Hans W. Friederiszick

The Role of Economics in Cartel Detection in Europe

In the wake of the successful implementation of leniency programs in and across the EU other instruments of cartel detection have become less prominent. In the period from 2002 to the end of 2005, the Commission adopted 30 statements of objections, a necessary procedural step before taking a decision in cartel cases, roughly 213 of which were based on leniency applications. While accepting the contribution of leniency in pursuing the overarching objective of antitrust policy in the context of cartels - deterrence and desistance of collusive agreements - the following article argues in favour of a more balanced tool set for cartel detection including economic methods.The paper is structured in the following way. Section 2 provides an introduction to the nature of collusion and the role of economics. Section 3 discusses the legal basis and the enforcement instruments available to the Commission for Fighting Cartels. Section 4 discusses the interdependency and the individual advantages of leniency and ex officio cartel detection. Section 5 puts forward the main challenges any economic methodology to trigger ex officio inspections has to deal with. Section 6 discusses the two main methods for cartel detection - top down and bottom up approaches. Section 7 concludes.

Hidden Efficiencies: On the Relevance of Business Justifications in Abuse of Dominance Cases

This article assesses the relevance of efficiencies and other justifications in recent Article 102 TFEU cases. Based on a review of all EU decisions and openings between 2009 and mid 2013 we find that procompetitive justifications still play a mediocre role in the EU Commission’s evaluations, except in IT related abuse cases. This stands in contrast to the policy goals expressed during the reform phase (2005 to 2009), the Guidance Paper and the increasing relevance of efficiency considerations in merger proceedings. We argue that this is due to a malfunctioning of the balancing test, i.e., the weighting of pro- and anticompetitive effects, as pro- and anticompetitive effects are often non-separable and non-monotone in Article 102 TFEU cases. In addition, the increasing practice of commitment decisions reduces transparency; little guidance regarding dynamic efficiencies further diminishes the relevance of business justifications in Article 102 TFEU cases. Policy options are discussed.

State aid modernization and its implications for the assessment of large investment projects: The relevance of market screens in the regional aid guidelines

The Regional Aid Guidelines foresee specific screens for an in-depth assessment of Large Investment Projects (LIPs): an in-depth assessment is initiated if the market share of the aid beneficiary is above 25% or the investment results in a capacity expansion above 5% in a declining market. It is currently being discussed within the broader State Aid Modernization package and also due to a recent court ruling on the case Propapier whether these market screens should stay as they are. Based on a dataset of all LIP cases notified under the 2006 Regional Aid Guidelines, we evaluate those market screens and find that the screens do have power to identify problematic cases – cases with a below average expected aid effectiveness and aid measures targeting specific industries. We also find, however, that the market screens are affected by a severe implementation problem and, hence, do not help to shorten phase I investigations. From a conceptual perspective, they are also not capable of identifying some of the potentially most problematic regional State aid cases. Policy options are discussed.

Die Großen Zwei – Wettbewerb im Kreditkartenmarkt? / The Big Two – How Competitive is the Market for Credit Cards

Zusammenfassung Der Kreditkartenmarkt wird von zwei Firmen bestimmt: VISA und Mastercard/Eurocard. Der Einfluss der „Großen Zwei“ hat sowohl in den USA als auch in Europa wettbewerbsrechtliche Bedenken ausgelöst und den bisher kaum wirtschaftswissenschaftlich analysierten Kreditkartenmarkt in den Mittelpunkt mikroökonomischer Analysen gesetzt. Die vorliegende Arbeit führt in die wesentlichen Rahmen- und Wettbewerbsbedingungen des Kreditkartenmarktes ein und stellt die im wettbewerbsrechtlichen Diskurs hergeleiteten Ergebnisse in einem breiteren ordnungspolitischen Rahmen vor. Die wettbewerbsrechtlich entscheidende Hypothese faktischer Marktmacht der „Großen Zwei“ wird anhand von Preis/Kosten-Vergleichen für die europäischen Länder analysiert: Eine Analyse der Preise und verschiedener Kostenindikatoren (Internetkosten, Zinsniveau, Kreditausfallrisiko) zeigt, dass die variablen Kosten nicht entscheidend für die Marktpreise im Kreditkartenmarkt sind. Dieses Ergebnis deutet auf eine faktische Marktmacht der Marken VISA und Mastercard/Eurocard in Europa hin. Die Bedeutung dieser Marktmacht wird anhand von Sonderverträgen dokumentiert. Summary The credit card market is made up of two main firms: VISA and Mastercard/Eurocard. The influence of the “Big Two” has triggered both in the USA and Europe, competition law concerns and placed the (as yet little economically analyzed) credit card market in the centre of microeconomic analysis. The present article introduces the essential market conditions of the credit card market, and presents results from competition law discourse in a broader economic framework. The crucial question from the competition law perspective of the market dominance of the “Big Two” is analyzed for European countries. Cost indicators (internet costs, interest rate levels, credit risk) are employed to show that the variable costs do not influence market prices in the credit card market. This result points to a dominance of VISA und Mastercard/Eurocard in the credit card market in Europe. Further evidence for this dominance is documented by special contracts.