Sunday, May 13, 2007
Posted by D. Daniel Sokol
Damien Neven, on academic leave while he serves as the chief economist of DG Competition, has a fascinating new article that appears in volume 21:48 of Economic Policy titled Competition Economics and Antitrust in Europe. Could it be that the rise of economic consulting firms in the EU has led to greater norm diffusion of an economics based competition culture and increased economic analysis of both DG Comp and national agency level economic thinking? If so, we owe NERA, LECG, CRA, RBB and others a debt of gratitude.
ABSTRACT: This paper aims to assess the influence that economic analysis has had on competition policy in the European Union over the last twenty years. Economists are increasingly used in antitrust cases; the annual turnover of the main economic consultancy firms has increased by a factor of 20 since the early 1990s and currently exceeds €20 million. This is about 15% of the aggregate fees earned on antitrust cases, a proportion close to that in the US. The economic resources mobilized by the EU Commission are, however, an order of magnitude smaller and this imbalance is a source of concern. The legal framework and the case decisions have also been influenced by economic analysis in important ways. For instance, the analysis of agreements between firms has increasingly focused on effects; the analysis of the factors that determine effective competition has become more sophisticated; the concept of collective dominance has been progressively developed in terms of the theory of collusion in repeated interactions, and quantitative methods have become more important. However, enforcement has sometimes appealed to economic reasoning in flawed or speculative ways; the paper discusses procedural reasons why this may have occurred. This paper assesses the system of evidence gathering implemented by the Commission in the light of the law and economics literature. It is concluded that while the reforms recently implemented by the Commission do address the main weaknesses of this system, they may still not allow for the most effective development of economic theory and evidence in actual cases.