The New Political Economy of EU State Aid Policy

Despite its importance and singularity, the EU’s state aid policy has attracted less scholarly attention than other elements of EU competition policy. Introducing the themes addressed by the special issue, this article briefly reviews the development of EU policy and highlights why the control of state aid matters. The Commission’s response to the current economic crisis notably in banking and the car industry is a key concern, but the interests of the special issue go far beyond. They include: the role of the European Commission in the development of EU policy, the politics of state aid, and a clash between models of capitalism. The special issue also examines the impact of EU policy. It investigates how EU state aid decisions affect not only industrial policy at the national level (and therefore at the EU level), but the welfare state and territorial relations within federal member states, the external implications of EU action and the strategies pursued by the Commission to limit any potential disadvantage to European firms, and the conflict between the EU’s expanding legal order and national

Estimating damages from price-fixing: the value of transaction data

We use a unique private data set of about 340,000 invoice positions from 36 smaller and larger customers of German cement producers to study the value of such transaction data for an estimation of cartel damages. In particular, we investigate, first, how structural break analysis can be used to identify the exact end of the cartel agreement and, second, how an application of before-and-after approaches to estimate the price overcharge can benefit from such rich data sets. We conclude that transaction data allows such a detailed assessment of the cartel and its impact on direct customers that its regular application in private antitrust cases is desired as long as data collection and preparation procedures are not prohibitively expensive

Regional State Aid Control in Europe: A Legal and Economic Assessment

This paper provides a legal and economic analysis of the European rules for regional State aid according to Article 107 (1) and (3) TFEU. It summarizes the historical evolution and the trends of regional aid rules and describes the economic rationale behind them. The main principles are discussed with reference to recent academic research, leading cases and the State Aid Modernization initiative ("SAM"). The current rules for the assessment of compatibility as laid down in the General Block Exemption and the Regional Aid Guidelines 2014 are critically reviewed in light of these principles

Effectiveness of bailouts in the EU

Governments in the EU frequently bail out firms in distress by granting state aid. I use data from 86 cases during the years 1995-2003 to examine two issues: the effectiveness of bailouts in preventing bankruptcy and the determinants of bailout policy. The results are threefold. First, the estimated discrete-time hazard rate increases during the first four years after the subsidy and drops after that, suggesting that some bailouts only delayed exit instead of preventing it. The number of failing bailouts could be reduced if European control was tougher. Second, governments’ bailout decisions favored state-owned firms, even though state-owned firms did not outperform private ones in the survival chances. Third, subsidy choice is an endogenous variable in the analysis of the hazard rate. Treating it as exogenous underestimates its impact on the bankruptcy probability. Several policy implications of the results are discussed in the paper

Modern Industrial Economics and Competition Policy: Open Problems and Possible Limits

Naturally, competition policy is based on competition economics made applicable in terms of law and its enforcement. Within the different branches of competition economics, modern industrial economics, or more precisely gametheoretic oligopoly theory, has become the dominating paradigm both in the U.S. (since the 1990s Post-Chicago movement) and in the EU (so-called more economic approach in the 2000s). This contribution reviews the state of the art in antitrust-oriented modern industrial economics and, in particular, critically discusses open questions and possible limits of basing antitrust on modern industrial economics. In doing so, it provides some hints how to escape current enforcement problems in industrial economics-based competition policy on both sides of the Atlantic. In particular, the paper advocates a change of the way modern industrial economics is used in competition policy: instead of more and more case-by-cases analyses, the insights from modern industrial economics should be used to design better competition rules