Fair Trading Commission - Queenstown, Guyana
Kevin Harriott presents information from the Fair Trading Commission in Queenstown, Guyana, related to a specific session in October. Contact email provided for inquiries.
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Presentation Transcript
Presented by: Kevin Harriott| Kharriot@gmail.com Fair Trading Commission| jftc.gov.jm 2016.10. 17-21 Queenstown, Guyana
The views expressed herein are those of this facilitator and do not necessarily reflect the views of the Fair Trading Commission in Jamaica. The Role of Economics in Competition Law Enforcement 2 February 18, 2025
Understand the rationale for competition law. Understand the features of perfect competition. Understand the link between economics and antitrust enforcement. The Role of Economics in Competition Law Enforcement 3 February 18, 2025
What do you understand by the term competitive markets ? Is it fair that students pay a lower fare than adults on public transportation? Is it fair for consumers that goods are being dumped in Jamaica? The Role of Economics in Competition Law Enforcement 4 February 18, 2025
The Objectives of Competition Law The Economics of Competition Law Market Definition Market Power Assessment 1. 2. 3. 4. The Role of Economics in Competition Law Enforcement 5 February 18, 2025
Narrow v. Broad Definition Competition Policy Competition law Anti-dumping Telecoms deregulation Industrial policy Intellectual property The Role of Economics in Competition Law Enforcement 6 February 18, 2025
Consumer Policy Competition law Public Sanitation Standards law Consumer law The Role of Economics in Competition Law Enforcement 7 February 18, 2025
Economics Objectives: Efficiency Consumer Protection Non-Economic Objectives Equity Political Other The Role of Economics in Competition Law Enforcement 8 February 18, 2025
Antitrust enforcement is a war against the unjustified use of market power. The Role of Economics in Competition Law Enforcement 9 February 18, 2025
Antitrust enforcement is a war against the unjustified use of market power. The Role of Economics in Competition Law Enforcement 10 February 18, 2025
Antitrust enforcement is a war against the unjustified use of market power. The Role of Economics in Competition Law Enforcement 11 February 18, 2025
Antitrust War Chest The Role of Economics in Competition Law Enforcement 12 February 18, 2025
Antitrust War Chest (i). Legislation - Anti-competitive agreements - abuse of dominance - Mergers 1. 2. 3. The Role of Economics in Competition Law Enforcement 13 February 18, 2025
Antitrust War Chest (i). Legislation (ii). Advocacy The Role of Economics in Competition Law Enforcement 14 February 18, 2025
Antitrust War Chest (i). Legislation (threat from commercial conduct) (ii). Advocacy The Role of Economics in Competition Law Enforcement 15 February 18, 2025
Antitrust War Chest (i). Legislation (threat from commercial conduct) (ii). Advocacy (threat from govt. conduct) The Role of Economics in Competition Law Enforcement 16 February 18, 2025
The Objectives of Competition Law The Economics of Competition Law 2.1 What is meant by Competitive Markets ? 2.2 How do competitive markets compare to other markets? 2.3 How economics have shaped legal standards Market Definition Market Power Assessment 1. 2. 3. 4. The Role of Economics in Competition Law Enforcement 17 February 18, 2025
The Role of Economics in Competition Law Enforcement 18 February 18, 2025
looks like or performs like the perfectly competitive market structure The Role of Economics in Competition Law Enforcement 19 February 18, 2025
Market structure: i. number of suppliers/buyers ii. conditions for entry and exit iii. information iv. substitutability The Role of Economics in Competition Law Enforcement 20 February 18, 2025
Various market structures studied by economists 1. (Perfectly) Competitive [worshipped, no real world example] The Role of Economics in Competition Law Enforcement 21 February 18, 2025
Various market structures studied by economists 1. (Perfectly) Competitive [worshipped, no real world example] 2. Oligopoly [tolerated, eg. new cars dealer] The Role of Economics in Competition Law Enforcement 22 February 18, 2025
Various market structures studied by economists 1. (Perfectly) Competitive [worshipped, no real world example] 2. Oligopoly [tolerated, eg new cars dealer] 3. Monopolistically Competitive [tolerated, service station dealer] The Role of Economics in Competition Law Enforcement 23 February 18, 2025
Various market structures studied by economists 1. (Perfectly) Competitive [worshipped, no real world example] 2. Oligopoly [tolerated, e.g. new cars dealer] 3. Monopolistically Competitive [tolerated, e.g. service station dealer] 4. Monopoly [despised, e.g. Guyana Power & Light Inc] The Role of Economics in Competition Law Enforcement 24 February 18, 2025
Features Competitive Oligopoly Monopoly Suppliers Many Few One Difficulties entering/exiting None Medium Very High information Perfect --- --- substitutability Perfect --- none The Role of Economics in Competition Law Enforcement 25 February 18, 2025
Economists rank markets based on efficiency Static Efficiency Allocative efficiency:- resources are allocated to reflect consumer preferences. [ p = mc ] Productive efficiency:- average production costs are minimized Total Surplus:- Maximize consumer + producer surplus Dynamic Efficiency Product innovation:- introduction of new product Cost innovation:- cheaper way of producing existing product The Role of Economics in Competition Law Enforcement 26 February 18, 2025
How do you measure cost Opportunity Cost Marginal cost Average cost Total Cost Fixed cost Variable cost Long run incremental cost Acquisition cost Replacement cost The Role of Economics in Competition Law Enforcement 27 February 18, 2025
Economic Performance Competitive Oligopoly Monopoly Allocative efficiency Productive efficiency Yes No No Yes No No Maximum Social Surplus Yes No Usually not The Role of Economics in Competition Law Enforcement 28 February 18, 2025
Competition law is an attempt to codify the behaviour of economic agents in a competitive market The Role of Economics in Competition Law Enforcement 29 February 18, 2025
Competition Law Standards Parallel Economic concepts Relevant Market Market Monopoly Power Market power Dominant enterprise monopoly Abuse of dominance Unilateral effects Collusion/conspiracy/cartel Coordinated conduct The effect of substantially lessening competition Anticompetitive effects The Role of Economics in Competition Law Enforcement 30 February 18, 2025
Characteristics of Competitive Market Scrutinized Conduct [Pillars of CL] Many suppliers/ consumers Mergers and Acquisitions (M&As) No difficulty entering/ leaving Abuse of dominance Perfect information Collusion Perfect substitutability Competition Advocacy The Role of Economics in Competition Law Enforcement 31 February 18, 2025
The Objectives of Competition Law The Economics of Competition Law Market definition Indirect evidence Direct evidence Market Power Assessment 4.1 legal standards of proof 4.2 theories of harm 4.3 dominance 4.4 mental traps to avoid 1. 2. 3. 4. The Role of Economics in Competition Law Enforcement 32 February 18, 2025
Purpose Assessment Indirect Evidence SSNIP Test (see US merger guidelines 2010) Direct Evidence first principles approach (see Salop, 2001) The Role of Economics in Competition Law Enforcement 33 February 18, 2025
Definition of Relevant Market Smallest group of substitutable products sold in a geographic region Relevant Market has at least Two Dimensions Product Market Geographic Market OTHER DIMENSION Time (day, week, month etc) The Role of Economics in Competition Law Enforcement 34 February 18, 2025
SSNIP (or Hypothetical Monopolist)Test Small but Significant Non-Transitory Increase in Prices Used by most Competition Authorities to define Market The Role of Economics in Competition Law Enforcement 35 February 18, 2025
SSNIP (or Hypothetical Monopolist)Test Start with the product at the centre of the complaint. ROUND ONE If there was only a single seller of this product (i.e. a hypothetical monopolist), could such monopolist profitably increase prices by 5%? The Role of Economics in Competition Law Enforcement 36 February 18, 2025
If price increase is profitable, then consumers do not have much substitutes for the product. Then concluded that product is in a market by itself. End SSNIP TEST The Role of Economics in Competition Law Enforcement 37 February 18, 2025
If price increase is NOT profitable, then consumers must have switched to a substitute for the product. conclude that product at the subject of the complaint is competing in a market with at least one other product. Identify the other product and continue SSNIP Test The Role of Economics in Competition Law Enforcement 38 February 18, 2025
ROUND TWO If there was only a single seller of these two products, could such monopolist profitably increase prices by 5%? The Role of Economics in Competition Law Enforcement 39 February 18, 2025
If price increase is profitable, then consumers do not have much substitutes for the two products. Then concluded that these two products are in a market by themselves. End SSNIP TEST The Role of Economics in Competition Law Enforcement 40 February 18, 2025
If price increase is NOT profitable, then consumers must have switched to a substitute for the two products. conclude that two products are competing in a market with at least one other product. Identify the other product and continue SSNIP Test. End SSNIP test when you have found a group of products for which it would not be profitable for a hypothetical monopolist to increase prices by 5%. The Role of Economics in Competition Law Enforcement 41 February 18, 2025
Direct Evidence of Market Definition Observed conduct such as collusion could define the relevant market. The Role of Economics in Competition Law Enforcement 42 February 18, 2025
The Objectives of Competition Law The Economics of Competition Law Market definition Indirect evidence Direct evidence Market Power Assessment 4.1 legal standards of proof 4.2 theories of harm 4.3 dominance 4.4 mental traps to avoid 1. 2. 3. 4. The Role of Economics in Competition Law Enforcement 43 February 18, 2025
Per se (strict liability) { No economic foundation} Rule of Reason (fact-specific) Conduct unjustified if it leads to a substantial lessening of competition The Role of Economics in Competition Law Enforcement 44 February 18, 2025
Definition of Market Power The ability to raise prices above competitive levels profitably for a sustained period of time. The Role of Economics in Competition Law Enforcement 45 February 18, 2025
Is this consistent to exercising market power? price time June The Role of Economics in Competition Law Enforcement 46 February 18, 2025
Is this consistent to exercising market power? price time June The Role of Economics in Competition Law Enforcement 47 February 18, 2025
Is this consistent to exercising market power? price time June The Role of Economics in Competition Law Enforcement 48 February 18, 2025
Is this consistent to exercising market power? price time June The Role of Economics in Competition Law Enforcement 49 February 18, 2025
Harm to rivals Harm to consumers The Role of Economics in Competition Law Enforcement 50 February 18, 2025
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