Second Annual Conference on Competition Enforcement in the

Second Annual Conference on Competition Enforcement in the Recently Acceded Member States, Brno, 23 April 2010 Economic analysis in competition law Panelists: Milan Brouček - Chief Economist, Office for the Protection of Competition Gergely Csorba - Chief Economist, Hungarian Competition Authority (GVH) Josef Bejček – Professor at Faculty of Law, Masaryk University in Brno

More economic approach in competition policy: Latest trends in the Czech Republic Milan Brouček Chief Economist Second Annual Conference on Competition Enforcement in the Recently Acceded Member States, Brno, 23 April 2010

Opening • the role of economics/economists in competition policy: o economics explains how markets work (models of competition, firm behaviour, consumer behaviour) o economists have developed quantitative techniques • role in particular areas of competition policy? • economists can quantify the „counterfactual“: – „what if“ situation for mergers – „but for“ situation for dominance and cartels

I. More economic approach • conceptual issue - change in approach (effect-based approach vs. form-based approach) • priority: assess effect (actual, likely), clear theory of harm • individual approach to cases • necessity to apply analytical methods • greater demand on economic data • possible objective necessity and efficiencies

I. More economic approach • key role of economic analysis in definition of relevant markets: – SSNIP test • unavoidable: price-based conduct • use of quantitative techniques – no reason for different approach in mergers and antitrust

II. Recent development - EC • pressure from courts (CFI, ECJ) • apparent shift to more economic approach (MEA): o o horizontal merger guidelines (2004) non-horizontal merger guidelines (2008) art. 82 (102) reform – guidance (2009) current art. 81 (101) reform • giving priority to assess effects of merger/conduct effect-based approach (EBA)

III. Recent development - Office • background: o no pressure from courts o very low pressure from undertakings o internal decision to apply MEA/EBA • main objective: o increasing efficiency of competition policy

III. Recent development – Office • advantages: o harmonization with some other key jurisdictions o too formalistic approach eliminated o competition on merits recognized and permitted • risks: o burden too high? o prioritization? o response from courts?

III. Recent development – Office • chief economist’s unit established (revived) - consists of economists, financial analyst, statistician 2009: 4 members, 2010: 7 members • part of Competition Section within the Office: o o engaged in: mergers, abuse of dominance, cartels, vertical restraints not engaged in: abuse of buyer power („retail chains“), state aid • role of chief economist unit • part of Devil’s Advocates’ panel

IV. Office´s experience since 2009 • mainly in abuse of dominance area: o o o possible margin squeeze/bundling in ADSL possible predatory pricing in bus transportation possible predatory pricing in energy sector possible margin squeeze in energy sector possible refusal to deal in financial sector • mergers: o influence of financial crisis? o recently two candidates for econometrics (unfortunately not realized)

IV. Office´s experience since 2009 • analytical materials (exchange of information, RPM, art. 82 (102) reform, definition of relevant markets …) • personal view: chief economist unit had/has significant impact in-house • key task - data collection: – looking for optimal way (learning by doing)

V. Office´s further plans (visions) • finish „first more economic“ cases • guidelines/best practices on applying MEA • cartels detection (screening markets) • using consumer survey • quantifying antitrust damages (i. a. to endorse private enforcement)

Conclusions • MEA: right direction of competition policy • Office has reflected/followed that direction • but: – prioritization (econometrics) – conjunction: legal and qualitative assessment • wish: economic analysis to be a standard tool used by Office, undertakings and courts…

Thank you for your attention. milan. broucek@compet. cz www. compet. cz