Re-pricing through disruption in tacitly collusive oligopolies: making
sense of abuse of collective dominance law
Professor Nicolas Petit, University of Liege
OECD Roundtable on Oligopoly Markets, 16 June 2015
Goals of the presentation
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Case for more ex post enforcement against tacit collusion
Proposed theory of liability under abuse of colldom/shared
monopolization
Pros and cons
Overview of enforcement in EU Member States (option)
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1. The merger control blindspot
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The merger mostly paradigm
Trigger defused in stable oligopolies
The Coca-Cola/PepsiCo impossibility
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2. Re-pricing through disruption
Fictional example
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Beer duopoly, with symmetric players
Collusive price of 10$/gallon; AVC of
5$/gallon
Government introduces tax of
3$/gallon
Four possible re-pricing options
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Real life illustrations
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Full transfer 13$/gallon
Full internalization of tax 10$/gallon
Partial internalization of tax 1013$/gallon
Over internalization of tax 5-9$ per
gallon
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Choice not entirely amenable to
simple game theoretic framework
Information, urgency and lack of
readability of disruption
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In the 1960s, introduction of radial
technology by Michelin in US tyre
oligopoly
In the 1980s, entry of low cost carriers
on routes dominated by oligopoly
airlines
In 2011, entry of the company Free on
the French mobile oligopoly
Change brought by digital
technologies and sharing economy
business models?
Proposed theory of liability
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Catch oligopoly practices adopted to restore collusive price equilibrium post
disruption
Creation of subtle communication conduits
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B makes public statements that it is studying with its analysts the effects of a “full
transfer” of the tax on retailers;
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A posts its new price on its Facebook timeline. A is friend with retailer Z. Z
shares A’s posts on its Facebook page. B is also friend with Z…
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A to take a minority shareholding in B, so as to be informed of B’s pricing strategy
as an insider
Change model, entry of 10 micro-brewers who eat 10% of the duopolists’ market share
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Selection of new price point, to maintain total profits on a 45% market share
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Attempted exclusion of micro-brewers will raise costs => necessity to re-price
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Collusive inducement of micro-brewers through threats and incentives
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Framework
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Any disruption imposes on oligopolists to re-price
Oligopolists must avoid a facilitating practice caught by cartel law
Space for abuse of collective dominance => adaptative oligopolist
strategy to re-price through disruption, and elude its pro-competitive
effect
Core evidentiary components, proof of (i) a certain degree of existing
collusion; (ii) disruption; (iii) re-pricing strategy; (iv) likely return to
collusive equilibria
Typical example is unilateral signaling, but not limited to this
“Parallel exclusion” is possibility, though no priority? At any rate, should
be restricted to disrupted contexts
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3.
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Pros and cons
Type I v Type 2 errors
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Disruption remains a necessary trigger…
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But rationalized approach, which keeps the theory reasonably predictable
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Kills “bogey man” of transposition of single firm conduct law in oligopoly markets
Abuse v cartel law?
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Problem with cartel law approach is not one of desirability, but of feasibility
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+ “problem of proof” (Mezzanote, 2009)
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Yet another “bogey man”: ex post proof of tacit collusion is possible + documentary
evidence; resilient idea
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Our approach focuses less on tacit collusion, and at any rate does not make it
unlawful => possibility to apply a “preponderance of the evidence” standard of
proof to tacit collusion
Rationalized v open-ended abuse of collective dominance?
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“Sports leagues” disease
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4.
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Overview of enforcement in EU countries
Follow up of 2011 study with N. Neyrinck
E-competitions database
9 relevant decisions
Merger cases
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Several German cases related to use of structural presumption of CollDom
Abuse of dominance cases
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No genuine cases of tacit collusion
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Spain, wholesale telephone sort messaging case, 2012: individually dominant
positions of each telco operator on termination market
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France, GIE Exploitation des carrières, 2012: price-fixing case, with selling boycott
treated as abuse of collective dominance
Not enough to draw conclusions
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Conclusion
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Rationalized, market-triggered, case-law proof and predictable abuse of collective
dominance theory of liability
For more, see (2012), ‘The Oligopoly Problem in EU Competition Law’, Research
Handbook in European Competition Law, I. Liannos and D. Geradin eds., Edward
Elgar, September 2013
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Follow me on twitter @CompetitionProf
Papers available @
http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm
?per_id=358753
Liege Competition and Innovation Institute (LCII)
University of Liege (ULg)
Quartier Agora | Place des Orateurs, 1, Bât. B 33, 4000 Liege, BELGIUM