Will the New U.K. Competition and Markets Authority Make Better Antitrust Decisions?

The United Kingdom has a unique set of institutions charged with enforcing competition law. The twin pillars are the Competition Commission (“CC”) and the Office of Fair Trading (“OFT”). In the coming parliament, legislation will be passed to merge them into a new Competition and Markets Authority (“CMA”), probably with effect from 2014.2 They each have a high reputation and are regularly ranked alongside the DOJ, FTC, and DG Competition as among the best in the world. OK, few would argue that any of these institutions is unimprovable, but it does mean there is much that could be lost if the CMA is less effective than its predecessors. Should we be worried

Competition Policy, Bailouts, and the Economic Crisis

The aims of this paper are twofold. First, I explain the economics of bank bailouts as distinct from bailouts for other sectors of the economy.Why do all the rules of good competition policy appear to fly out of the window when the banks get into trouble? Does this mean that we should abandon the rules equally for car manufacturers and other industries in trouble? I argue that a unique combination of two characteristics made it essential to bailout or nationalize the banks in the current crisis. No other sector of the economy can claim the same justification. Second, I review the threat of a retreat to politically- determined industrial policy and the need for vigilant implementation of economic effects-based competition policy

Compensating Competitors or Restoring Competition? EC Regulation of State Aid for Banks during the Crisis

We contrast the theory underpinning state aid for failing banks with that for failing firms in the real sector, and find that this should justify a different treatment for banks under Article 107. For example, there is little justification for measures to compensate rivals when the bank has been saved for reasons of systemic stability. We find that the formal guidance on bank restructuring aid takes insufficient notice of this. In four detailed case studies, we also find a number of inconsistencies with respect to size of subsidy, sustainability of divestitures or treatment of mergers. We conclude that while the Commission provided a useful constraint in the midst of a crisis of unprecedented scale and complexity, its approach could have been improved by focusing more closely on the fundamental justification of state aid in each case (i.e. the counterfactual)

Behavioural economics in competition policy enforcement for financial product markets

Behavioural Economics (BE) acknowledges that individuals often make choices that are not entirely rational. The UK Competition and Markets Authority and Financial Conduct Authority have recently highlighted the relevance of BE. This article explains the difference it makes to the economic analysis of competition and why it is seen as particularly relevant to financial product markets. BE is already being used to frame and test theories of harm. It also brings experimental techniques to the analytical toolkit. The current approach is illustrated with examples from recent and ongoing cases. Finally, the risks of over-intervention and unintended harm from inappropriate remedies are highlighted