CL news by nation = https://globalcompetitionreview.com/regions/spain
Best cl strategy: foc cas decisions
ec: Private actions seeking to nullify contracts for infringing antitrust rules cannot rely on the EU Damages Directive, but can still use decisions from competition authorities as strong rebuttable presumptions of wrongdoing
CLP shapes alternative economic systems
CLP polar opposites:
Competition, like fire, is a great servant [if controlled], and a terrible master [ if perfcomp or monopoly]
a. monopoly
many buyers but only one seller, who therefore, may increase prices [productive inefficiency PI] and reduce supply [allocative inefficiency (AI)= deadweight loss] …moreover, monopoly brings excessive staff, excess capacity or excessive product differentiation. This situation is also referred to as X-inefficiency
b. perfcomp
[allocative efficiency (AE) + productive efficiency (PE) ] =max [ society’s welfare (EW) + consumer welfare (CW)] = max. EE [ economic efficiency]= Pareto efficiency = the welfare of one, cannot be improved without lowering the welfare of another……HOWEVER, THIS EFFICIENCY ACHIEVED BY PERFCOMP, IS ONLY (static = short term)
Under perfect competition, there are many buyers and sellers, and prices reflect supply and demand. Companies earn just enough to stay in business and no more. If they were to earn excess profits, other companies would enter the market and drive profits down….perfcomp requires all producers and consumers to have full and symmetric information and no transaction costs….sellers are small firms [incapable of controlling prices by adjusting supply]. They sell homogeneous gs [minimal differences in capabilities, quality, and pricing.] so gs are substitutable….and there is no point in:
- marketing
- BAD: innovating …thus, perfectcomp prevents DE (dynamic=long term efficiency) ……Firms cannot set themselves apart by charging a premium for higher-quality products and services. For instance, it would be impossible for a company like Apple to exist in a perfectly competitive market because its phones are more expensive
- BAD: investing to expand production (to cut consumer prices, and raise corp profits] …thus, perfcomp does not allow for economies of scale, since firms have near zero profit
- gov regs: regs are to protect the EW, make sure that competition is neither too perfect, nor too imperfect. 2 types:
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-
- a. pricecontrols : gov regs on wages, prices, or their rates of change.
- b. entry/exit controls [eg to reg. access to information and transaction costs, so that they are neither too asymmetric, nor too symmetric
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gov/cma/clp goal, is only to defend COMPETITION, and NOT PERFECT COMPETITION, NOR COMPETITORS…WHY? because EW would be harmed, if gov/cma/clp defended all competitors (garanteeing perfect comp) = garanteeing entry access + competition on equal grounds + subsidies/ais [to artificially promote entry or prevent firms from exiting]
A/ NORWAY SYSTEM: BEST POLITICAL SYSTEM
OIL FOR DEVELOPMENT PROGRAM [eg norway is a member]
The aim of the OfD Programme is to reduce poverty by promoting economically, environmentally and socially responsible management of petroleum resources. The programme is currently being phased out, and will be concluded in 2024.
this Fund is composed of 40% bonds, and 60% foreign equity [in many different , worldwide, market indices and smes – to diversify risk -]….so norway does not try to beat the market, but to be with the market….EG. would be wrong for oil countries to give free oil rents to their citizens, as it would start the Dutch Disease, by increasing domestic demand [ = excessive private and/or public domestic spending] …unless the country had the capacity to absorbe such excessive domestic spending
2. not reducing taxes (currenty 78%) to NR fims (extracting…in norway)….the NR firms do not complain about the high tax, because they still make huge profits, and they are selected via transparent, competitive procurement, etc
B/central planning (COMMUNIST SYSTEM) = STATE MONOPOLY
can sustain growth for a period, but most new goods and services would not become available – as was evidenced by the catastrophic failure of communist planned economies by 1989.
C/ COMPETITION = CAPITALIST SYSTEM:
competition benefits everyone by encouraging continuous economic growth. The goal of capitalism is to reach a perfectly efficient market (=where neither buyers nor sellers have market power). this system forces everyone to tell the truth, and gets the right product, at the right price, to the right people….But … competition can lead to inefficient allocation of resources. to avoid this, in some cases, cos need to cooperate..eg.is very difficult, for instance, to travel north/south across London, Manchester and Glasgow because competing railway companies saw no point in joining their networks beyond their terminal stations at Victoria, Waterloo, Euston and Kings Cross, for instance…..while the multitude of competing lines around central London offered considerable resilience during the ww2 london bombings…..but competition favours the rich: Some are born rich. and money pays lobbying etc. is immoral …. private health care can start to shunt the poor into long waiting lists. Ticket resale sites – and selling TV rights to major sports – have destroyed the community and social events. There have been calls for tradeable procreation permits, and for tradeable pollution permits and carbon trading, which allow wealthier folk to bribe poorer people to make sacrifices.
competition (like democracy) is far from perfect, but it is often the least bad of all the alternatives that have been tried. competing humans do not usually lose their humanity. Look at the camaraderie of athletes at the Olympic Games…nobody should want humans to be purely profit driven.
One problem is that free (competitive) markets fail to take account of the social costs that they impose on others – such as on the environment….eg. huge costs imposed on the rest of us by the failures in the financial markets that led to the 2008 financial crisis, and more recently to the problems associated with hyper-competition such as high frequency trading.
This is why competition needs to be constrained by regulation and supplemented by Consumer Protection.
some countries are thrived by encouraging cartels. Germany’s economy grew rapidly in the late 1800s whilst its government encouraged companies to coordinate their prices, production levels and marketing. The Germans believed that this helped achieve economies of scale, remove damaging competition and facilitate R&D and investment. whole areas of German industry had been cartelised.
There is a related debate about whether the state should support national champions at the expense of local or international competitors
E/ globalisation (=world liberalization)
Globalization: process whereby: national cultures, national economies and national borders are dissolving. Thus, it involves political, economic and cultural dimensions. In this new globalised world, the doctrine of state sovereignty is being superseded by market forces and global governance.
PROS:
Proponents of trade liberalization claim that it ultimately lowers consumer costs, increases efficiency, and fosters economic growth.
CONS:
-nations end up giving up political/legislative/judicial soverignity to intl.bodies that are incompetent and impose their own interests , or general interests, over the nations particular interests, which need tailor-made policies…eg. El Salvador is now a prosperous country since they stopped listening to UN, wto, etc.
-globalization perpetuates inequalities in the world:
The inequality that globalization causes inside countries is because those without capital cannot gain from the economic integration inherent in globalization; thus those with capital grow richer and those without grow poorer….rapidly imposed globalization, as in Russia in the early 1990s, does increase inequality. However, naturally occurring globalization creates stability
-leads to homogenisation of culture
-is overly Western-dominated
– financialisation: the combined effects of: [shareholder primacy, shp + common ownership , cow + the concentration of asset management, cam], influence competitive strategies [of nations/corps], by corrupting concepts like ‘own-firm profit’ or ‘value maximisation
-creates new global problems: international organised crime (eg women trafficking), global terrorism, and climate change
-strengthened the concentration of firms downstream
-led to the exertion of a buying power upstream, particularly over farmers, since their dispersal is now total.
<> cocoo: press for a change in clp, since this map, harms the collective well-being (wpi) …..curiously, there is still no international body capable of correcting this market failure ….. eg farmers in developing nations, like the Ivorian cocoa farmers, lack resources to setup/enforce their own competition clp…..the WTO is limited to promoting just one very rudimentary form of competition (free circulation of goods).
<> cocoo: inapropriate liberalising laws are an entry barrier for smaller companies for basic goods, thus they are forced to remain informal, and consequently cl and consumers are not respected.
eg. small Colombian exporters of cut flowers were also harmed by the Flower Label Program (FLP) which is a private, voluntary eco-labelling programme led by German industry, aimed at restricting the use of toxic chemicals and pesticides for the cultivation of such flowers….The Colombian government’s submission to the WTO contended that the FLP is arbitrary and discriminatory, as it imposes significant compliance costs , and is de facto mandatory, since non-compliance results in ‘negative pressure
<> cocoo: challenge countries’ failure to file submissions to the WTO…. and for wto to have true cl powers.
-the ‘rule of reason’ (ROR) is the analysis of a Product Standard(PS) (eg FLP) , to balance its comp benefits v anticomp effects…however, the ROR mechanism is absent at the international level
<> cocoo will apply the ROR in favour of developing nations
-The GATT/WTO legal framework on PS:
PS types:
-mandatory (government driven) : are regulated by GATT (General Agreement of Tariffs and Trade)/WTO agreements.
– voluntary (market driven)
-‘product-related’ PS (PR-PS) , changes the characteristics and quality of the final product, to protect the end-user or the environment
-Non-product-related PS (nPR-PPMs) only changes how the product is created/harvested…egs: protection v slave labour; protection of the environment or the welfare of animals
LOOPHOLE: the lack of coherent recognition of nPR-PPMs at the international level, harms developing countries
<> cocoo will advocate the formal and transparent regulation of nPR-PPMs.
-Korea Beef Case: WTO Appellate Body, held Korea responsible for violation under Article III:4 (NT) because domestic law gave a sufficient incentive for its retailers to act in a manner inconsistent with the WTO. <> cocoo: identify ps that violate wto Article III:4. on the basis that affects internal sales, discriminates between like products, and fails to afford like treatment to imported products
- Government protection, preference and subsidies
- (EU prohibits most state aids.)
- Protecting inventions etc.
- (Intellectual property legislation forbids the copying of new inventions for a number of years. only after, competitors are allowed to make their own copies)
- Price fixing or market sharing (“cartels”)
- Abuse of dominant position or market power
- Merger control
- Inefficient markets (“Market Studies and Investigations”)
- Utility monopolies and oligopolies
- it is in practice difficult to achieve such ideal competition in all cases (it is for instance not sensible to have hundreds of aeroplane or computer manufacturers, or national newspapers);
- there are some natural or near-natural monopolies (it is for instance not sensible to run more than one electricity cable, or gas/water pipe, to each house);
- it is sometimes sensible for governments to protect the interests of inventors (through patent protection) …
- … or protect firms in key industries or disadvantaged regions
- or protect vulnerable customers (such as the elderly);
- and it is impossible for customers to have perfect information about complex goods and services.
On the other hand, companies protected or subsidised, or companies which dominate an industry, can too easily become complacent and inefficient; and they may go even further and charge higher prices and make excessive profits.
Thus, Governments issued policies to balance the need to grow large and efficient companies, against the need to protect customers against exploitation. Competition Policy is the responsibility of the Department for Business (SOS). Day-to day, however, all the policies (except private actions) are delivered through these specialist agencies:
- The policing of the EU single market and state aids, is by DGCompetition
- UK intellectual property policy is implemented by the Intellectual Property Office (ipo)
- ‘economic regulation’, = eg cp , implemented by cma…The CMA is also responsible for giving advice to the government where government’s policies and legislation is having a detrimental effect on competition and innovation.
- utility regulation – is implemented by regulators such as Ofgem, Ofcom, Ofwat and ORR.
- Private actions heard by the CAT
- uk NSI ACT: 17 AREAS (MA CAN BE BLOCKED ON WPI GROUNDS ) BY CMA…..SOS MAY INTERVENE [INVESTIGATE AND DECIDE THAT A MA VIOLATES WPI, AND REFER THE MA TO CMA , TO BLOCK IT]………OUTSIDE THE 17 AREAS, MA CAN ONLY BE BLOCKED (BY CMA) ON ee GROUNDS
eg: SUPERMARKETS
Is heavily constrained because, eg:
- Expensive services (such as cancer treatments and university courses) have to be made available to the least well off in our society, not just those who can afford them.
- But the middle class often ensure that it is only the well-informed and/or the well-networked and/or the better off that can make full use of competition.
- a multiplicity of suppliers, which is hard to arrange in smaller towns and in rural areas
- spare capacity (under-used teachers, wards, doctors) has to be paid for by someone.
- Unsuccessful institutions have to reduce capacity – but that always runs into serious opposition
- And the customer might not always be right. The university that most effectively sells itself to 17 year olds might not employ the best teachers. Even more worryingly, its teachers might mark generously so as to avoid upsetting students
Competition between Professionals
when surgeons started to publish their success rates etc. , it encouraged them to learn from one another, and so good practicespread much more quickly. The result was that most surgeons’ performance came up to near the standard of the best, and patients no longer needed to ‘exercise choice’
BALANCING OF GOALS
sadly, most jurisdictions today balance in favour of ee goals, over wpi goals eg:..UK, Belgium, usa….however, in South Africa, wpi is even with ee
A/ CLP GOAL = EE (‘economic efficiency’) = AE + PE . slc test. ee goals: deliver benefits to consumers: low prices • high output and quality • Promote innovation (disruptive & sustained) • Promote consumer choice & variety competition
CLP GOAL = EE (‘economic efficiency’) = [AE + PE ] = EW = [PS(producer surplus) +CS (consumer surplus)], current and future
B/ CLP/WPI GOALS : GREY AREA : • Fairness (no exploitative conduct) • Freedom to compete/freedom to trade •Limit abuse of economic dependence & superior bargaining power • Ensuring market access for small and medium undertakings •Privacy and informational selfdetermination
C/ wpi goals: can be translated into ee goals, thus, is wrong to name them ‘non-economic’. ee goals and wpi goals, are compatible. wpi goals egs: all examples . egs. •Protection of the environment, biodiversity and sustainability •Security of supply • Right to food • Competitiveness of the local industry • Geopolitical concerns & national security • Promotion of employment & social welfare •Promoting human happiness or capabilities; financial stability, industrial growth, industrial policy, innovation, national security, media plurality and empowering historically disadvantaged persons
a ‘market’ is not a set of products which ”resemble“ …. but is a set of products, or geographical areas, in mutual competition…eg. bananas would be in the same market [as oranges], if the price of bananas cannot be raised (much), becos consumers would then substitute bananas for oranges.
products (or geographical areas) in the same market, have their prices correlate positively
The test to identify a market, is the the SSNIP test (= hypothetical monopolist = Small but Significant Non-transitory Increase in Prices)
Rent-seeking activities : firms competing (bribing, lobbying) for moprents (to get mop/map), waste welfare resources, as they produce no (or negative) social value
Market power: MAP = [prices – marginal costs of production]
MOP = SMAP = entry barriers = DP (DOMINANT POSITION) = an undertaking has DP, if it has substantial and durable map, so that they could, if they wished, charge nearmop prices. DP firms/nations is not a clp breach, unless they do anticomp.
Diff:
- DP firms/nations have a propr higher duty to prevent anticomps…but only if they commit anticomps [eg abuse by charging nearmonop prices], they commit ADP …moreover, ADP violates clp, only if:
(1) substantially harms comp, and
(2) anticomps outweigh any EE
- a non DP firm, even if commit anticomps [eg abuse], is not ADP, thus it does not violate clp….eg: Article 2(3) of UK/EU mcr : duty to ban only those mergers that could potentially create or reinforce a DP [dominant position : is allowed] …….cocoo: This arts breach economic principles, since they also should ban mergers which do not create/reinforce a DP, but decrease EW/wpi (usual in markets with few firms)
AEQ [allocative efficiency quantity and quality]
AEQ is a type of EW GAIN:
diff:
- PMQ (profit maximising=market equil quantity) = **what society gets, if there is comp = [Qd=Qs]….in a competitive market, (MSB>MSC)…the msb (social benefit from a bit more gs output) exceeds the MSC (the extra cost to produce that little more gs output) creates EW…..This causes the industry to grow, until the AEQ (what we want) is reached.
- AEQ (ae quantity) = what society wants = [MSB=MSC] =[marginal social benefit = marginal social cost]…the mix of gs produced matches consumer preferences; how?: not producing (gs) too much or too little…there is no deadweight loss or waste of resources. the amount and quality of gs production (output) is finetuned to the exact needs/wants of society, at the least cost of resources…
** EXCEPTION: the “invisible hand” of capitalism gets society, more than just PMQ….it gets us AEQ!!( WHAT SOCIETY WANTS/NEEDS)
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- (D=MSB)…this is true if there are no positive externalities (spillover benefits))
- (S=MSC)….this is true if there are no negative externalities (spillover costs) ex: NO ENVIRONMENTAL HARM
- THEREFORE if there are no negative externalities (spillover costs) and no positive externalities (spillover benefits), competitive markets (capitalism) achieve AEQ (WHAT WE WANT)= [MSB=MSC] = [D=S]. …self-interested, profit maximizing, COMPETING firms end up doing what is best for society (AEQ), as if there is some “invisible hand ” guiding their decisions..This is the “invisible hand” of capitalism
AIQ :[allocative inefficiency quantity and quality]
type of welfare loss caused by smap=mop, bringing prices above marginal costs. this causes higher PS [producer surplus], but not enough to compensate for the lower CS [consumer surplus]. Because [welfare = CS + PS], the CS loss, brings welfare loss…… some people may gain without imposing losses on others.
PEC [productive efficiency cost]
economies of scale = type of welfare gain, thanks to comp, getting us ever closer to the chinese model: maximum output at the lowest cost……Competition ensures that production occurs at the lowest possible cost and without waste, ow, rivals will do it cheaper.
PIC [productive inefficiency cost]
type of welfare loss caused by smap/mop, bringing high cost of production caused by operating below production potential, because the capital and/or labor are underutilized….waste (welfare loss) because the full gs that consumers need/want, are not produced.
<> cocoo will find the invisible boundary [where toomuch/toolittle competit harms consumers ], in a market, and identify which pbs/soes/firms are crossing it + cocoo v gov for failing their duty to properly regulate/subsidise, so that there are sufficient gs [quantities and qualities [minimum quality standards not met]] , so that more EW is gained
MA is a more profitable strategy than predation (DP firms cutting prices to kick out rivals or deter entry)….however, even more profitable is to first engage in predation , and then to ma rivals (at a lower price than if there had been no former predation). <> cocoo to block this mergers
the ec has a duty to consider the interest of consumers in all aspects of its competition policy.
incomplete contract: [ eg ip development contracts]
a contract that is too gappy or indefinite in important respects, to be enforced. in some cases, a court should fill gaps. in other cases, there is a duty to negotiate in good faith to make an incomplete contract sufficiently complete, or to reach a contemplated final contract [when the reason the contract is incomplete is because there was a contemplated final contract].
Contracts are incomplete when they are complex, or do not specify what happens under all contingencies…
<> cocoo to identify incomplete [ eg concession] contracts, and seek that is completed, by negotiation, or by court.
<> cocoo.uk v ec/ca for failing their duty to promote a more competitive allocation process, thus they failed a duty to promote ew
<> cocoo.uk may research auction houses’ [award concessions] designs, to identify anticomps and/or incomplete contracts
how gov/soes impact clp:
- Legislation and regulation;
- Subsidies
- Procurement
- market activities :
many public sector firms (soes) compete with private firms. this causes anticomps [thus reducing profitability of priv.firms…..this is unfair because the taxes they pay are subsidising their public firm competitor ]…thus, more stringent competition requirements should be placed on public firms, to prevent anticomps resulting from:
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-
- public/private differences in regulations;
- lower cost of capital of public firms, as they are not required to earn a commercial rate of return or can borrow funds at lower rates
- public firms have no requirement to pay taxes.
- public firms may be exempted from anticomps.
- public firms may receive gov subsidies. if they are used to cross-subsidise commercial activities, the public business will have a comp advantage
- public firms get lax public procurement rules
- some public sector agencies have the power to collect data for public purposes….they have an advantage if they can use this data on terms more favourable than the private sector.
- if the public firm is less efficient [actually or potentially] than private providers, but is able to “crowd out” private firms, will result in a higher tax burden and allocative efficiency (AE)is reduced.
- if the public firm is less likely to innovate and entry is deterred, Dynamic efficiency (DE) is reduced.
- public firms have greater incentives to exploit their map, and more opportunity to conceal anticomps…..In particular, an SOE [State Owned Enterprise] may :
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-
- set prices below marginal production costs, especially on products for which demand is price-elastic
- understate its marginal cost of production and overinvest in capacity, in order to relax a binding prohibition on pricing below cost
- have stronger incentives [than a private firm] to raise its rivals’ costs and to exclude rivals….. For example, SOEs often enjoy privileges and immunities
- have objectives other than profit maximization
- benefit from statutory monopolies….Consequently, SOEs may not need to recoup the costs of anticompetitive activities by raising prices
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CP is the responsibility of the SOSBIS…THUS, COCOO WILL CHALLENGE SOSBIS FOR CP CHANGES
There is an increase in wpi arguments during crises and in emerging economies, THUS, COCOO MUST FOCUS ON DEVELOPING COUNTRIES AND CRISES
AB aggressive behaviour [to cut the throats of newcomers], ARE remedied by the CMA without even finding (adp) evidence…THUS, COCOO WILL FIND AB FIRMS, AND THREATEN THEM TO CONTACT CMA TO IMPOSE REMEDIES/FINES
RTEFA = refusal to ef access
[essential (facility=service=product) doctrine]=efd
RTEFA is a type of RTD….but could still be challenged on both clp(efd) grounds, and on wpi grounds [eg: chatham bus station]
CAS (eg cma/ec)
have 2 clp mandates: enforcement + advocacy
in developing countries, the state plays a double role: as ca, and as publicfirms….resulting in corruption and anticomps…. Thus, the first step to become a developed country requires cas to be indep <> cocoo challenge nations’ [regs/laws that are in breach of their own constitutions/int.treates], by failing to declare the indep of cas
<> cocoo: press/supercomplaint v CA, to amend some regulations, as it is failing its 2 mandates + failing its independence
<> cocoo v nations that fail to give their cas indep and sufficient powers to restrict anticomp
ADP
Facebook CASE: court held: the merging of the data constituted a violation of the users’ constitutionally protected right to informational self-determination, the Court decided facebook was liable for adp
In Astra Zenecca the CJEU found that misleading representations to the patent office, a possible regulatory offence, could constitute adp, if it was part of a strategy by a DP seeking to unlawfully exclude rivals.
A patent can be revoked if the patentee’s prescribed declaration: “…contains a false statement or representation which is material and which the patentee knew or ought reasonably to have known was false at the time made”.
CLP AND PATENT(ip) POLICY, are in conflict:
- clp restricts the abuse of smap
- ip policy confer map
cocoo opinion: developing countries should balance in favour of clp , over ip policy, because most ips belong to developed countries, and bring anticomps that harm developing countries.
<> cocoo to claim that a specific european/usa ip , is not subject to clp in a developing country, on basis that clp + wpi, outweigh ip
if an IP causes ADP, the clp exemption must be withdrawn or limited
<> cocoo will claim that an ip causes ADP, so it must be withdrawn/limited
CLP EXEMPTIONS
1/IP [eg patents] are clp exempted, unless causes ADP
2/IF THERE IS NO UA/PRACTICE, CLP IS NOT APPLICABLE + IF THERE IS UA/PRACTICE THAT IS EXEMPTED, CLP IS NOT APPLICABLE :
UAS [undertaking economic agreements or persons(legal/physical)]
In cases involving uncertainty [on whether a proposed activity is ua [subject to clcp], and if so, whether, the ua would be anticomp, the CMA should be approached to provide a non-binding ‘Short-form Opinion’ 0845 7 22 44 99.
PB’s gs purchases are ua, only if there is a subsequent economic offer/supply of gs
Only uas/practices are subject to clp….moreover, the ua/practice are only subject to clp, if are not exempted:
– if does not Contribute to improving the production or distribution of goods, or to promoting technical or economic progress
– if does not Allow consumers a fair share of the resulting benefits
– if does Not impose restrictions on firms that are not indispensable to the attainment of the above-listed objectives
– if does Not give rise to the possible elimination of competition in a substantial part of the market of the products in question
-if is not in a block exemption: EC: Block exemption clauses [uas/practices that are not subject to clp]: [exclusive distribution and purchasing arrangements, R&D cooperatives, patent and know-how licensing, and specialization agreements]
< > cocoo.uk will identify nonexempted or wrongly exempted anticomp uas/practices...eg strikes; get high earners; etc
3/ PROF.BODIES:
clp exemptions for professional bodies (eg sra), are not justifiable on economic grounds, except for qualifications and standards of services
<> cocoo will destroy prof.body exemptions unlawfully (selfregulated) (self) granted [eg advertising ban on solicitors] , other than qualifications and standards of services
4/ Insurance, investment brokerage and banking services: clp exemptions are granted only if needed to reduce risk and uncertainty.
<> cocoo will destroy clp banking….exemptions unlawfully (self) granted [= clp exemptions other than to reduce risk and uncertainty]: eg exemptions for pricing of insurance or security brokerage services, or to setting of interest rates and service charges by banks]
5/ R&D and Environment protetion, are clp exempt, if based on coop between rivals…because cooperation and competition between firms are not in conflict.,,eg in pharmaceuticals and electronics, firms cooperate in R&D but compete in the pricing and sale
<> cocoo identifies where coop. becomes anticomps
6/ in some jurisdictions, clp exemptions are granted for “special” sectors such as energy, liner shipping, air, trucking, professional sports, small business and government enterprises….and for ‘natural monopolies’.
In most of these cases there are no credible reasons for clp exempting…eg: privatization, deregulation, structural changes and application of clp to ‘natural monopolies’ like airlines, power and telecommunication sectors, have increased productivity, lowered prices and improved services.
<> cocoo v countries that grant clp exemptions where they should not
EU CLP/WPI GOAL BALANCING [kneepkens]
diff:
- -ec. benefits (EB=EW) = wpi.ua
- -nonec benefits (NEB=NEW) = wpi.nua =wpi non-ua
the EAF (exempt.analytical framework) uses the EP*, to balance conflicts between the cartel prohibition, and [wpiuas = wpis of ec.benefits…because uas are, by definition, economic]
only gov (demolegit), and not the courts, may balance the cartel prohibition against noneconomic benefits [wpis that are not uas]
diff:
- CLP GOAL = WPI.UA = EE (‘economic efficiency’) = [AE + PE ] = EW = EB = WPI.UA = [PS(producer surplus) + CS (consumer surplus)], current and future …..(total: of producers and consumers) EW= consumers’ satisfaction in a given market only. Can only be computed if it’s first translated into monetary terms. this is done by measuring: [consumer surplus(profit) = CS = [price paid by consumers – consumers preference ] = max price consumers would have paid]]
- SW(societal welfare) = [wpi.uas + wpi.nuas]
if ew ignores the costs to 3ps/society, then: societal welfare < total welfare
an ua that increases cs [max price consumers would have paid], it also, indirectly, increases ew, because the consumer is now able to consumer more of other products/services. This violates clp
7 wpi types
paternalistic benefits wpiuas = WPI.P.UA
ec: are only eligible in the 1stcond, if they can increase/protect consumer surplus
ecj/cma: asnef/equifax case: pbwpiuas are EP eligible . ecj held that the creation of a creditors register could prevent overindebtness.
wpi.ua = economic benefits wpi
all the benefits of a ua , which:
a. may increase ew, and
b. can be translated into monetary terms {based on ec.theory and evidence}
wpi.d.ua = direct economic effects wpiua
improvements in price, quality, range, or service, for direct and indirect buyers, in a given market, affected by the anticompetitive ua.
EC AND CMA OPINION: DEEWPIUAS ARE ELIGIBLE UNDER 1STCOND AND UNDER EAF
ALL DEES ARE ALSO EBS.
egs of wpi.d.ua :
a.less production costs.
b.Innovation increase.
c.Entry of new markets
wpi.i.ua = indirect economic effects wpiua =negative externalities
WPI.i.ua = ua WITH EFFECTS THAT ARE, PRIMAFACIE, OF ECONOMIC NATURE.
EG: THE INTERNALISATION OF NEGATIVE EXTERNALITIES- [eg carbon emissions]; BENEFITS FOR BUYERS IN OTHER MARKETS; OR BENEFITS FOR SOCIETY AT LARGE
reducing wpi.i.uas, may produce wpi.uas, in some cases eg (if the proposed ua reduces carbon emissions]..thus, it can be balanced (v the costs to competition) eg. ceced case.
EC AND CMA OPINION: WPI.i.UAS CAN BE, BUT EC IS RELUCTANT TO, DEEM IT ELIGIBLE UNDER 1epc. THEY do ARE ELIGIBLE UNDER EAF…the ec is more reluctant to accept wpi.uas, than wpi.d.uas
wpi.i.ua egs:
a.reduction of fin stability risks because of selfregulation
b.limiting the risks of overindebtness of borrowers
c.cost reductions that sellers may enjoy, if consumers increase use of payment cards, instead of cash.
wpi.n.ua = noneconomic effects wpiua
sometimes they are also ebwpiuas
EC AND CMA OPINION: wpi.n.ua ARE NOT ELIGIBLE UNDER 1epc.. BUT THEY ARE ELIGIBLE UNDER EAF, IF THEY CAN BE TRANSLATED INTO monetary terms, THUS BECOMING WPI.UAS.
The reason wpi.n.uas cannot be eligible for balancing, is because private uas [lack demolegitimacy] should not decide that buyer’s welfare should be sacrificed due to anticompetition….. unless they can be converted into wpi.uas.
<> padi identifies wpi.n.uas that can be converted into wpi.uas
<> padi identifies wpi.n.uas by pbs/soes/tenderwiners
wpi.ej.ua = economic justifications wpiua
justifications for Regulations to solve market failures
-in banking prudential regulation, we find these ejwpiuas:
a. remedying banks inherent instability, higher chance of failing / bank runs
time asymmetry between a bank’s assets and liabilities, means that if many consumers withdraw lots of cash, the bank can become iliquid. eg. northern rock. … an iliquid bank may be solvent…. a public panic bank run on a solvent bank exposes a market failure (a negative externality) due to the time asymmetry, and also an information asymmetry (customers do not understand that the illiquid bank is actually solvent)….2 regulatory tools (to solve the above):
1. dgs (deposit guarantee scheme= consumer insurance). but dgs are voluntary (for banks to adopt),
2. lolr (lender of last resort)..the eu membe state banks are lolrs, and the ecb (eu central bank) monitors this.
b.remedying systemic risk(bank domino effect):
to protect banks’ consumers v the consequences of bank failure: is a wpi.n.ua goal….this goal is not to correct a market failure… is hard to rm cl goals, with wpi.n.ua goals.
systemic risk is a market failure (a negative externality), mitigated via regulation for: banks’ minimum capital requirements; asset diversification; rescue loans; expropriation; rescue mergers.
the esrb [european systemic risk board] : systemic risk is the risk of disruption of the fin.system, with the potential of serious consequences for the internal market and/or the world economy.
-in banking business conduct regulation, we find this wpi.ej.ua: consumer protection from info asymmetry :
to remedy info asymmetry: even if banks disclosed all info, consumers would still hardly understand it……-crl can be (as cl) paternalistic: consumers must be offered what they need. not what they ask. because they suffer from bounded rationality. consumer satisfaction is not decisive. thus, banning some products, or product features, is the best way to protect consumers.
wpi.nej.ua = noneconomic justifications wpiua
-in banking prudential regulation, we find this wpi.nej.ua: protecting bank consumers from the grave consequences of bank failure
-in banking business conduct regulation, we find these nejwpiuas :
a. consumer protection from overindebtness:
may cause consumer loss of self esteem, and social exclusion.etc….. how?: by regulating an interest maximum,the risk for the bank for lending, is limited….but my opinion is that the real reason for regulation restricting loans/mortages, and for using credit agencies to discriminate the poor, is to keep the limited london housing stock just for the richest, since the demand by the (money laundering) rich for expensive property in london is infinite…the regulatory restriction on mortages does not increase the demand (relative to the supply -which is, by the way, kept artificially low) . the combined effect is that property prices keep climbing…. other factors: absence of building land; little competition between developers
b. consumer protection from limitations to their choice. eg ban on deceptive products/services.
c. financial inclusion. eg: to guarantee society at large, access to payment services .
d. consumer privacy protection.[eg: reg. to ban the sharing of personal info for commercial purposes, even when the consumer consented]
UK
how will cma apply the S.9 [rival collaboration] exemption [so that ua is cleared]?
By using four “efficiency” criteria: [<> a carboncopy of the eu 4 EPCS]
- the agreement must give rise to benefits to production, distribution or technical or economic progress (Condition 1);
- the restriction to competition arising from the agreement must be indispensable to achieve those benefits (Condition 2);
- consumers must receive a fair share of the benefit (Condition 3); and
- there must be no elimination of competition (Condition 4)
an agreement to reduce or eliminate certain types of plastic packaging , reduces carbon emissions during the production process, thereby “reduces the negative externalities from greenhouse gases” such that it could be classified as a cca…. in practice, the cma will only clasify it as a cca if the ua achieves large reductions in greenhouse gas emissions
<> cocoo will fight plastics, arguing that the reduction in neg.ext. is large enough to be a cca, thus clearing the anticomp merger……or that the merger should be blocked becos the reduction in neg.ext is not large enough to be a cca.
<> the line between cca/noncca, is very fine, invisible, subject to challenge by cocoo <> ask cma directly about particular firms/mergers….CMA has an open-door policy: businesses to approach the CMA for informal guidance on proposed environmental sustainability agreements]…This is subject to the condition that the parties did not withhold relevant information from the CMA that would have made a material difference to its assessment
CMA publishes anonymised summaries of sustainability agreements that have been shared for cma approval
<> cocoo will seek disclosure
cl and cma are failing their duty to effectively facilitate businesses’ desire to address climate change. how?: cl , and cma interpretation of cl, should be more admissible of accepting agreements as ccas…well beyond the restrictive interpretation by the EC
The 4 EPCs [exemption possibility conditions]:
- 1EPC: all [benefits that can be translated into monetary terms = ec. benefits = EBs = wpiuas]. paternalistic benefits are not ec.benefits.
- 2EPC: THE UA MUST GIVE CONSUMERS A FAIR SHARE OF THE BENEFITS
- 3EPC: ‘THE COMP RESTRICTION MUST BE INDISPENSABLE TO ATTAIN THE BENEFITS’
- 4EPC: THE UA MAY NOT ELIMINATE A SUBSTANTIAL PART OF COMPETITION
The 3 UA Types <> the 3 CLP prohibitions:
A/ 102 TFEU UAs = ADPUA (ABUSE OF [DOMINANT POSITION =map] UA)
unlike the other uas, adpuas dont have the CLP EXEMPTION POSSIBILIY (EP) (101.3), thus, adpuas may be banned, even if the EP could have applied…ADPUAS are very rare in banking.
B/ 101 TEFEU UAs = THE CARTEL* PROHIBITION= antitrust law = governs business conducts (eg erecting trade barriers between eu member states)
A cartel* is a UA where the undertakings (firms) face the cost of negotiation, bargaining and lack of legal enforcement…3 types: CPUA, DAUA, CRUA: 2 types: a. cruas whose object is a cr; b. cruas whose effect is a cr.
101 (tfeu) UAs that violate the cartel prohibition, are void….… parts of the ua contract only survive if the violation (eg a rc), is not crucial for those parts…An 101 UA may be assumed to exist, even if a firm’s unilateral action/proposal, is tacitly accepted by another.
<> cocoo: claim to hold the entire contract (or parts of it) void/valid
C/ EUMR UAS = MCR
The MCR regulates 3 UA Types: concentration; merger; takeover. A merger is an UA where the undertakings (firms) have the option to internalise the transaction cost… but it involves organizational costs and agency problems.
EC/CMA OPINION
- [DIRECT EC.BENEFIT UAS = WPI.D.UAS] ARE ELIGIBLE UNDER 1EPC AND UNDER EAF.. EGS OF WPI.DUAS: a.less production costs. b.Innovation increase. c.Entry of new markets
- [INDIRECT EC.BENEFIT UAS = WPI.I.UAS] CAN BE, BUT EC IS RELUCTANT TO, DEEM IT ELIGIBLE UNDER 1EPC. THEY DO ARE ELIGIBLE UNDER EAF
- [NON EC. JUSTIFICATION UAS = WPI.NEJ.UAS]. ARE NOT ELIGIBLE UNDER 1EPC. BUT THEY ARE ELIGIBLE UNDER EAF, IF THEY CAN BE TRANSLATED INTO MONETARY TERMS , THUS BECOMING WPI.UAS.
1EPC admits for balancing, either WPI.NEJ.UAS OR WPI.EJ.UAS, only as long as they can be translated into monetary terms; and where that translation evidences that ua may generate the benefit of increased ew [buyers gaining more ew thanks to this ua]….iow, the 1stcond only admits for balancing nefwpiuas or efwpiuas, that have the potential to become ebwpiuas.
-will such WPI.NEJ.UAS OR WPI.EJ.UAS [eg innovation], really , in the future, become wpi.ua? , and if so….to what extent?…is hard to predict, but even if is a ‘may be’, and is to be realised after many years…it may still be admited for balancing.
<> padi can challenge EPs granted by courts, if a proposed benefit failed to materialise, or did so to little extent.
wpi.nua effectss are not eligible, because they cannot be compared to anticompetitive effects, becasue wpi.nuas cannot be translated into monetary units. This lack of a common unit between anticomps and wpi.nua effects, means that this conflict can only be resolved by political, subjective decisions (law-by parliament). this should not be decided by the courts, and even less, by the undertakings themselves (their sole duty is not to reduce consumers prosperity by collective action)…..but the law is silent about how to balance….which is a shame….eg: the min.amount of biofuel that should go into gasoline, is not to be decided by a horizontal agreement among suppliers, nor by the cma, or ec. this should be decided by democratically elected legislators….or by large consumer associations that represent consumers with their consent….
padi could argue that a particular wpi.n.ua, of a [proposed, or existing] merger, offsets its anticompetitive effects, so it should be allowed…. or that it does not offset it, and should be blocked…. to support either possibility, padi can argue that , since the law is silent about how to balance, and neither courts , nor ec/cma, nor the undertakings themselves, are legitimised to balance…. padi, as a charity democratically elected by consumers, representing them with their consent,or, alternatively, padi is subject to control by a demo elected body…. then, padi is more legitimised (than courts/cma/ec…), to balance….padi will offer , to the undertakings, a position paper, under an NDA, advising on how the uas should be amended…. or PAP
<> padi’s EEAC [locus standi] v State/gov/sosbib unlawful decisions [eg parliament decision to write unlawful reg/law; sosbib balancing etc]……
EXCEPTION: if there is ultravires, padi also has standi (eeac) to claim :
- v State that is acting ultravires [by overdelegating]
- v the delegated body (eg ec, cma, private parties that won a public tender, courts [padi can void a court decision], countries, ngos, etc), as is also acting ultravires,[by carrying state functions that lack demo.legitimacy (eg prioritisation=balancing, of public policies)]
[buyers harmed by anticomps, who are unrelated to the affected markets] = all of society
<> padi’s standi in EEACs
can the benefits that society at large get [from the anticomp ua] , be added to the ‘appreciable advantages’ that affected consumers receive [from the anticomp ua] , to outweigh the anticomp harms?:
in the past, ec said yes…eg: ceced case: ec held that ‘the environ.benefits for society allow consumers a fair share of the benefits, even if no benefits accrued to individual buyers’…..but now ec/cma has changed opinion to a ‘more economic view’
innovation is the main force of ew growth, but the high uncertainty of innovation benefits, makes it imprudent to allow them to outweigh anticomps…iow, innovation benefit’s uncertainty means they are not wpi.uas for the 1EPC. …thus, a comp restriction must never block innovation [on a key product feature], beyond the short term. this is the 4EPC
<> padi can challenge nationalisations [expropiations] , on the basis that, instead of expropriation, a merger should have been cleared…expropriations result in taxpayers losing ew, as they need to pay more than if a merger was cleared.
106.2 tfeu: eu may not prevent undertakings from providing an SGEI…so, if a merger is needed for an undertaking to render an SGEI, the merger should be cleared….SGEI = [private services of general economic interest]eg royal mail, nat.rail, energy, comms.etc. Current eu state aid rules for SGEIs, allow exemptions from state aid control, for up to 500k, as they are asumed not to affect competition in eu…...
<> padi can challenge this asumptiononly the benefits that a t.o. has for consumers, can be considered in the siec test… exception: all benefits for society at large, may be included in the siec test, only if the commonality exemption applies…eg: where all taxpayers are consumers in the market/s affected by the anticomp t.o. [because only then there will be no wealth redistribution between citizens]
the siec test does not consider benefits that would also materialise in a state rescue. …but, as the benefits for the state cannot be in the siec test, this test may block a merger that is beneficial for society…thus, are there other rms that do consider [for balancing] benefits for the state?…yes:
21.4 EUMR is such a rm: ‘if a eu dimension merger is cleared, but which could harm the legitinterests of a memberstate, such memberstate can take measures to protect itself from such merger.. ….public security, media plurality, and prudential rules, are automatically legitinterests….any other wpis must be communicated to ec for assessment’
ec: 21.4 eumr only gives memberstates the possibility to block , not to clear mergers, that infringe their legitinterests…..however, ec does not have the power to interpret eu law. this is the role of the ecj, and ecj has not yet had a chance to decide on this.
may a memberstate clear a merger that violates its legitinterests.?…yes, memberstates can force through mergers that are blocked by ec.
<> cocoo will ask nation to force through, a ec blocked merger
TAS
undertakings often use a ta, to facilitate or cover up unlawful collusion.
<> cocos will give ‘free’ advice to SFAs [assocs with statutory functions], arguing that their infringement does not flee cl, cp, becos of SFA‘s actions/omissions have (had) a dir or indir effect on the market, thus on competition….[eg: seeking members commercial interests…eg via tacit uas.]…, thus, this assoc is a ta, thus bound by cl/cp….thus, acted uv , and was negligent/reckless by failing to comply with cl/cp.
<> cocos performs no dir or indir effect on the market, thus is not a ta…thus, cl cp does not apply to cocos
mod <> baes shit
mod can procure from UK suppliers or from abroad….except that mod colludes with baes(uk nc), to procure mostly from baes, using either of these excuses:
A/only one supplier (baes) can meet demand for certain types of expensive and sophisticated equipment
cocoo: is the baes equip really more sofisticated than the offshore firms?
is it true that only one supplier can meet the demand? offshore firms really do not manufactore those types, and even or supperior quality?
B/security considerations require the mod to contract with a trusted national supplier (baes), to maintain sovereign capability, for example, nuclear-powered submarines or complex warships.
<> cocoo:
-mod gets no vfm from nocompro….iow, is paying too much to baes
-is baes really a trusted firm?? <> cocoo will dig out baes shit.
-is it true that to maintain sovereign capability, must mandate that mod contract from a uk firm (mostly baes)?
The most effective route to securing VFM for money in defence procurement is normally through competition. However, because such competition is frequently absent on the largest defence contracts, the Department introduced the Single Source Contract Regulations to balance a fair return for industry with the need for better value for money for the taxpayer. The Department has identified significant potential cost reductions on contracts within the new regime,
<> cocoo disagrees:
- mod is failing its duty to increase its ability to negotiate contracts and scrutinise costs to secure better vfm
- mod should require formal justification for nocompros, and be able to demonstrate it is applying credible pressure for competition. mod should be able to demonstrate why a nocompro offers better value for money…. mod should be identifying where competition can be increased
- SSRO and the mod should work together to monitor the impact of decisions on the defence industry. The SSRO’s statutory aims make clear it should balance value for money for the taxpayer with a fair return for industry
The Single Source Regulations Office (SSRO) : 2014. Its duty is to ensure that gvfm is obtained for the UK taxpayer in expenditure on QDC = qualifying defence contracts [=nocompros over £5m] , and that single source suppliers are paid a fair and reasonable price under those contracts.
<> SSRO is therefore COCOO’s main target
Within the mod, the SSAT oversees the application of the Regulations and acts as liaison point for the SSRO…BUT…The mod is not required to share with the SSRO the extent of contracts excluded and exempted from the Regulations, or the underlying reasoning
<> cocoo: why not? which types of contracts the mod is not required to share?
The SSRO is a pb ,not part of mod, but approved by the Sosde…SSROis a ‘regulations office’, not a regulator…ssro can request the information they need….ssro Can ask the mod to penalise suppliers that do not provide information, but ssro has no access rights…the SSRO must ensure that suppliers are paid a fair and reasonable price….BUT…The SSRO has sought to audit industry rather than regulate it. Does not consider whether industry is receiving a fair rate of return. Staff lack relevant experience, and its methodology has been flawed.
The SSRO found breaches of the Regulations that occurred during negotiations, but were not reported as deviations. five contracts had breached the Regulations because they had not observed the principle of ‘not taking profit on profit’ : the policy is that Profit can only be charged on profit, if a sub-contractor is part of the same group as the prime contractor….BUT mod did not take action to correct the error in these cases <> why not?.nobody asked.
Disagreements between mod and suppliers have centred on the ‘reasonableness’ of costs, the more subjective category…One such disagreement relates to ‘re-work’. Suppliers are expected to bear the cost of re-work caused by their poor workmanship…the supplier is now setting up a system to record the causes of re-work
<> cocoo will validate these claims, or ask mod to validate them
-what more can be done to reduce nocompros?
-why the increase in ‘cannibalisation’ in the Royal Navy, where parts are being taken from one vessel to keep another going?
-Around 50% of mods procurement is nocompro. sometimes may be valid reasons for nocompros…
<> COCOO: BUT…. there is scope to reduce nocompros, AS PER GOV policy!!!
Contingent liabilities
mod has repeatedly failed to comply with contracts’ contingent liability procedures, in order to deny both Parliament and the Treasury the means to scrutinise the extent to which the taxpayer is exposed to potentially huge liabilities in the future….
it is also concerning that mod keeps failing their duty to design and implement a clear strategy to drive compros, thus mod is likely to failed their duty to achieve the planned savings of £1.7 billion.
mod keep allowing some suppliers to keep refusing the regulations. Thus, mod is in a duty to arm Sssro with the teeth to do its job
following Brexit…mod is failing to properly support UK defence suppliers, and failing to promote competitive procurement
Reducing single source procurement [sspro = nocompro]
government’s (mod) policy is to use competition wherever possible in order secure the best vfm…. Nevertheless, to retain sovereign capability, as well as consolidation within the defence industry, in some cases there are a limited number of suppliers able to provide the sophisticated equipment needed
<> cocoo challenges this
mod said it did not want to fall into the past traps whereby large uk companies acquired (t.o.) some of the smaller ones, with the result that the ability to procure competitively is reduced
<> cocoo: did cma not investigate?
mod admitted that, after brexit, the UK lacks the onshore ability to deliver its needs….thus mod was trying to prevent uk defence contractors from being disadvantaged in selling their products or entering into international alliances
<> cocoo will contact usa ftc, and uk cma, wrt baes current undertakings, and see if bae is complying:
to co-operate (SO NO ENTRY BARRIERS) with actual or potential contractors bidding for DEFENCE contracts, even where they might need to sub-contract BAES production capacity
teaming arrangements undertakings, were retained in 2006, to prevent a BAES only supplier, from choosing only to work with a BAES sub-contractor, thus foreclosing the market….
Where BAES proposes a teaming agreement involving two or more BAES
entities in an MOD contract, the Undertakings require BAES to seek approval from CMA. BAES has sought permission from the cma to pursue teaming arrangements five times and permission was granted on each occasion…..
<> cocoo will challenge those cma decisions
MOD allows only UK firms in their procurement, on basis of national
security (wpi), for complex warships, submarines and some types of munitions. This
does not mean the entire supply chain is manufactured in the UK
< > cocoo: mod should tender to other uk firms….not just to baes
cma: our statutory duty is to focus on the competition issues raised in the Undertakings. We have therefore not applied a wpi test [eg. national security] which is at Sos discretion.
BAES had divested or closed businesses in areas relevant to the Undertakings. BAES, since 2006, it has sold, closed or otherwise reduced the significance of its business in a number of areas:
cocoo <> did bae [against the wpi), sold/closed/reduced these areas becos they were limiting their nm (near monopoly)?
cma: in all cases, the absence of the Undertakings would not have led to a different outcome in the tendering process
< > cocoo: but the reason is becos baes is infringing the undertakings !!….thus, cma should not advise [sos] that the undertakings should be released….but that they should be complied with by baes, and fined for infringing them !!!
BAES told us that no reference has been made to the Undertakings when BAES has discussed procurement strategies with the MOD….MOD said that the mere existence of the Undertakings, mean that the potential for competition is created
<> cocoo: not, if alll know the undertakings are a joke!
we (cma) have seen no evidence that the Undertakings have enabled other actual/potential prime contractors, to bid for or win contracts relating to MOD programmes….thus, the undertakings can be withdrawn.
For the Undertakings to remain appropriate, two conditions must hold:
(a) There must be a likelihood that procurement will, in the future, be on a competitive basis (which, in turn, means that there must be alternative credible prime contractors) such that the Undertakings would be relevant. If there is no reasonable prospect of MOD competitively tendering contracts in a given area of defence spending, the Undertakings have no role in that area <> cocoo: the undertakings need be amended, to apply even where no likelihood of future compros.
(b) BAES must have the ability and incentive to foreclose other potential prime contractors <> cocoo: baes cannot foreclose, because to foreclose, first you need compros [to be foreclosed]…thus, the undertakings need be amended, so that foreclosure is not a requirement
to determine whether there is a realistic prospect of the Undertakings being used in the foreseeable future in a compro:
– is competition among prime contractors likely?
cma: no
are the Undertakings needed to prevent baes foreclosure of other prime contractors?
cma: no
-is BAES likely to have the ability and incentive to foreclose in the event (which we consider unlikely) that a major warship programme is put out to competitive tender?
cma: no