ANCHORS
-TOT (turnover test)=£1m annual t.o. min, to be called-in by CMA for investigation
-[market share test = SOST (share of supply test: min.25% of supply of goods/services in UK, prior to MA )]
-HMT(hypothetical monopoly test] = SSNIP test : is a test to define [market boundaries = market definition]. it asks: WOULD THE MA ALLOW THEM TO INCREASE PRICE BY 10% SUSTAINABLY?….if so, the MA should be blocked……The SSNIP test allows for loose application: egs:
-the price increase is not over prevailing prices, because they already most likely reflect the NM(near monopoly) power. Thus, it should be over the prices that would prevail if the market was competitive.
-in intermediate goods markets (where there are retail and wholesale transactions) : what’s the extent of passthrough? (the extent which retailers pass the 10% pricerise to consumers.),… and, whats the extent of consumer reaction to the passthrough?
-the cellophane phallacy: when monopoly prices prevail, there will appear to be many product substitutes (to the NM products)… BUT, they could be in separate markets. …usa case Dupont: dupont argued that cellophane was not a separate market because there was a high elasticity of demand between cellophane and alluminium foil. But court held that they were separate markets thus cellophane was not a NM, because it only had a small share of the ‘wrappings market’.
-is not always 10%…it will depend on the market, inflation, past prices, etc. less that 10% implies that demand is more elastic. and viceversa.
-the priceincrease needs to be ‘non-transitory’. most accept that should be min.1 year, but this depends on the market, inflation, past prices, etc.
-what factors det. competitiveness?:
a.intramarket rivalry: can competitors can act collectively, as a single NM, to constrain prices of the merged company.? if so, the merged co. has low market power.
b.extent of buyer/supplier power: do buyers have good alternatives to the 10% priceincrease? ; can they negotiate down the price?;
c. rivals dont need to be in a market to affect competition. the mere threat of entry can affect competition.
-NMs are more likely to introduce innovations (R&D) (to protect their NM). notice that innovation is in a different market to the products.
single firm conduct provisions should be applied only to firms that have “substantial market power SMAP”: when competitive constraints imposed by other firms are relatively ineffective on the dominant firm. In this situation, the dominant firm’s decision about its own output and price can influence market outcomes.
is map durable? [can be maintained for a considerable period of time]
Competition authorities and courts rely primarily on indirect evidence to determine whether a firm has smap, such as market shares, barriers to entry and expansion, buyer power and the nature of competition in the market. there is no single factor that will
provide conclusive answers.
Entry barriers and barriers to expansion are the most important factors in determining whether a company’s ability to exercise smap, is effectively constrained. If other firms can enter or rivals can expand, a firm will not be able to
maintain smap. Barriers to entry and expansion are thus a necessary, but not sufficient for conclusive evidence of smap, because markets can be competitive even if entry barriers are high.
The assessment of entry barriers requires a thorough analysis of the likelihood, extent and timeliness of entry or expansion that can constrain the exercise of market power. A decisionmaker might conclude ,incorrectly, that entry barriers are low, for example, when
entry appears possible but in fact would not constrain map. Conversely, there is a risk that once high market shares have been found, the existence of entry barriers is assumed without sufficient factual inquiry.
There are indirect smap evidence-types, to draw conclusions from : structural market; buyer power;
Market share data continue to be the “high priest” in assessing whether a firm has smap. market share data depend on the ability to define a relevant market ….but… Where market boundaries are difficult to draw, market share (concentration) data are close
to arbitrary.
Even with accurate market definition, high market shares are not necessarily proof of smap. Any presumed correlation between high shares and market power will depend on:
a.how competitors or customers can react when a firm restricts output,
b. the reasons why the firm maintained high market shares, and
c. whether there are any other conditions that limit the firm’s ability profitably to raise price.
These factors are indeed more relevant than market shares in establishing smap
Market shares can fail to correctly predict whether a firm has smap
Direct evidence of smap, such as a firm’s profitability, is not frequently used
in single firm conduct cases. Methods for directly measuring market power are very dataintensive; and even if the necessary data are available, they are typically subject to different interpretations and therefore will not conclusively establish smap.
One econometric method to directly measure a firm’s market power is to estimate a firm’s demand elasticity. Elasticity of demand is the percentage change in quantity demanded for a particular product in response to a one percent change in price. Estimating a firm’s demand elasticity with respect to a product, measures how customers will react to a price change and to what extent the firm’s sales are sensitive to changes in rivals’ sales. A firm will face inelastic demand if competitors cannot react “effectively” by increasing their output in response to a firm’s increase in price or decrease in output. Thus, low firm’s price elasticity suggests greater market power. … but this method requires to gather large amounts of data
if high profits have been persistent and are consistent with other evidence, they could be a smap indicator.
Conduct of a firm can also be considered as evidence in the analysis of substantial market power. However, conduct in itself cannot be smap evidence
the fact that a firm conduct engages, eg in price discrimination, cannot in itself demonstrate that the firm has smap
Competition authorities and courts should also be willing to consider conduct of a firm as relevant evidence that a firm lacks market power. For example, bidding wars for customers where smaller competitors win new customers or the alleged monopolist/dominant firm is forced to lower its prices in response to market entry are inconsistent with smap
WHEN A FIRM IS FOUND TO HAVE SMAP , CMA.EC MUST NOW find that the firm’s conduct has anti-competitive effects.
In economic theory, a firm is said to exercise market power when it prices above its short-run marginal costs. Unlike the demand curve faced by a firm in a perfectly competitive market, the demand curve faced by a firm with market power would not be not flat, but negatively sloped. The slope of the demand curve, is the firm’s market power.
In practice, almost all firms have some degree of market power and are able to raise price above short-run marginal cost. Moreover, a firm may have market power for a variety of benign reasons. For example, in industries characterized by scale economies, even efficient companies would be unprofitable if they did not exercise market power and price above short-run marginal cost. Some degree of market power therefore is the norm and is compatible with competitive markets
map is harmful only if it can become smap [durable map] = a firm that could, durably, raise/maintain price above competitive level and exclude competitors (or other barriers)
monopoly power (= smap) = the ability of a profit maximizing firm, to price above long-run marginal cost, rather than short run marginal cost.
[ market = a set of gws and/or geoareas, in such level of mutual comp, that their prices +correlate >> I WILL CHECK PRICE CORRELATIONS BETWEEN HORIZ COMPETITORS] . The ideal is not perfect compet, but an iMS where consumers have 100% switchpower = plcs0%map = the GWS (of the plcs market rivals] are total SUBSTITUTES
Even after the merger has been assessed on competition grounds in accordance with the mcp, the outcome of the transaction may still be subject to a sector-specific policy, prompting a
A cleared merger with required remedies, if failed to comply such promises, cocoo will claim that firm must undo the merger: acquired firm to be forcibly sold
CLP/WPI goals may only be used in court if can be computed (translated to moneyvalue)
Always use COUNTERFACTUALRELATIVITY (CONRE) = (what would have happened in the absence of the cma’s block/clearance). this means that signals must always be construed WRT effectivecomp [=no MAP = consumers may easily switch] ?…and also, any effectivecomp must be always construed WRT the given IMS. exs: would prices have declined?. would the plc’s value be different?. would the plc’s gws quality be differfent?
ipos generate more value than matos >> matos always willing to accept lower valuation
target cos are always undervalued (specially ipo targets), so that the buyer will get a valuation kick
no ua, no clp
the goal of 2LEG is the prevention+elimination of [SPILLS (+ OR -) + DEADWEIGHTLOSSES] = the underlaying MAFs that make a given IMS become too compet. perfect, or too compet. imperfect.
all horizUAS + all cartels [vert or horiz] generate SIL = obl= primafacie = onusSHIFTS2def >> no BA needed
where there is [STRINFO (strategic info) = actual knowlg, or constructive knowlg] >> the co receving it has o2exitmarket and/or o2whistleblow…ow: deemed acceptance, with SLI
cocoo does not need legal expertise/qualifications, to engage in strategic litigation.Thus, is better (for standi, and for winning), if cocoo is able to speak as, or about, the policy victims
is best if cocoo identifies individuals, to support them to claim….is not true that the only way is as a party, either as the claimant or the intervener, or by representing a claimant…other ways: speaking to lawyers; providing advice, providing an insight into behind-the-scenes discussions with Government officials, or providing evidence in the form of statistics or case studies, witness statements, and expert reports
– cocoo should track patterns [or repeat issues] of behaviour/decision-making, gradually affecting wpi.
-two types of litigation:
– ‘a lawyer who acts on behalf of a particular client… has to act on their best private interests, which are usually at odds with fixing the policy/legal problem.’.
– ngo strategic litigation must be secondary to campaigning: oscar, as a an inhouse sol employed by padi charity, is free to fix the actual policy/legal problem, as it is in the wpi (not a client’s private int
-cocoo will keep submitting evidence to Government decision-makers (to assist them understanding the qols/qofs involved). this helps me build a reputation and gives locus for later strategic litigation, if the decision-maker decides not to take cocoo’s evidence into account in the course of policymaking……cocoo should apply for a CPO (cost protection order)… thus, the biggest risk is at pre-admission stage [costs risk is just of paying the opponent’s acknowledgement of service ]
-Think creatively – could you challenge the absence of a policy? >> pus failed to include all possibilities and justifications and reasonings in the BA that led to the decision (ex to amend a Reg, or grant a ppp)>> JR (decis made UV) >> void decis.+ victims of the decis can challenge if the harm emerged from the flawed pus decis (ex if the decis/reg is silent on a particular possible event happening)
ex: an individual was suffering abuse from another in asylum support accommodation…However, the Home Office had no policy for this situation, which formed the basis of a challenge. HO lost