Brief 61: The AEC test Royal Mail v Ofcom 28.05.20
After the Intel judgment, is passing the as-efficient competitor test (AECT) sufficient to establish the absence of an exclusionary pricing abuse? This was a critical question put before the UK Competition Appeal Tribunal (CAT) by Royal Mail, a near monopoly supplier of “final mile” delivery services for bulk mail, appealing a decision that its wholesale delivery terms were exclusionary.1 The CAT’s answer was an emphatic no. It found that the AECT is not required as a matter of law.2 It also claimed that there were no compelling reasons of economic principle that mandated the use of the test, and said that the test is of very limited or no use as a guide to compliance.3
This Brief discusses substantive aspects of the case and their relevance for wider consideration of the applicability of the AECT
Brief 60: Sainsbury’s/Asda and the CMA’s GUPPI decision rule: On the money or basket case? 16.10.19
In April 2019, the UK’s Competition and Markets Authority (CMA) issued one of its highest-profile decisions in recent years, prohibiting the proposed merger between the supermarket chains Sainsbury’s and Asda.1 In so doing, it relied solely on Gross Upward Pricing Pressure Index (GUPPI) calculations to determine if local overlaps in the parties’ grocery stores were likely to result in a substantial lessening of competition (SLC).
This Brief considers the wider implications of the CMA’s mechanical use of GUPPI values as a decision rule in this case.
Brief 59: A questions of balance: comments on a proposed new test for UK merger control 01.05.19
Digital markets are under intense scrutiny. A notable concern is that competition authorities have insufficient scope to block acquisitions of innovative potential entrants that might otherwise have become a disruptive competitive influence and a spur for increased innovation in digital markets. In one response, a recent report prepared for the UK Government by a digital competition expert panel headed by Professor Jason Furman has proposed significant reforms to the UK merger regime. These include a recommendation that the “balance of probabilities” test of harm currently applied by the UK Competition and Markets Authority (“CMA”) is replaced by a new test based on the “balance of harms”. Similar issues are also considered in a recent report commissioned by DG Competition: “Competition Policy for the Digital Era” by Jacques Crémer, Yves-Alexandre de Montjoye and Heike Schweitzer.
This latest RBB Brief discusses the merits of introducing a balance of harms test into merger control.
Brief 58: Beyond internal documents: the Commission’s recent conglomerate effects practice 10.12.18
The European Commission has shown an increasing reliance on internal documents in its recent merger practice. However, whilst findings from internal documents can be informative, the economic assessment of the market evidence available remains crucial to test any such findings and put them in context.
The importance of an economic assessment has been reflected in both Essilor/Luxottica and Qualcomm/NXP, two recent conglomerate merger cases. This Brief discusses the Commission’s review of these two cases, drawing some general conclusions on its current approach to conglomerate effects.
Brief 57: Mamma Mia! Mis-using Abba Lerner’s index to measure market power 26.11.18
In August 2018, the Federal Government released the Final Report of the Productivity Commission’s (PC) inquiry into competition in Australia’s financial system.
One of the main findings of that inquiry was that price competition in the banking system was limited and reinforced by opaque pricing and obfuscation. The basis for this finding was that all banks – large and small in Australia – exhibited pricing power and were able to use that power to keep prices above marginal costs.
That important finding was alleged to be supported by analysis undertaken by the PC using the Lerner index, which it claimed showed that all banks in Australia had market power, but that the major banks were the “dominant force in the market” and, as a result, were able to charge higher premiums above their marginal costs compared with other institutions.
This Brief explains why the use of the Lerner index to determine whether a firm has market power is flawed and casts doubt on the PC’s findings that all banks in Australia possess market power and moreover, that the major banks, in particular, have been able to set prices above competitive levels to the detriment of consumers.