Paolo Buccirossi

Competition Policy and Productivity Growth: An Empirical Assessment

This paper empirically investigates the effectiveness of competition policy by estimating its impact on Total Factor Productivity (TFP) growth for 22 industries in 12 OECD countries over the period 1995-2005. We find a robust positive and significant effect of competition policy as measured by newly created indexes. We provide several arguments and results based on instrumental variables estimators as well as non-linearities to support the claim that the established link can be interpreted in a causal way. At a disaggregated level, the effect on TFP growth is particularly strong for specific aspects of competition policy related to its institutional set up and antitrust activities (rather than merger control). The effect is strengthened by good legal systems, suggesting complementarities between competition policy and the efficiency of law enforcement institutions.

They Played the Merger Game: A Retrospective Analysis in the UK Videogames Market

We study the effect of a merger in a dynamic high-technology industry–the videogame market– which is characterized by frequent introduction of new products. To assess the impact of the merger between two large specialist retailers in the UK, we perform a difference-in-differences analysis comparing the price evolution of the merging parties to that of their 7 major competitors on an original sample of 196 videogames belonging to six different consoles. The results of our econometric analyses suggest that there has been a reduction in the general level of prices of both new and pre-owned games after the merger. This decline has been more marked for the merging parties, which suggests that the merger between Game and Gamestation did not lead to a substantial lessening of competition; rather it is consistent with the existence of efficiency gains.

Handbook of Procurement: Preventing collusion in procurement

The system of sealed bids, publicly opened with full identification of each bidders price and specifications, is the ideal instrument for the detection of price-cutting. (Stigler, 1964, p. 48.) Introduction Competitive procurements are commonly designed to select the most efficient contractor in a pool of competing firms and to maximize the buyers savings. Competition is not, however, firms’ preferred scenario. Firms dislike cutthroat behaviour. They would rather coordinate their actions in order to soften price competition and raise joint profit. Coordination, whether explicit or tacit, is both tempting and feasible since most procurements are repeated over time. In oligopolistic markets it typically takes a rather simple form. Firms set a high price and keep it stable over time only if no one undercuts its rivals at any point in time. Cheating is normally deterred by the threat of a possibly ever-lasting price war. The emergence of ‘bidding rings’ in procurement, that is, collusive agreements in tendering processes, is driven by forces very similar to those governing cartel formation in oligopolistic markets. As Stigler pointed out, transparency of procurement processes may facilitate collusion since a cartel can promptly identify and punish defecting firms. Successful bidding rings greatly increase supply price or reduce supplied quality at a given price and are therefore a central concern in procurement design. As John Vickers, Chairman of the UK Office of Fair Trade (OFT), puts it with: Collusive tendering deprives customers of the benefits of competition.

Leniency and Damages

Modern antitrust engenders a possible conflict between public and private enforcement due to the central role of Leniency Programs. Damage actions may reduce the attractiveness of Leniency Programs for cartel participants if their cooperation with the competition authority increases the chance that the cartel’s victims will bring a successful suit. A long legal debate culminated in a EU directive, adopted in November 2014, which seeks a balance between public and private enforcement. It protects the e ffectiveness of a Leniency Program by preventing the use of leniency statements in subsequent actions for damages and by limiting the liability of the immunity recipient to its direct and indirect purchasers. Our analysis shows such compromise is not required: limiting the cartel victims’ ability to recover their loss is not necessary to preserve the eff ectiveness of a Leniency Program and may be counterproductive. We show that damage actions will actually improve its eff ectiveness, through a legal regime in which the civil liability of the immunity recipient is minimized (as in Hungary) and full access to all evidence collected by the competition authority, including leniency statements, is granted to claimants (as in the US).

Western Balkans and the Design of Effective Competition Law: The Role of Economic, Institutional and Cultural Characteristics

In recent years, a vast number of countries worldwide have adopted competition laws, including antitrust provisions and merger control. This phenomenon is linked to the belief that competition is beneficial for economic welfare, and that competition law is capable of protecting competition in the marketplace. Literature shows that the effectiveness of competition law in a given country may depend on the economic, institutional and cultural characteristics of the country itself. This paper contributes to this literature by assessing what should be the optimal design of competition law in Western Balkan countries. First, we identify the “policy choice set”, the essential variables that define a competition policy regime. Second, we review the economic, institutional and cultural characteristics that should shape the optimal policy design. Finally, we examine the Western Balkan economies to describe where they stand, in terms of these characteristics, and derive policy implications on how their competition policy should be designed and implemented. Several conclusions emerge from our analysis. The existence of high barriers to entry and poor institutional quality points to the importance of an institutional set-up where the independence and transparency of the competition authorities is maximised within the context of an administrative model; also, no sector or enterprise, including SOEs, should be excluded from competition law enforcement, and competition law provisions should ensure that the voice of the competition authority is heard whenever new legislation that potentially affects competition is introduced. In terms of enforcement, while the role of advocacy emerges as crucial, along with the prosecution of entry-foreclosing abuses, a more lenient approach to merger control can be suggested, in the form of high notification thresholds.

Price or Variety? An Evaluation of Mergers Effects in Grocery Retailing

Assortment decisions are key strategic instruments for firms responding to local market conditions. We assess this claim by studying the effect of a national merger between two large Dutch supermarket chains on prices and on the depth as well as composition of assortment. We adopt a difference-in-differences strategy that exploits local variation in the merger’s effects, controlling for selection on observables when defining our control group through a matching procedure. We show that the local change in competitive conditions due to the merger did not affect individual products’ prices but it led the merging parties to reposition their assortment and increase average category prices. While the low-variety and low-price target’s stores reduced the depth of their assortment when in direct competition with the acquirer’s stores, the latter increased their product variety. By analyzing the effect of the merger on category prices, we find that the target most likely dropped high priced products, while the acquirer added more of them. Thus, the merging firms reposition their product offerings in order to avoid cannibalization and lessen local competition. Further, we show that other dimensions of heterogeneity, such as market concentration, whether a divestiture was imposed by the Dutch competition authority, and the re-branding strategy of the target stores, are important for explaining the post-merger dynamics. A simple theoretical model of local-market variety competition explains most of our findings.