The liberating effect of killing off a state-owned rival

When the final flight of the Hungarian national flag carrier, Malev landed in Budapest there were widespread concerns about the European Commission’s decision to declare Government payments to the company as illegal state aid, leading inevitably to the company’s shut down. Four and a half years on, evidence appears to show that shutting down the incumbent state-owned fat cat was probably the best thing that could happen to Hungarian passenger air transport.  Read more of this post

Advertisements

The farce of antitrust penalties in the financial sector

It has been on the news this week that the Hungarian competition authority (GVH) imposed a record fine on 11 banks that coordinated their actions to dissuade mortgage borrowers from participating in a scheme aimed at lowering the financial burden on home-owners with foreign-currency loans. Details of the case aside, this case made me realise just how farcical it is to impose these hefty fines in an industry, where governments find it acceptable that only gains are privatised and losses are socialised. Read more of this post

Behavioural biases in regulation

Something has puzzled me for a long time. Why are regulators so willing to apply achievements in behavioural economics to public policy in such a one-sided way? In the UK, there is a Behavioural Insights Team, whose mission statement is “to apply insights from academic research in behavioural economics and psychology to public policy and services”. Yet, to my best efforts (although I may not have looked thoroughly enough) I could not find anything else than how consumers are behavioural agents, which has to be taken into account when designing policies. Nowhere was there any discussion that regulators may also be characterised by the same behavioural biases. Read more of this post

Errors in competition policy

When I meet someone who works for competition authorities I often try to get them to answer two questions: (1) which standard of harm they follow as a principle: consumer welfare or total welfare, and (2) when it comes to making inevitable errors, which one would they be less willing to succumb to: type 1 or type 2?

Read more of this post

Are American lawyers more honest than their European counterparts?

Surely it is by no means powerful or conclusive evidence but I came across a very interesting finding, which suggests that in representing mergers in European Commission cases US law firms seem to be more genuine about efficiency defence claims than their EU counterparts. Read more of this post

The price of escaping Norfolk

I recently made an interesting discovery about ticket prices for trains in the UK. As I live in the middle of Norfolk I am in the fortunate position to have a choice between two train operators when travelling down to London. First Capital Connect (FCC) services the King’s Lynn – King’s Cross line, and National Express East Anglia (NXEA) covers the Norwich – Liverpool Street line. For some reason I always preferred the former one as it is quieter and seems to be more punctual (although I found later that on record NXEA is more punctual than FCC and in 2010 only FCC finished behind NXEA in terms of passenger satisfaction). Anyhow, it was not until a few weeks ago that I actually compared the prices of the two services – schoolboy error I know – but I did not think that there was much room for price variation in the presence of regulation and pervasive subsidies. Read more of this post

A tip of the iceberg? The probability of catching cartels

Reliable estimates of the probability of cartel detection could help regulators design more appropriate sanctions for cartels, and improve our understanding of the efficiency of cartel enforcement and its potential deterrent effects. Yet, we only have sporadic evidence of what proportion of cartels is detected. In a recent paper I investigate the possibility of applying capture recapture (CR) methods to find out more about the detection rate of cartels. CR methods are widely used and have been rigorously developed in ecology and epidemiology for estimating population parameters such as population size, or capture and survival rates. Read more of this post

Assessing Competition Policy: Methodologies, Gaps and Agenda for Future Research

Research on the evaluation of competition enforcement has probably never been more timely than today. Competition authorities run on scarce resources and are under serious pressure to make as big an impact on anticompetitive practices as possible. A recent paper by Davies and Ormosi surveys the relevant literature in order to (i) assess the fitness for purpose of the main quantitative methodologies employed, and (ii) identify the main undeveloped areas and unanswered questions for future research. Read more of this post

Putting a leash on BBC websites

Jeremy Hunt, UK Culture Secretary claimed today that BBC websites may need “clearer red lines” to allow privately held and run competitors to survive. Hunt’s warning suggests that BBC might need to be put on a leash when competing with their private counterparts in areas that do not directly fall into their public service remit. BBC has over 400 different websites, including ones such as Top Gear, the largely public-money-inspired ambitions of which – according to Hunt – may give a signal to private broadcasters that will “put off anyone who’s got an idea for a website to do with cars from bothering to invest in it.”

Read more of this post

Another sign of Brussels having more faith in markets?

Here is a case which might be another piece of evidence of the Commission refraining from unduly intervening in markets. This of course may not be more than mere speculation but the Commission decided to forgo an in-depth analysis into the effects of a merger that in the past would have raised serious regulatory concerns. The remedies offered were very much forward-looking and the Commission accepted them without worrying about the more static effects of the merger. Is that another sign of the start of a new era of European competition enforcement? (This post also contains a link to my preliminary simulation of the Orange / T-Mobile merger.)

Read more of this post