Second Annual Conference on Competition Enforcement in the Recently Acceded Member States, Brno, 23 April 2010

Economic analysis in competition lawPanelists:Milan Brouček - Chief Economist, Office for the Protection of CompetitionGergely Csorba - Chief Economist, Hungarian Competition Authority (GVH)Josef Bejček – Professor at Faculty of Law, Masaryk University in Brno

More economic approachin competition policy:Latest trends in the Czech Republic

Milan BroučekChief Economist

Second Annual Conference on Competition Enforcement in the Recently Acceded Member States, Brno, 23 April 2010

Opening•the role of economics/economists in competition

policy:o economics explains how markets work (models of

competition, firm behaviour, consumer behaviour)o economists have developed quantitative techniques

•role in particular areas of competition policy?•economists can quantify the „counterfactual“:

– „what if“ situation for mergers– „but for“ situation for dominance and cartels

I. More economic approach• conceptual issue - change in approach (effect-based

approach vs. form-based approach)• priority: assess effect (actual,likely), clear theory of

harm• individual approach to cases• necessity to apply analytical methods• greater demand on economic data• possible objective necessity and efficiencies

I. More economic approach• key role of economic analysis in definition of relevant

markets:– SSNIP test

• unavoidable: price-based conduct• use of quantitative techniques – no reason for different

approach in mergers and antitrust

II. Recent development - EC

• pressure from courts (CFI, ECJ)• apparent shift to more economic approach (MEA):

o horizontal merger guidelines (2004)o non-horizontal merger guidelines (2008)o art. 82 (102) reform – guidance (2009)o current art. 81 (101) reform

• giving priority to assess effects of merger/conducteffect-based approach (EBA)

III. Recent development - Office•background:

o no pressure from courtso very low pressure from undertakingso internal decision to apply MEA/EBA

•main objective:o increasing efficiency of competition policy

III. Recent development – Office• advantages:

o harmonization with some other key jurisdictions o too formalistic approach eliminatedo competition on merits recognized and permitted

• risks:o burden too high?o prioritization? o response from courts?

III. Recent development – Office•chief economist’s unit established (revived) - consists of

economists, financial analyst, statistician2009: 4 members, 2010: 7 members

•part of Competition Section within the Office:o engaged in: mergers, abuse of dominance, cartels,

vertical restraintso not engaged in: abuse of buyer power („retail chains“), state aid

•role of chief economist unit•part of Devil’s Advocates’ panel

IV. Office´s experience since 2009•mainly in abuse of dominance area:

o possible margin squeeze/bundling in ADSLo possible predatory pricing in bus transportationo possible predatory pricing in energy sectoro possible margin squeeze in energy sectoro possible refusal to deal in financial sector

•mergers:o influence of financial crisis?o recently two candidates for econometrics (unfortunately

not realized)

IV. Office´s experience since 2009

•analytical materials (exchange of information, RPM, art. 82 (102) reform, definition of relevant markets …)

•personal view: chief economist unit had/has significant impact in-house

•key task - data collection:– looking for optimal way (learning by doing)

V. Office´s further plans (visions)

•finish „first more economic“ cases•guidelines/best practices on applying MEA•cartels detection (screening markets)•using consumer survey•quantifying antitrust damages (i.a. to endorse

private enforcement)

Conclusions

•MEA: right direction of competition policy•Office has reflected/followed that direction•but:

– prioritization (econometrics)– conjunction: legal and qualitative assessment

•wish: economic analysis to be a standard tool used by Office, undertakings and courts…

Thank you for your attention.

milan.broucek@compet.czwww.compet.cz