The deterrent effect of competition authorities’ work

September 15, 2017

(by Mike Walker^) In his post last month, Steve Davies bemoaned the lack of evidence on the magnitude of harm deterred by the activities of the Competition Agencies. He presented some estimates from research in CCP on cartel deterrence, concluding most strikingly: “On the most conservative of our estimates, more than half of all potential cartel harm never occurs, because it is deterred. This is very much a lower bound, and the proportion could be as high as 90%.” Read the rest of this entry »

Does the CAT’s fast-track procedure strike the right balance between claimants and defendants?

August 25, 2017

(by Sebastian Peyer) The Consumer Rights Act 2015 significantly expanded the jurisdiction of the Competition Appeal Tribunal (‘CAT’).[1] The Tribunal can now adjudicate stand-alone damages claims, award permanent and interim injunctions,[2] allow opt-out collective proceedings (see previous blog post) and deal with claims in the new Fast Track Procedure (‘FTP’). Enforcement mechanisms prior to 2015 were ineffective for small and medium sized enterprises (‘SMEs’) because of the high cost associated with bringing such actions before the High Court and the narrow jurisdiction of the Competition Appeals Tribunal (‘CAT’) for follow-on damages actions. A comparative glance at Germany showed that claimants had a strong preference for simply stopping anti-competitive behaviour through an injunction, yet even this simple tool was considered costly and complex in England. Since the introduction of the 2015 Act, a number of claimants have applied for the fast track procedure and the CAT has awarded one injunction in the FTP (Socrates Training Limited v The Law Society of England and Wales).[3]  The FTP appears to be both effective at capping costs to reasonable levels and, more importantly, at providing a credible mechanism to encourage out of court settlements. Read the rest of this entry »

The deterrence value of competition policy can and should be measured

August 17, 2017

(by Steve Davies) In a post last year, I argued that it was time for competition economists, both academics and practitioners, to start seriously tackling one of the big unknowns: how much harm is deterred by Competition Law and the Competition Authorities (CAs)? In this blog I pull together some results from three recently completed papers on cartel deterrence. I believe that these importantly move forward our understanding of this great unknown, and merit exposure to a non-academic audience in a non-technical way.

We have three ‘headline’ results. Read the rest of this entry »

Has the CAT’s MasterCard decision killed off opt-out class actions by indirect purchasers?

August 10, 2017

(by Sebastian Peyer) On 21 July the Competition Appeal Tribunal (‘CAT’) rejected an application for an opt-out collective proceedings order (‘CPO’) in Walter Hugh Merricks v Mastercard Inc, thereby  blocking the largest opt-out competition claim brought in the UK to date and one of the first large indirect purchaser actions. The applicant brought the claim on behalf of 46.2 million people asking Mastercard for around £14 billion in compensation. Despite the negative outcome for the applicant (and millions of consumers), the CAT’s decision has clarified a number of important points for future CPO applications. But the Tribunal’s decision may have also inadvertently raised the bar for indirect purchaser claims. Read the rest of this entry »

Brexit uncertainty: fewer mergers, big business winners

June 5, 2017

(by Peter Ormosi)[1] While it is widely recognised that last year’s EU referendum caused significant uncertainty for markets, some early indications were that it had not reduced the level of business confidence. Almost a year on, our research – based on a careful study design of a treatment and control group and using data from S&P’s Capital IQ  – finds that the uncertainty surrounding the referendum has in fact led to a significant drop in merger numbers and the numbers have failed to recover to earlier levels.[2] Apart from establishing a causal relationship, the study suggests that the post-referendum policy uncertainty is helping the largest M&A transactions, while hindering the smaller ones, with possible negative consequences.

Read the rest of this entry »

Competition law is an appropriate tool to prevent exploitative price hikes in Pharma

May 26, 2017

(by Sven Gallasch) On 15 May the European Commission formally opened an investigation into Aspen Pharma’s pricing practices concerning five life-saving cancer drugs. This European investigation represents the latest enforcement effort in a string of cases emerging across Europe, including in the United Kingdom and Italy. All investigations are focussed on pharmaceutical pricing practices and allege that their pricing strategies may be exploitative[1] and amount to an abuse of a dominant position.  The surge in these previously rare exploitative pricing cases, has set off alarm bells in the pharmaceutical sector, among legal counsel of big pharma and some academic commentators. Read the rest of this entry »

An energy price cap could kill competition – here’s a better idea

May 3, 2017

(by Catherine Waddams) The Conservatives have announced that their manifesto will include a pledge to cap the price of energy bills. This comes just two years after Labour campaigned to freeze household energy prices. The Tories are yet to flesh out the details of their plan, but it has already drawn strong reactions both for and against. The price of energy stirs deep emotions in part because it is a necessity, one which absorbs a much higher proportion[1] of the income of those in poverty and “just about managing” than of richer households.

But there are two other important features: Read the rest of this entry »