How Should "Protection" be Evaluated in Art. III GATT Disputes ?

This paper considers the economic analysis protection in Art. III GATT disputes. We first observe that the appropriate measure of protection and the level of protection that is acceptable have hardly been discussed in the case law and that panels tend to presume that a strong substitution between domestic and foreign products always lead to substantial protection. Next, we consider a stylised model of trade and find that the ability to raise price is a robust measure of protection and that protection falls significantly (for a given barrier) with the degree of product differentiation but also with the degree of rivalry. We also observe that the effects of non-tariff barriers on import values in ambiguous so that imports are not a robust measure of protection. Our findings suggest that the distinction drawn in the case law between "like" and "directly competitive and substitutable" products is not helpful. Finally, we suggest a method to evaluate protection in trade disputes which is inspired by the definition of the relevant market in antitrust.protection; GATT; market definition

The Scope of Conflict in International Merger Control

In this paper, we analyse the scope for conflict between national merger control agencies which assert jurisdictions simultaneously. We consider a positive model of merger control in which market definition and the analysis of dominance are both explicitly specified. We find that conflict in international merger control is less likely to occur when economic integration is high. Hence, "globalisation" should alleviate rather than exacerbate conflict. In addition, we observe that conflict is less likely to arise between countries of different size and for extreme policy rules (very lenient or very strict) towards dominance.international antitrust; merger control; extra-territoriality

Consumer Surplus vs. Welfare Standard in a Political Economy Model of Merger Control

This paper considers merger control in a common agency framework where firms and their competitors can influence the antitrust agency and where transparency - while making lobbying less effective - also implies real resource costs. We examine the performance of two alternative standards that can be assigned to the antitrust agency in the presence of these regulatory failures. We find that under a welfare standard, lobbying leads to the clearance of relatively inefficient mergers that decrease welfare (i.e. there is a type II error). By contrast, under a consumer surplus standard the agency will ban relatively efficient mergers that would increase welfare (i.e. there is a type I error). Lobbying actually reduces the extent to which this occurs, albeit at a cost in terms of real resources. We also find that a consumer surplus standard is more attractive when mergers are large, when increasing the size of a merger greatly enhances industry profits, when there is little transparency, and when co-ordination costs amongst competitors are low.political economy; merger control; institution design

The International Dimension of the Antitrust Practice in Poland, Hungary and the Czech Republic

This paper analyses how the competition authorities in the Czech republic, Poland and Hungary (CPH) have dealt with the interface between trade and competition in their actual practice. The following findings emerge (i) there has not been any significant conflict in the allocation of jurisdiction between CPH on the one hand and the EU on the other hand. This may however be due to a lack of integration between these countries. (ii) the definition of the relevant geographic market suffers from significant shortcomings in each country under review with a general bias in favour of narrow market definition. Problems are most severe in the Czech republic. (iii) Anti-trust agencies in all three countries have attempted to advocate competition in the formulation of trade policy. Developments regarding the independence of the agencies is however mixed. There are some worrying signs that the Polish agency has become less independent whereas the Hungarian agency has probably become even more independent (iv) anti-trust agencies in all three countries could indeed be pursuing objectives of industrial policy in the exercise of merger control towards foreign firms. The situation is most severe in Poland where the suspicion arises that profitable market positions have been auctioned off to foreign buyers in exchange for commitments which are unrelated to the competitive situation.antitrust; transition

The Allocation of Jurisdiction in International Antitrust

In this paper, we consider the organisation of international antitrust as an issue of institution design which involves a trade-off between an inadequate internalisation of external effects across jurisdictions and the risk of capture in a centralised agency. We focus on the first element of the trade-off and on merger control. We first point out that the current framework of public international law allows for wide discretion in the assertion of jurisdiction. We then consider various allocation of jurisdictions in a stylised model of international merger control which attempts to capture the essential features of the objectives being pursued and of the procedures being implemented in the major jurisdictions. We find that in this framework, much of the scope for conflict disappears. The fact that conflicts actually often arise in global industries must then be associated with the pursuit of objectives that antitrust authorities are not supposed to pursue. We also find that the allocation of jurisdiction matters surprisingly little for the final outcome.international antitrust; jurisdiction; merger control

Scope of Conflict in International Merger Control

In this paper, we analyze the scope for conflict between national merger control agencies which assert jurisdictions simultaneously. We consider a positive model of merger control in which market definition and the analysis of dominance are both explicitly specified. We find that conflict in international merger control is less likely to occur when economic integration is high. Hence, globalisation should alleviate rather than exacerbate conflict. In addition, we observe that conflict is less likely to arise between countries of different size and for extreme policy rules (very lenient or very strict) towards dominance. ZUSAMMENFASSUNG - (Die Konfliktmöglichkeiten bei internationaler Fusionskontrolle) In diesem Beitrag werden die Konfliktpotentiale zwischen Kartellbehörden untersucht. Die Analyse basiert auf einem positiven Ansatz der Fusionskontrolle, in dem die Kartellbehörde explizit modelliert wird. Es zeigt sich, daß Konflikte bei der internationalen Fusionskontrolle weniger wahrscheinlich sind, wenn Unternehmen auf integrierten Märkten konkurrieren. In diesem Sinne führt eine "Globalisierung" der Weltwirtschaft zu einer Reduzierung des Konfliktpotentials zwischen Wettbewerbsbehörden.

Consumer Surplus vs. Welfare Standard in a Political Economy Model of Merger Control

This paper considers merger control in a common agency framework where firms and their competitors can influence the antitrust agency and where transparency while making lobbying less effective also implies real resource costs. We examine the performance of two alternative standards that can be assigned to the antitrust agency in the presence of these regulatory failures. We find that under a welfare standard, lobbying leads to the clearance of relatively inefficient mergers that decrease welfare(i. e. there is a type II error). By contrast, under a consumer surplus standard, the agency will ban relatively efficient mergers that would increase welfare (i. e. there is a type I error). Lobbying actually reduces the extent to which this occurs, albeit at a cost in terms of real resources. We also find that a consumer surplus standard is more attractive when mergers are large, when increasing the size of a merger greatly enhances industry profits, when there is little transparency, and when co-ordination costs amongst competitors are low. ZUSAMMENFASSUNG - (Konsumentenrente vs. Wohlfahrtskriterium in einem polit-ökonomischen Modell der Fusionskontrolle) In diesem Beitrag wird die wettbewerbsrechtliche Analyse der Fusionskontrolle mit einem Agency-Ansatz erweitert, in dem Unternehmen die Kartellbehörde beeinflussen können und wo Lobbying Kosten verursacht. Es werden zwei unterschiedliche Entscheidungskriterien der Fusionsbehörde hinsichtlich ihrer Effizienz untersucht. Benutzt die Fusionsbehörde ein Wohlfahrtskriterium führt Lobbying seitens der Unternehmen zur Genehmigung von ineffiziente Fusionen, was zu einem Sinken der Wohlfahrt führt. Andererseits führt das Kriterium der Konsumentenrente zur Untersagung von verhältnismäßig effiziente Fusionen, was die Wohlfahrt ebenfalls reduziert. Daraus ergibt sich, daß eine Berücksichtigung der Anreizstrukturen der Unternehmen die Wettbewerbsbehörde zu beeinflussen, wohlfahrttheoretisch keine eindeutige Betrachtungsweise zuläßt. In diesem Sinne zeigt sich, daß das Kriterium der Konsumentenrente vorteilhafter ist, bei Mega-Fusionen, wenn Fusionen sehr profitable sind, wenn es wenig Transparenz gibt und wenn die Koordinationskosten zwischen den nicht-fusionierenden Unternehmen niedrig sind.

The Modernisation of EU Competition Policy : Making the Network Operate

This paper does not seek to evaluate whether decentralisation of the implementation of Art.81 ECT is desirable but simply analyses how the network of enforcers envisaged in the White Paper would operate. We identify two issues. We observe that in the proposed framework, simultaneous enforcement by several authorities is likely to occur and that each member states will have little incentive to take into account in its decision the interests of other member states. We show that such system of enforcement can have a "disintegrating effect", to the extent that it does not allow for a balancing between positive and negative net benefits across member states. We suggest that in order to avoid these effects, some co-ordination between the members of the network should be organised. In particular, we advocate the re-emergence in the intra-EC context of a 'positive comity' obligation and we suggest that a formal procedure for co-ordination between different institutions should be laid down (as in the US). We further observe that the accountability of antitrust authorities could deteriorate in the White Paper era. In order to address this concern, we suggest that institutional constraints like accountability and independence standards should be imposed on member states. Finally, drawing on the US experience with multiple enforcement, we argue that the role of the Commission should be as much to manage regulatory innovation (arising from the enforcement activity of member states) as to resolve conflict.antitrust; institution design

Endogenous Costs and Price-Cost Margins

Empirical work on price-cost margins often treats costs as exogenous. Allowing for endogenous costs when estimating price-cost margins is the topic of this paper. Methodologically, the endogenous cost model we propose leads to an additional equation that allows for the simultaneity in price setting in the product and the input market (labor in our case). In other words, the usual two-equation set-up (demand and first-order condition in the product market) is generalized to include a third equation, which endogenizes costs. We implement the model using data for eight European airlines from 1976-1994, and show that the treatment of endogenous costs has important implications for the measurement of price-cost margins and the assessment of market power.endogenous costs, price-cost margins, rent sharing, airline industry

The Political Economy of European Merger Control: Evidence using Stock Market Data

The objective of this paper is to investigate the determinants of EU merger control decisions. We consider a sample of 164 EU merger control decisions and evaluate the anti-competitive consequences of these mergers from the reaction of the stock market price of competitors to the merging firms. We then account for the discrepancies between the actual decisions and what the stock market would have dictated in terms of the political economy surrounding the cases. Our results suggest that the commission’s decisions cannot be solely accounted for by the motive of protecting consumer surplus. The institutional and political environment does matter. As far as firms’ influence is concerned, however, our data suggests that the commission’s decisions are not sensitive to firms’ interests. Instead, the evidence suggests that other factors - such as country and industry effects, as well as market definition and procedural aspects - do play significant roles. ZUSAMMENFASSUNG - (Die politische Ökonomie der europäischen Fusionskontrolle: Evidenz anhand von Aktienmarkt-Daten) In diesem Beitrag werden die Bestimmungsfaktoren für Entscheidungen der EUFusionskontrolle untersucht. Für eine Auswahl von 164 Entscheidungen der EUFusionskontrolle werden die wettbewerbsbeschränkenden Folgen dieser Fusionen berechnet. Dies geschieht anhand der Reaktion des Börsenkurses der Konkurrenten auf die Fusion. Erklärt werden anschließend die Abweichungen zwischen den gegenwärtigen Entscheidungen und dem, was die Aktienmärkte im Hinblick auf die politische Ökonomie, in welche die Fälle eingebettet sind, vorgeschrieben hätten. In Bezug auf Fehler vom Typ I (dem Anschein nach Wettbewerb bejahende Fusionen, die verboten wurden) decken die Ergebnisse einige systematische Fehler auf, untermauern jedoch nicht die häufige Behauptung, dass die Kommission auf Kosten der Konsumenteninteressen von den Interessen der Wettbewerber beeinflusst wird. Es werden auch systematische Fehler in Richtung von Fehlern des Typ II (scheinbar wettbewerbseinschränkende Fusionen, die genehmigt wurden) festgestellt, welche von einer Anzahl institutioneller und politischer Eigenschaften der EUEntscheidungsfindung beeinflusst zu sein scheinen. Die Ergebnisse unterstützen die Auffassung, dass wettbewerbseinschränkende Fusionen mit größerer Wahrscheinlichkeit in Phase I genehmigt werden, wenn sie Unternehmen aus großen Mitgliedstaaten betreffen, jedoch mit geringerer Wahrscheinlichkeit, wenn der relevante Markt national ist. Zudem wird festgestellt, dass die Häufigkeit der genannten Fehler während der Amtszeit von Kommissar Monti gestiegen ist.Merger Control, European Commission, Political Economy, Lobbying, Stock Market Data