Damien Neven (Université de Lausanne and CEPR), Pénélope
Papandropoulos (ECARES and DULBEA) and Paul Seabright (University of
Cambridge and CEPR) present the message of a new book published by CEPR,
entitled, Trawling
for Minnows: European Competition Policy and Agreements Between Firms.
The book:
- provides an up to date account of modern economic analysis as it
applies to agreements between firms
- proposes a new streamlined procedure for the evaluation of
vertical agreements
- establishes criteria for a set of joint ventures, balancing their
risk to competition against their potential efficiency benefits
- casts light on the way the Commission currently takes decisions
and the inducements this creates for lobbying
- proposes reforms to increase transparency and reduce the cost of
article 85 for business.
The authors have undertaken a comprehensive review of EU policy
towards agreements between firms, using three distinct approaches. First
they consider what the literature in industrial economics has to say
about the effects of such agreements on competition, and about the
consequent rationale for public intervention. Second, they examine the
legal framework and the decisions of the European Commission and the
European court, asking to what extent these are consistent with the
recommendations that emerge from the economic literature. Third, the
book looks at the procedures of the Commission and the way it undertakes
investigations and reaches decisions, in order to see to what extent
these procedures represent an appropriate means of implementing a
defensible policy.
The book examines vertical agreements – that is, those agreements
between firms that produce complementary products. It emphasises the
importance of clear and predictable policy that does not give
unnecessary discretion to public officials, and recommends a three-stage
decision procedure, in which relevant markets are first defined, then
market power is assessed, and finally the impact of agreements on third
parties is evaluated. The book compares this with the actual decisions
of the Commission, and finds it to be deficient in many important
respects. In particular, the Commission uses a very narrow definition of
what constitutes a restriction of competition, fails to distinguish
between intra-and inter-brand competition and ends up catching many
harmless agreements. The authors conclude that the reforms aired in the
recent Green Paper issued by the Commission go nowhere near far enough,
and that present practice is a very long way from what realistic reforms
might produce.
The book also considers explicit or implicit ‘cartel’ agreements
concealed by firms. In this regard the Commission’s practice has a
great deal to recommend it. In particular, the Commission and the Court
seem, rightly, to look with tolerance on implicit agreements between
firms which do not involve explicit coordination. Nevertheless, a
particular concern arises because of the requirements imposed by the
Court on the material evidence required to convict firms. Such
requirements appear excessive in light of the small cost that wrongful
conviction may entail in this area, and also explain the apparent lack
of deterrent effect that the current policy has on cartels.
The book looks at joint venture agreements and the efficiency
benefits these can create (which may entitle them to exemptions under
Article 85) as well as proposing methods of identifying these benefits.
The book examines current procedures, and finds them to be unnecessarily
narrow and formalistic.
Chapter 5 examines the procedures of the Commission, on the basis of
a survey of firms that have undergone Commission investigation. It finds
that in many crucial areas the Commission enjoys high levels of
discretion with very little transparency. In addition the procedures are
slow and cumbersome; unfortunately, however, many of the reforms that
have sought to speed up the procedures have done so at the expense of
even such little transparency as already exists (notably by increasing
the proportion of cases settled under purely informal procedures).
Chapter 6 conducts a more careful econometric analysis of the
determinants of lobbying behaviour by firms. Firms are more likely to
lobby senior Commission officials for cases that appear ‘difficult’
or involve high technology; firm characteristics also determine lobbying
behaviour, with significant differences between nationalities in this
respect. Lobbying is also significantly more intense in cases in the
transport sector.
The study concludes by recommending reforms in the decision-making
criteria that would drastically reduce the number of cases needing to be
examined by the Commission. This would mean that the Commission could
examine the reduced number of remaining cases in a more transparent
manner. These changes could be implemented without changing the treaty
but would require changes in secondary legislation and more than
marginal changes in the Commission’s approach. Such a sharp change in
policy could be communicated through a set of published guidelines which
clearly laid out the principles of the Commission’s intended new
practice, and recognised officially a degree of departure from some of
the earlier case law. These guidelines would both increase the degree of
consistency between cases, and ensure that firms were better able to
foresee whether their agreements were in breach of the law.
Notes for Editors:
CEPR is a network of over 450 Research Fellows based
throughout Europe, who collaborate through the Centre in research and
its dissemination. CEPR helps its Research Fellows to develop projects,
obtain their funding, administer them and disseminate their results. The
Centre’s research ranges from open economy macroeconomics to trade
policy, from the economic transformation of Central and Eastern Europe
to regionalism in the world economy. The views expressed in the book are
the authors’ own. CEPR takes no institutional positions.
Damien Neven is Professor of Economics at HEC,
University of Lausanne and a Research Fellow in CEPR’s Industrial
Organization and Transition Economies programmes.
Pénélope Papandropoulos is affiliated with
ECARES and DULBEA at the Université LIbre de Bruxelles, where she is
currently finishing her PhD dissertation.
Paul Seabright is a Fellow of Churchill College,
University of Cambridge and a Research Fellow in CEPR’s Industrial
Organization and Transition Economies programmes.
‘Trawling
for Minnows:
European Competition Policy and Agreements Between Firms’
Damien Neven, Pénélope Papandropoulos and Paul Seabright
ISBN 1 898 128 34 0–– £40.00
Available from
CEPR, 90-98 Goswell Road, London EC1V 7RR, UK
Tel: (+ 44 20) 7878 2900 Fax: (+ 44 20) 7878 2999 Email: