The Economics of EC Competition Law: Concepts, Application and Measurement Simon Bishop Founding Partner, RBB Economics and Mike Walker Vice President, Charles River Associates LONDON SWEET & MAXWELL 2002
Foreword Preface List of Tables List of Figures Tables vii xi xix xxi xxiii 1. 1.01 The Goals of EC Competition Policy 1.04 The Use of Empirical Techniques 1.10 The Plan of the Book 1.12 Part I Concepts 2. Effective Competition 2.01 2.01 Some Potential Definitions of Effective Competition 2.04 The Two Extremes: Perfect Competition and Monopoly 2.11 What is the Weifare Standard for EC Competition Law? 2.22 Oligopoly Models 2.28 Dynamic Considerations 2.43 Summary 2.48 3. The Assessment of Market Power 3.01 3.01 What is Market Power? 3.04 Indicators of Market Power 3.17 The Relationship between Profitability and Market Power 3.58 Analysing Market Power in the Light of the Alleged Anti- Competitive Behaviour 3.70 Summary 3.74 4. The Relevant Market 4.01 4.01 Principles of Relevant Market Definition 4.07 The Cellophane Fallacy 4.34 The Commission's Approach in Practice 4.44 xv
Some Further Issues in the Practice of Market Definition 4.72 Approaches in Selected Member States: UK, Germany, Italy and France 4.88 Summary 4.94 Part II Application 5. Article 81 Vertical Restraints Horizontal Agreements The Role of Market Definition in Article 81 Summary 6. Article 82 The Economic Meaning of Dominance and Abuse Market Definition in Article 82 Cases Excessive Pricing Price Discrimination, Discounts and Rebates Aftermarkets Tying and Bundling Predatory Behaviour Refusals to Supply and Essential Facilities Collective Dominance under Article 82 Summary 7. Merger Control Economics and the Law The Role of the Relevant Market in Merger Analysis Horizontal Mergers I: Single Firm Dominance Horizontal Mergers II: Collective Dominance Vertical Mergers Conglomerate Mergers and Range Effects Buyer Power Entry Efficiencies Mergers in the New Economy Mergers Involving Failing Firms SLC v Dominance Conclusions 5.01 5.01 5.32 5.57 5.67 5.70 6.01 6.01 6.04 6.13 6.17 6.23 6.45 6.54 6.69 6.104 6.125 6.128 7.01 7.01 7.08 7.12 7.16 7.28 7.61 7.65 7.80 7.82 7.88 7.90 7.98 7.100 7.105 Part III Measurement 8. to Empirical Analysis 8.01 8.01 xvi
The Role of Empirical Analysis in EC Competition Law 8.03 Empirical Techniques Discussed in Part III 8.04 Common Criticisms of the use of Quantitative Techniques 8.14 Shock Analysis 8.20 Summary 8.24 9. Introducing Multiple Regression Analysis as a Tool of Antitrust Policy 9.01 9.01 Basic Econometric Analysis 9.04 Three Examples of Multiple Regression Analysis 9.09 Appraising Multiple Regression Analysis 9.15 Specification Tests 9.30 Appraising a Model in Practice 9.42 Summary 9.45 10. Estimating Elasticities 10.01 10.01 Econometric Estimation 10.02 Using Elasticity Estimates to Define Relevant Markets 10.11 Using Elasticity Estimates to Directly Simulate the Effect of a Merger 10.22 Diversion Ratios 10.39 Summary 10.48 Annex: Derivation of True Diversion Ratio Formulas 10.49 11. Price Correlation Analysis 11.01 11.01 Correlation Analysis as an Aid for Assessing Competition 11.04 The Use of Correlation Analysis in Commission Decisions 11.11 The Relationship between Price Correlation Analysis and Relevant Markets 11.15 Spurious Correlation 11-20 Benchmarking 11.26 Price Correlation Analysis and Variable Exchange Rates 11.31 Summary 11-44 12. Shipment and Transport Costs Tests 12.01 12.01 Two Tests Employing Shipment Data 12.03 The Use of Shipment Tests in Commission Decisions 12.15 Analytical Issues widi Shipment Tests 12.21 Transport Costs Studies 12.27 Summary 12.30 xvii
13. Price Concentration Studies 13.01 13.01 A Hypothetical Example of a Price Concentration Study 13.04 The Lack of Use of Price Concentration Studies in EC Competition Law 13.10 Analytical Issues 13.12 Summary 13.22 14. Bidding Studies 14.01 14.01 Empirical Analysis in Bidding Markets 14.03 Examples of Bidding Markets 14.10 Summary 14.14 15. Granger Causality and Cointegration Tests 15.01 15.01 Econometric Price Tests as an Aid for Assessing Competition 15.03 The Use of Granger Causality and Cointegration in Commission Decisions 15.09 Analytical Issues Arising from the Use of Granger Causality and Cointegration Tests 15.12 Summary 15.21 16. Summary 16.01 Appendices A. Commission Notice (97/C372/03) on the definition of relevant market for the purposes of Community competition law A.01 B. Commission's Vertical Guidelines ([2000] OJ. C291/01) B.01 C. Commission's Horizontal Guidelines ([2001] OJ. C3/02) C.01 D. Commission's Draft Market Analysis Guidelines for Bibliograph}/ Index Telecoms D.01 XVIII