Factors accounting for the enactment of a competition law – an empirical analysis
Franz Kronthaler, Johannes Stephan
Einzelveröffentlichungen,
Nr. 6,
2005
Abstract
The paper is concerned with the factors that account for decisions to enact a national competition law. In a first step, the paper updates and enlarges the existing data bases of countries that have enacted a competition law. The paper then identifies and discusses possible factors that influence the decision to enact a competition law. In a third step, the method of panel-data logit analysis is employed to test a set of hypothesis pertaining to the factors across the time dimension and across countries. The results of this analysis are interpreted in terms of significance and in terms of the sign of their influence on the probability of a country to enact. Given generality of the analysis, the results can shed light on the probability of individual countries, and in particular developing countries, to actually take the step of enactment.
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Analysis of statements made in favour of and against the adoption of competition law in developing and transition economies
Johannes Stephan, Franz Kronthaler, Frank Emmert
Einzelveröffentlichungen,
Nr. 9,
2005
Abstract
The paper is concerned with documenting and assessing statements made by policymakers, opinion formers, and other stakeholders in favour and against the adoption of competition laws with particular reference to transition and developing countries which have not yet enacted these kind of laws. For example, claims that competition enforcement might reduce the inflow of foreign direct investment, or that other policies are successfully used as substitutes for competition law, are assessed. In a first step, the method of generalized analysis structures the list of statements around core issues of common features to make them accessible to further interpretation and assessment. The paper shows that some claims are in fact country or region specific, and specific to the development level of the respective countries. In a second step, the core issues are assessed according to economic and legal criteria. Since the analysis focuses on transition and developing countries, the criteria for economic assessment are predominantly economic growth and development issues, but also include the economic coherency of a set of claims submitted by stakeholders in a given country. The criteria for legal assessment include whether claims are problematic in light of WTO-principles, or are even born out of a political objective which is incompatible with the spirit, if not the letter of WTO-rules.
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Distance, Lending Relationships, and Competition
Hans Degryse, Steven Ongena
Journal of Finance,
Nr. 1,
2005
Abstract
We study the effect on loan conditions of geographical distance between firms, the lending bank, and all other banks in the vicinity. For our study, we employ detailed contract information from more than 15,000 bank loans to small firms comprising the entire loan portfolio of a large Belgian bank. We report the first comprehensive evidence on the occurrence of spatial price discrimination in bank lending. Loan rates decrease with the distance between the firm and the lending bank and increase with the distance between the firm and competing banks. Transportation costs cause the spatial price discrimination we observe.
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The Contestable Markets Theory - Efficient Advice for Economic Policy
Christian Growitsch, Thomas Wein
Externe Publikationen,
2004
Abstract
During the nineties of the last century several formerly monopolistic markets (telecommunication, electricity, gas, and railway) have been deregulated in Germany based on European directives and theoretically inspired by the theory of contestable markets. The original contestable market theory implied three assumptions necessary to be satisfied to establish potential competition: Free market entry, market exit possible without any costs, and the price adjustment lag exceeding the entry lag. Our analysis shows that if the incumbent reduces its prices slowly (high adjustment lag) and the market entry can be performed quickly (low entry lag), a new competitor will be able to earn back sunk costs. Therefore it is not necessary that all three conditions be complied with for potential competition to exist. Applying this „revised“ contestable market theory to the deregulated sectors in Germany, natural monopolies can be identified in telecommunication sections local loops and local/regional connection networks, in the national electricity grid and the regional/local electricity distribution networks, in the national and regional/local gas transmission/distribution sections, and in the railroad network. These sections are not contestable due to sunk costs, expected high entry lags and a probably short price adjustment lag. They are identified as bottlenecks, which should be regulated. The function of system operators in energy and railroad are closely related to the non-contestable monopolistic networks.
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The influence of Vertical Integration and Property Rights on Network Access Charges in the German Electricity Markets
Christian Growitsch, Thomas Wein
Externe Publikationen,
Nr. 6,
2004
Abstract
German Electricity markets were deregulated in the late nineties of the last century. In contrast to other European countries, the German government enacted negotiated third party access instead of installing a regulation authority. Network access charges for new competitors are based on contractual arrangements between energy producers and industrial consumers, which specify the calculation schemes for access charges. Local and regional suppliers are nevertheless able to set (monopolistic) charges at their own discretion, restricted only by the possibility of interference competition authorities. While some of those suppliers have been acquired by one of the four Transmission System Operators and become vertically integrated, the majority is still independent public utility companies. In this paper we analyse if there is evidence for different charging behaviour depending on the supplier’s economic independence or its level of vertical integration. Controlling for other coefficients as the so called structural features and related cost differences as well as the influence of competition law suits, multivariate estimations show significantly lower access charges than vertically separated suppliers, whereas incorporated network operators charge significantly higher charges compared to independent suppliers for at least one typical case.
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Competition Policy in Central Eastern Europe in the Light of EU Accession
Jens Hölscher
Journal of Common Market Studies,
Nr. 2,
2004
Abstract
This study reviews the progress made in EU accession candidates on competition policy. The analysis shows that institution-building and legislation are well under way and that anti-trust practice is not too lax. Due to the diversity among the accession countries under review, the study finds that the strictly rule-based frame work of the EU might not be the most favourable solution for some candidates: firstly, the small and open economies of most candidates make it particularly difficult to define the ‘relevant market’ in competition cases. Secondly, the traditionally intense vertical integration of production in accession states calls for a reassessment of ‘vertical restraints’. The policy implications of this study suggest that the EU competition task force should take a proactive, case-by-case approach vis-à-vis its new members.
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Competition Policy in Central East Europe in light of EU Accession
Johannes Stephan
Journal of Common Market Studies,
2004
Abstract
This study reviews the progress made in EU accession candidates on competition policy. The analysis shows that institution-building and legislation are well under way and that anti-trust practice is not too lax. Due to the diversity among the accession countries under review, the study finds that the strictly rule-based frame work of the EU might not be the most favourable solution for some candidates: firstly, the small and open economies of most candidates make it particularly difficult to define the ‘relevant market’ in competition cases. Secondly, the traditionally intense vertical integration of production in accession states calls for a reassessment of ‘vertical restraints’. The policy implications of this study suggest that the EU competition task force should take a proactive, case-by-case approach vis-à-vis its new members.
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Softening Competition by Inducing Switching in Credit Markets
Jan Bouckaert, Hans Degryse
Journal of Industrial Economics,
Nr. 1,
2004
Abstract
We show that competing banks relax overall competition by inducing borrowers to switch lenders. We illustrate our findings in a two-period model with adverse selection where banks strategically commit to disclosing borrower information. By doing this, they invite rivals to poach their first-period market. Disclosure of borrower information increases the rival's second-period profits. This dampens competition for serving the first-period market.
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Firm-Specific Determinants of Productivity Gaps between East and West German Industrial Branches
Johannes Stephan, Karin Szalai
IWH Discussion Papers,
Nr. 183,
2003
Abstract
Industrial productivity levels of formerly socialist economies in Central East Europe (including East Germany) are considerably lower than in the more mature Western economies. This research aims at assessing the reasons for lower productivities at the firm level: what are the firm-specific determinants of productivity gaps. To assess this, we have conducted an extensive field study and focussed on a selection of two important manufacturing industries, namely machinery manufacturers and furniture manufacturers, and on the construction industry. Using the data generated in field work, we test a set of determinant-candidates which were derived from theory and prior research in that topic. Our analysis uses the simplest version of the matched-pair approach, in which first hypothesis about relevant productivity level-determinants are tested. In a second step, positively tested hypothesis are further assessed in terms of whether they also constitute firm-specific determinants of the apparent gaps between the firms in our Eastern and such in our Western panels. Our results suggest that the quality of human capital plays an important role in all three industrial branches assessed. Amongst manufacturing firms, networking activities and the use of modern technologies for communication are important reasons for the lower levels of labour productivity in the East. The intensity of long-term strategic planning on behalf of the management turned out to be relevant only for machinery manufacturers. Product and process innovations unexpectedly exhibit an ambiguous picture, as did the extent of specialisation on a small number of products in the firms’ portfolio and the intensity of competition.
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Merger Control and Competition Policy in Central East Europe in view
Johannes Stephan
ICFAI Journal of International Business Law,
2003
Abstract
Im Zuge der Beitrittsverfahren sind die EU Kandidatenländer gezwungen, das institutionelle Regelwerk der Union (den acquis communautaire) voll- ständig zu übernehmen. Dabei handelt es sich um ein Regelwerk, das in ausgereiften Marktwirtschaften gewachsen ist. Es stellt sich somit die Frage nach seiner Kompatibilität für die noch recht jungen Marktwirtschaften in Mittel- und Osteruropa mit ihrem deutlich niedrigeren Entwicklungsniveau. Potentielle Konfliktpunkte könnten insbesondere bei der Ausgestaltung und Durchsetzung der Wettbewerbspolitik erwartet werden: Viele (ehemalige) Staatsunternehmen im Restrukturierungsprozess sind bisher nicht wett- bewerbsfähig, staatliche Beihilfen und eine laxere Kontrolle von Marktmacht könnten Wettbewerbsverzerrungen im gemeinsamen europäischen Markt hervorrufen. Tatsächlich zeigt sich aber, dass die Kandidatenländer nicht nur bereits das vollständige diesbezügliche Regelwerk implementiert haben, auch zeigt die Analyse der behandelten Fälle, dass die Durchsetzung der Wettbewerbspolitik dort den strengen Vorgaben der EU entspricht: Der pragmatische Weg Ungarns greift lediglich dort in den Markt ein, wo regionale und soziale Ungleichgewichte zu korrigieren sind, Polen hält streng die vorgegebenen Regeln zur Verhinderung monopolistischer Marktmacht ein und hat fiskalische Kontrollmechanismen seiner staatlichen Beihilfepolitik installiert. Insgesamt scheinen die Kandidatenländer die Wettbewerbspolitik des europäischen Binnenmarktes also durchaus zu verkraften. Als problematisch erwies sich aber vor allem die Definition des relevanten Marktes für die besonders offenen Volkswirtschaften in Mittel- und Osteuropa. Eine mögliche Handlungsempfehlung bestünde in einer weniger regelgebundenen Behandlung der Wettbewerbspolitik, die proaktiv Fall für Fall gesondert betrachtet. Dieses Argument wird insofern weiter unterstützt, als sich die institutionelle Kooperation zwischen der EU Kommission und den Kandidatenländern erst im Aufbau befindet, die neuen Mitglieder sich also am unteren Ende der institutionellen Lernkurve befinden.
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