1 INTRODUCTION: STARTING FROM FIRST PRINCIPLES 1
1.1 Competition Economics and You 1
1.2 What does Economics Contribute to Competition Law? 2
1.3 The Books Approach to Explaining Competition Economics 6
1.4 Explaining Some Basic Principles the Economic Naturalist's Way 8
1.5 Some Health Warnings on Competition, Competition Policy, and Competition Economists 17
1.6 The Remainder of this Book 21
2 MARKET DEFINITION 23
2.1 Why Market Definition? 25
2.2 Dimensions of the Relevant Market 29
2.3 The Demand Side: Substitution and Elasticities 31
2.4 Bringing in the Supply Side: The Hypothetical Monopolist Test 37
2.5 Critical Loss Analysis: 'Gould' or 'Would'? 56
2.6 The Cellophane Fallacy 65
2.7 Supply-Side Substitution and Market Aggregation 68
2.8 Price Discrimination Markets 74
2.9 Chains of Substitution, and Specific Aspects of Geographic Market Definition 77
2.10 Market Definition for Complements and Bundles 85
2.11 Markets Along the Vertical Supply Chain 91
2.12 Product Substitution Versus Product Migration 95
2.13 Market Definition for Features Other than Price 98
2.14 Market Definition in Practice: Main Empirical Methods 102
2.15 Conclusion: Why Market Definition? 112
3 MARKET POWER 115
3.1 The Core Concern in Competition Law 116
3.2 What is Market Power? 118
3.3 Assessing Market Power Through Market Shares and Concentration 123
3.4 Entry and Exit Barriers 132
3.5 Collective Dominance, Tacit Collusion, and Effective Competition 142
3.6 Profitability as a Measure of Market Power 150
3.7 Buyer Power and Bidding Markets 166
3.8 Market Power, Investment, and Innovation 171
4 ABUSE OF DOMINANCE 177
4.1 Successful Competitor or Dangerous Monopolist? 179
4.2 General Principles for Assessing Exclusionary Conduct 182
4.3 Cost Benchmarks for Exclusionary Conduct 189
4.4 Predation 198
4.5 Price Discrimination 215
4.6 Loyalty Rebates, Discounts, and Exclusive Dealing 223
4.7 Margin Squeeze 239
4.8 Bundling and Tying 249
4.9 Refusal to Supply and Essential Facilities 261
4.10 Excessive Pricing 268
5 CARTELS AND OTHER HORIZONTAL AGREEMENTS 283
5.1 Are All Cartels Bad? 283
5.2 Economic Characteristics of Hardcore Cartels 287
5.3 Non-Hardcore Horizontal Agreements: Counterfactual Analysis 293
5.4 Finding Cartels: Can Economics Help? 302
6 VERTICAL RESTRAINTS 309
6.1 Business Practices, the Law, and the Economics 309
6.2 Economic Rationales for Vertical Restraints 312
6.3 Anti-Competitive Effects of Vertical Restraints 322
6.4 Conclusion: Questions for Competition Law 331
7 MERGERS 333
7.1 What Can Economics Add to Merger Control? 334
7.2 What is the Test for Judging a Merger to be Anti-Competitive? 335
7.3 The Counterfactual 338
7.4 Unilateral Effects in Horizontal Mergers 345
7.5 Non-Horizontal Mergers 363
7.6 Merger Efficiencies 371
8 STATE AID 379
8.1 State Aid in a Wider Context 380
8.2 The Basic Economic Principles of State Aid 384
8.3 Where Does Economics Fit in to a State Aid Case? 386
8.4 Is there State Aid? If So, How Much? The Market Economy Investor Principle 388
8.5 Is there a Distortion of Competition or Trade? 402
8.6 Services of General Economic Interest: The Altmark Criteria 409
8.7 Services of General Economic Interest: Measuring Appropriate Compensation 418
8.8 Does the State Aid Measure Address a Market Failure? 425
8.9 Aid for the Rescue and Restructuring of Companies in Difficulty 428
8.10 The Balancing Test 433
8.11 Remedies to Minimize the Distortion of Competition 437
8.12 Conclusion: Comments on State Aid Enforcement 441
9 DESIGN OF REMEDIES 443
9.1 After the Diagnosis, What Next? 443
9.2 Structural Remedies 445
9.3 Behavioural Remedies; Price and Access Regulation 453
9.4 Behavioural Remedies: New Insights from Behavioural Economics 464
9.5 Fines 474
9.6 Measuring the Costs and Benefits of Remedies, and of Competition Law 480
10 QUANTIFICATION OF DAMAGES 491
10.1 Damages Claims, Economics, and the Law 493
10.2 Main Stages in the Damages Estimation 499
10.3 Harm From Hardcore Cartel Agreements: Conceptual Framework 500
10.4 Harm From Exclusionary Conduct: Conceptual Framework 508
10.5 A Classification of Methods and Models for the Quantification of Damages 514
10.6 Comparator-Based Approaches: Cross-Sectional 524
10.7 Comparator-Based Approaches: Time Series 529
10.8 Comparator-Based Approaches: Difference-in-Differences 534
10.9 Approaches Based on Financial Analysis 536
10.10 Approaches Based on Market Structure and Industrial Organization Theory 546
10.11 Insight into the Pass-on of Overcharges 553
10.12 From the Counterfactual Stage to a Final Damages Value: Interest and Discounting 561
11 THE USE OF ECONOMIC EVIDENCE IN COMPETITION CASES 567
11.1 Smokescreens and Mud-Slingers? 567
11.2 Best Practice in Presenting Economic Evidence 568
11.3 When Can Courts Rely on Economic Experts? 570
11.4 The Use of Economics: A Promising Future? 580
Bibliography 587
Index 597