Competition policy

Chiara Fumagalli, Massimo Motta, Emanuele Tarantino, 27 March 2022

The acquisition of potential competitors is a widespread phenomenon. This may be anti-competitive, as the incumbent kills off potential future competition, or welfare-improving, such as by easing financial constraints for the target. This column provides a framework to trade-off these effects. The authors find that antitrust agencies should prohibit takeovers whose transaction price is particularly high, as the high price signals that the takeover is not indispensable to the target firm’s success. This provides support for the proposals made by antitrust agencies to revise the current laissez-faire approach to mergers in digital markets.

Decio Coviello, Andrea Guglielmo, Clarissa Lotti, Giancarlo Spagnolo, 24 March 2022

Rules constraining bureaucratic discretion may limit the misuse of public funds but may also hinder government performance. Using Italian public works data, this column examines the prevalence and impact of procuring administrations manipulating the value of contracts. The authors find evidence suggesting that appointed administrations violate procedural rules to manipulate the value of contracts to retain discretion, and do it often enough to establish repeated interactions with less risky and better-performing suppliers so that, on average, procurement outcomes improve. They find no manipulation (and poorer procurement outcomes) for elected administrations, possibly due to stronger electoral discipline. 

Clarissa Lotti, Giancarlo Spagnolo, 02 March 2022

Monetary savings in public spending are one of the main arguments in favour of centralising procurement. In addition to direct savings from public administrations that buy through a central procurement agency, this column reports evidence of sizable indirect savings from public administrations that do not. These additional savings appear driven by informational externalities on less competent public buyers purchasing more complex goods. Accounting for indirect savings also increases the estimate of direct ones.

Romesh Vaitilingam, 25 February 2022

With sharply rising US inflation prompting debate about the potential role of powerful firms in driving up prices and whether antitrust interventions and/or price controls may be an effective policy response, the IGM Forum at Chicago Booth invited its panel of leading US economists to express their views. As this column reports, few think that dominant corporations in uncompetitive markets are a significant factor in rising prices; and asked whether antitrust interventions could reduce inflation, more than four in five experts disagree. A smaller majority disagrees with the proposition that 1970s-style price controls could reduce inflation, but even those who say that they might work don’t necessarily think that reintroducing them should actually happen. 

Jacques Crémer, David Dinielli, Amelia Fletcher, Paul Heidhues, Monika Schnitzer, Fiona Scott Morton, 11 February 2022

The final stage of negotiations around the EU Digital Markets Act are underway. This column highlights five key sets of issues that remain under debate and provides an economic perspective. The authors support several of the proposed amendments, such as extending the prohibition on parity clauses and introducing new rules to address the anti-competitive use of default settings. They also agree with the intention of the latest proposals on self-preferencing, interoperability and data portability, and remedy options, but suggest some modifications.

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