Competition Studies

1. Competition Studies Marina Bidart Consultant Presentation at the workshop organized by the UNCTAD – COMPETITION BRANCH 19 November 2007

2. Layout of the presentation • A general classification of competition studies: objectives, scope, requirements of information, examples referred to the energy markets • The Guidelines for competition studies prepared by COMPAL (April 2005): objectives, scope, requirements of information, examples • The COMPAL typology of competition reports: a tool for future studies (2006)

3. Three types of competition studies • Sectoral competition studies • Objectives: • Oversight of strategic economic sectors • Competition advocacy • Competition authority’s general and diffuse concerns • Identification of elements that hinder and empower competition • Scope of the studies: • The whole value chain and the related markets / sectors • Information requirements: • Public and confidential • Examples: • Fuels and electrical sectors in El Salvador, COMPALl studies.

4. Three types of competition studies (cont’d) • Mergers & Acquisitions analysis • Objective: • Authorize or block an economic concentration • Scope: • Markets where merging parties operate • Other possible related markets • Information requirements: • confidential • Examples • Petrobras/Eg3; Petrobrás / Pecom Energia (Perez Companc)

5. Three types of competition studies (cont’d) • Anticompetitive practices: cases • Objective: • Assess the existence of a competition law violation; estimate damages, propose sanctions and remedies • Scope: • Markets where the unlawful practice takes place and have impact. • Markets that facilitate the unlawful practice • Information requirements • Confidential • Examples • YPF S.A. in LPG market

6. Structural Analysis First step, common to all kind of competition studies • Value chain • Regulation / Law aspects • Product characteristics • Demand analysis • Identification of economic agents. Taxonomy of the transactions • Relevant markets. Market shares and concentration indicators • Barriers to entry

7. Oil Refining Wholesale market Gas stations Imports Constraint FACTOR Fuel imports Wholesale market Gas stations Oil Imports Local refining Value chain example • Oil producers • Oil importers

8. Behavioural analysis • Sectoral competition studies • Prices, margins, Lerner Index, correlation to international prices (if exist) • Prices: geographical patterns • Identification of elements facilitating illegal agreements and abuse of dominance (example: contracts) • Anticompetitive practices investigation • The former, but referred to affected markets • Direct and/ or indirect evidence of illegal behaviour • Estimation of damages • Mergers / acquisitions proceedings • Parties behavioural elements that facilitate post- merger monopolisation / cartelization

9. Guidelines for studies prepared by COMPAL (April 2005) • Objective: focused on identifying anticompetitive practices • Advantages: “goes to the point” • Disadvantages: neglects other kind of competition concerns (competition advocacy, control M&A, monitoring key sectors) • Scope: one or more key economic sectors, at national level • Advantages: comprehensive review of the selected sector, from the competition point of view • Disadvantages: difficulties to identify anticompetitive practices, on a solid base

10. Guidelines for studies prepared by COMPAL (April 2005) • Information requirements • Confidential or sensitive if in line with the objective • Non necessarily confidential if in line with the scope • Methodology • Conventional structural analysis • Behavioural analysis: in line with the objective and requiring confidential / sensitive information • Advantages: “goes to the point” • Disadvantages: requires high experienced consultants in antitrust investigation and in handling sensitive information

11. The proposed COMPAL new typology for competition reports Moving towards better coordination between objectives and scope: • National Report on Competition/Consumer Protection • Objective: provide overall economic context, institutional and legal framework, international cooperation, and problems identified • Scope: whole economy (methodology ?) • Report on the potential existence of anti-competitive behaviour at national level • Objective: clearly identify sectors/markets in which potential anti-competitive practices may exist • Scope: selected economic sectors (methodology ?) • Sectoral Study: • Objective: identification of possible anti-competitive practices in accordance with the competition law, and measurement of the impact • Scope: a particular sector (methodology: structural analysis ?) • Report on a particular market • Objective: the study should look at anticompetitive practices in the market • Scope: a market (methodology: structural analysis ?)

12. Conclusions / Recommendations • Coordinate COMPAL competition studies with the whole range of needs and functions of competition authorities: • Support to carry out competition advocacy (studies to support recommendations on regulations, custom duties, taxes, subsidies, etc.) • Support to monitor competition performance in key economic sectors (energy markets, food, pharmaceuticals, etc.) • Support to develop a methodology to analyse M&A (e.g.non traditional sectors) • Support to identify anticompetitive practices • For each type of competition study: coordinate objectives, scope and methodology

13. Thanks for your attention Marina Bidart marina.bidart@gmail.com