What determines the outcome of competition law cases? This is the crucial question for competition advisers.

Is it advanced assessments, including usage of sophisticated economic methods?

Our experience says no. Keep it simple. Most decisions depend critically on a few (simple) assumptions characterising the relevant markets. This could be whether or not new firms can easily challenge incumbent firms (entry barriers) or whether the product in question has good substitutes or not.

Consequently, we have two recommendations for the parties and their legal and economic advisers:

• Check whether the competition authorities have got the assumptions right. Wrong assumptions lead to wrong or unfounded decisions.
• Perhaps surprisingly, contribute to the competition authorities’ knowledge of the markets. Otherwise, the decisions may be random.

These recommendations are based on our own competition cases as well as on a review of international competition cases we have conducted on behalf of the Norwegian competition authorities.

Our work on postal liberalisation illustrates these two recommendations. In postal liberalisation, a central question is 

whether the universal service obligation (USO) will be an unfair burden for the incumbent after liberalisation and distort competition.

Studies on the USO typically assume that unprofitable parts of the postal network can be abolished without affecting other parts of the network. However, this approach makes a wrong assumption about the demand effects. Large buyers of postal services, e.g. banks, would be very unsatisfied if they could not send letters to all households.

In a study for the Danish Chamber of Commerce, we developed a ‘commercial approach’, based on the right assumption, for estimating cost of USO. Our commercial approach is now incorporated in the guidelines from the European Committee for Postal Regulation (CERP) on estimating the USO cost. The guidelines enable legislators to make informed decisions on how the USO should be handled in liberalised postal markets.

What public procurers can learn from private procurers

In a short exploratory study, commissioned by the Swedish Competition Authority, we identified four lessons public procurers can learn from the private sector:

·      Communication between procurers and suppliers is seldom satisfactory.

·      The flexibility for suppliers to propose alternative products is often unduly restricted in tender specifications.

·      Predictability regarding what will be required in future tenders is considered as poor

·      Learning is paramount to be able to carefully evaluate procurements through their entire life cycle and to feed-back the lessons learnt into future procurements.

For more information on the report, read here

(available in Swedish and English)

The Impact of handset subsidies on innovation

The Norwegian Post and Telecommunications Authority commissioned Copenhagen Economics to assess the impact of bundling mobile handsets and subscriptions on innovation, e.g. diffusion of new technologies such as 3G.

We find empirical indications that handset bundling promotes diffusion of technology, but due to limited data availability, we do not draw strong conclusions. We also conclude that economic theory cannot provide a clear-cut answer: In some cases more market concentration promotes innovations – in other cases the relation is the opposite.

For more information on the report, read here