Thursday, July 11, 2019
Estimating the Pass-On Effect in Antitrust Damage Cases: Relative Strengths and Weaknesses of the ‘Comparator’ Method vs. the ‘Pass-On Rate’ Method
Miguel de la Mano, Compass Lexecon and Christopher Milde, Compass Lexecon are Estimating the Pass-On Effect in Antitrust Damage Cases: Relative Strengths and Weaknesses of the ‘Comparator’ Method vs. the ‘Pass-On Rate’ Method.
ABSTRACT: In this paper we compare the assumptions and information requirements of two common methods to pass-on effect estimation for the calculation of damages in cartel or abuse of dominance cases: the comparator and the pass-on rate methods. We note that the comparator method is feasible in some situations in which the pass-on rate method is not. Moreover, the comparator method may require fewer assumptions on the true (but unobservable) price mechanism. Where both methods are feasible, however, the pass-on rate method arguably requires less data and likely fewer control variables. Therefore, depending on the specific circumstances in a given case and the availability of data, each method has different strengths and weaknesses. A general preference for the comparator method as stated in the EU draft guidelines on pass-on estimation is thus not justified. To the contrary, in some arguably standard situations the lower data and control variable requirements of the pass-on rate method may imply that it is preferable to the comparator method.