Tuesday, July 29, 2008
Conceptual Problems with the Hypothetical Monopolist Test in Ex-Ante Regulation of Communications Under the New Regulatory Framework
Posted by D. Daniel Sokol
Wolfgang Briglauer (Austrian Regulatory Authority for Broadcasting and Telecommunications (RTR), Economics Division) has written on Conceptual Problems with the Hypothetical Monopolist Test in Ex-Ante Regulation of Communications Under the New Regulatory Framework.
ABSTRACT: Under the new European regulatory communications framework that was enacted in 2002, market definitions are subject to a different and much more analytical scope. With regards to market definition, the new regulatory ex-ante framework explicitly adopts the so-called "Hypothetical Monopolist Test" (HMT), which has long been the state of the art in ex-post competition law. Direct empirical implementation based on rigorous statistical grounds is found to be exceedingly difficult. The very fact that the HMT is endorsed in ex-ante as well as ex-post jurisdictions, but rarely implemented directly in practice, underlines this point. Therefore, a proper understanding of the conceptual framework is of particular importance because this makes clear what the individual factors determining the outcome of the HMT are. Such understanding will serve as a valuable guidance in the decision-making process in line with the conceptual framework. This article discusses those aspects and gives applications from sector-specific communications markets. Doing this also illustrates that the HMT is, in principle, designed to be applied alongside all relevant market definition dimensions. Any methodological deviations from the HMT have therefore to be justified analytically.