is a member of the Economic Advisory Group on Competition Policy for the European Commission –, who did an empirical research in 1996 on why were car prices so different across Europe. He constructs and estimates an oligopoly model to analyze whether price discrimination, caused precisely by market segmentation, was responsible for it. He was able to estimate demands for each European country, identifying “foreign firm disadvantage” and “country of origin effect” in the process, and he could even test for collusion in each market.

As for the concerns expressed with the enlargement of the EU, to the extent that the vast majority of European OECD-member States had to rely on the European Community to build their own competition policy framework, I am skeptical on whether the newest EU members, most of which new even to market economy itself, have anything to lose with some homogenization of competition policy at the European level. Moreover, one should not forget that the goals of competition policy are everywhere independent from considerations like income per capita or the Gini Index, as the principles governing competition should be more or less the same in every country.

Another concern that I would like to comment is that with legal uncertainty. It is because of such issues that there should be a legal body on the matter, like the TFEU or other regulations regarding vertical restraints or mergers. Moreover, the defined thresholds for public intervention are usually sensible enough to avoid that firms fear the actions of competition authorities (unless for obvious reasons which only they know). Besides, to the extent that the first stages of any litigation process can be (and should be) done at the national level (as it should be recognized in all European countries’ constitutions), I also doubt that litigation costs would increase, not to mention the relatively small economic weight that new EU members have, making it difficult for a case to even reach the Commission.

This said, I restate my view that having a single European competition policy framework is far from being the greatest challenge to the economics of antitrust. Perhaps more important than that, and unfortunately, competition law is far from being a big issue in the European Political Economy.

João Garcia, 618

 

Sources:

Verboven, Frank, International Price Discrimination in the European Car Market, RAND 1996.

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Author: studentnovasbe

Master student in Nova Sbe

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