Tuesday, December 1, 2009
Posted by D. Daniel Sokol
Michele Polo (Bocconi - Econ) analyzes Anticompetitive versus Competitive Explanations of Unilateral Practices: The Identification Problem.
ABSTRACT: I consider the application of Article 82 using an economic approach. I argue that proving a given practice anticompetitive or efficient can be usefully framed as an identification problem. I need to spell out in detail not only the anticompetitive story, related to the type of alleged anticompetitive strategy, but also the alternative competitive explanation, extracting the empirical predictions of the two. Comparing the latter, I can identify the factual elements that, occurring under both circumstances, are admissible under both of them, and those that instead, being specific to one of the stories, allow for discriminating between them. I apply this approach to a recent Italian case [Mercato del Calcestruzzo Cellulare Autoclavato, No. A372 (Autorità Garante della Concorrenza a del Mercato, 24 October 2007)] of selective price cuts, an example of predation where the dominant firm tries to eliminate a competitor by selectively offering discounts to the clients of the target. On the basis of a rich empirical analysis, the Authority condemned RDB, a medium-sized firm active in the market for construction materials. I show that, once the two stories are properly described, the evidence provided in the decision of the Antitrust Authority is consistent with a competitive strategy of decentralized price negotiation, whereas it is in sharp contrast with the empirical predictions derived from a predatory model of selective price cuts.