Cover Pricing and the Overreach of ‘Object’ Liability under Article 101 TFEU

This article uses the example of cover pricing to show a possible overreach of liability under Article 101 TFEU, in relation to arrangements deemed to have the ‘object’ of restricting competition. Cover pricing is where a bidder seeks a non-winning bid from a competitor so that he can participate in a tender process without securing the contract. The wide meaning of ‘concerted practice’ means that a potential breach of Article 101 may arise even where the party receiving the request refuses to provide a cover bid. It is important that a restriction by object (which leads to the finding of an infringement regardless of whether the practice was implemented or had any harmful effect) applies only to the most serious arrangements between undertakings. It is shown that cover pricing very rarely has any anti-competitive effect and indeed the alternative (lawful) behaviour, of openly announcing a non-intention to win the contract, is more likely to reduce competition. It is nevertheless treated as an object restriction, mainly because it involves direct communication between competitors of pricing intentions. Article 101 may therefore be unable to distinguish some arrangements with ambivalent effects from the most serious cartel practices. It is argued that a greater effects analysis is needed (either in applying the law or calculating penalties), to ensure fairness and proportionality

The treatment of horizontal agreements aimed at solving incentive problems

If a group of horizontal rivals gets together to agree on a way to structure efficient production, are they violating competition law? The issue could arise where a group of producers of agricultural products gets together to form a cooperative or even where professionals in the same field get together in a partnership. On the face of it, each supply agreement between the producer and the cooperative or partnership is vertical, but the design of the collective rules, which govern for all, involves horizontal coordination. This article takes as the starting point the example of dairy cooperatives as they emerged in the later part of the nineteenth century as a solution to a challenge offered by new technology. We use the landmark contract law case of McEllistrim v. Ballymacelligott Cooperative to illustrate the ways in which competition law could be engaged when cooperatives are formed. Comparisons of Ireland and Denmark in the period leading up to the decision suggest that not only might the restraint be ancillary, but if not, it reduced costs, increased quality, and was welcomed by consumers (though these were in England rather than in Denmark or Ireland). The restraint also appears essential in some form, suggesting that either ancillarity or the application of Art. 101(3) Treaty on the Functioning of the European Union would have allowed the restraint to be used

Law and Peace: Contracts and the Success of the Danish Dairy Cooperatives

We consider the successful early emergence of cooperative creameries in Denmark in the late nineteenth century within the framework of the ‘new institutional economics’ presented by Williamson (2000). Previous work has focused on the social cohesion of the Danes, but we demonstrate that this was not sufficient for the success. The Danish legal system, which we compare to that of other countries, was also of crucial importance, along with the way in which rules were monitored and enforced. Of particular importance was the Danish cooperatives’ use of contracts, which we explore with evidence from a variety of primary and secondary sources.cooperatives; creameries; contracts; new institutional economics

Do Low-Price Guarantees Facilitate Collusion?

We examine the role low-price guarantees allegedly play in supporting supracompetitive prices. We find that when firms can commit to matching or beating any lower price announced by a competitor, all Nash equilibria yield Bertrand selling prices. This result casts doubt on the robustness of the conclusions of models which restrict attention to meet-the-competition clauses only.Center for Research on Economic and Social Theory, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/100775/1/ECON238.pd

Non-discrimination clauses in the retail energy sector

The British Energy regulator will soon review a non-discrimination licence condition which it imposed to ensure that energy retailers charge the same mark-up in different regions. Many consumers are loyal to incumbent firms, necessitating heavy discounting by entrants to attract customers, which had led to regional price discrimination. Matching characteristics of the energy market to models of discrimination, we identify the necessary conditions for the licence condition to have a positive effect for consumers, and explore whether the policy has helped potentially „vulnerable? consumers. We conclude that the most likely effect of the licence condition is to reduce competition in the mainstream energy markets, and welcome the regulator?s latest review of the retail market

Price and Behavioural Signals to Encourage Household Water Conservation: Implications for the UK

Water scarcity is a global concern. Even in non-drought situations the political and economic costs of developing water resources may favour conservation. Using a single high price to constrain demand raises distributional and political challenges. Increasing block tariffs (IBTs) have been proposed as a solution, balancing incentives for conservation with an equitable distribution of costs across households. Our survey indicates the international evidence on using IBTs to conserve water is mixed, highlighting the operational challenges of implementing effective IBTs. An alternative approach that may side-step affordability concerns are non-price conservation interventions. Robust evidence on behavioural interventions to conserve water is limited, although social comparisons appear effective. Nevertheless, existing price and behavioural interventions have typically been implemented in response to droughts, thus caution is needed when generalising this evidence to non-drought situations. We discuss the applicability of IBTs to the UK, highlighting an essential pre-condition is detailed research to understand a locality’s water consumers and their water demand

Regulating collective management organisations by competition: An incomplete answer to the licensing problem?

While the three functions of Collective Management Organisations - to licence use, monitor use, and to collect and distribute the revenue - have traditionally been accepted as a progression towards a natural (national) monopoly, digital exploitation of music may no longer lead to such a fate. The European Commission has challenged the traditional structures through reforms that increase the degree of competition. This paper asks whether the reforms have had the desired effect and shows, through qualitative research, that at least regarding the streaming of music, competition has not delivered. Part of the reason for this may be that the services required by the now competing CMOs have changed

Digitalisation and intermediaries in the Music Industry: The rise of the entrepreneur?

Prior to digitalisation, the vertical structure of the market for recorded music could be described as a large number of creators (composers, lyricists and musicians) supplying creative expressions to a small number of larger record labels and publishers. These funded, produced, and marketed the resulting recorded music and subsequently sold these works to consumers through a fragmented retail sector. We argue that digitalisation has led to a new structure in which the retail segment has also become concentrated. Such a structure, with successive oligopolistic segments, can lead to higher consumer prices through double marginalisation. We further question whether a combination of disintermediation of the record labels function combined with ‘self-publishing’ by creators, will lead to the demise of powerful firms in the record label segment. If so, this would shift market power from the record label and publisher segment to the retail segment (and new intermediaries such as ISPs), rather than increasing the number of segments with market power