Economic analysis in DG COMP
Ann-Sophie Dupont
DG Competition
European Commission
Kiev, March 2016
Competition economics at the EC
 Increasing role of economic analysis in EU
competition enforcement since 1990s
 Creation of the office of the chief economist in
2003
 Most important economic analysis at DG
Competition done at the Chief Economist Team
 About 30 economists/econometricians with PhD
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Role of the Chief Competition Economist
 Economic advice for case enforcement and policy initiatives
• independent guidance on methodological issues of economics
and econometrics in the application of EU competition rules
• contributes to individual competition cases (in particular ones
involving complex economic issues and quantitative analysis),
to the development of general policy instruments, as well as
assisting with cases pending before the Community Courts.
 Development of economic expertise in the DG
• focus for economic debate within DG COMP, in liaison with
other Commission services and with the academic world
• organises training sessions and gives advice on studies of a
general economic nature, as well as on market monitoring
• coordinates the activities of the Economic Advisory Group on
Competition Policy (EAGCP)
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Economic Advisory Group on Competition Policy
 discussion forum on competition policy matters
 academics
 recognised reputation in the field of industrial
organisation
 different fields of research
 different research centres in Europe
 proposed by the Chief Economist and nominated
by the Commissioner
 Purpose: support DG Competition to improve the
economic reasoning in competition policy analysis
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Opinions of the EAGCP
• Hardcore restrictions under the Block Exemption Regulation
on vertical agreements: An economic view, by the Vertical
Restraints subgroup, September 2009.
• EU Rescue & Restructuring Aid Guidelines, by the State Aid
sub-group, February 2008
• Non-Horizontal Mergers Guidelines: Ten Principles, by the
merger sub-group. August 2006
• Draft Community Framework for State Aid R&D&I by the
State aid sub-group, July 2006
• Services of General Economic Interest" by the State aid
sub-group, June 2006
• "An economic approach to Article 82" Explanatory note by
the antitrust sub-group, July 2005
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Competition economics at the EC
 Deeply involved in
 mergers (around 60% of our resources)
 antitrust (i.e. agreements and abuse)
 state aids
 Little involvement in cartels, because:
 cases decided on hard evidence
 no quantitative analysis necessary for
determination of fines
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Market
Definition
Competitive
Assessment
CET Work
on
Mergers
Efficiencies
Remedies
Theory of
Evidence
Harm
To Collect
CET Work on
Antitrust
Assessment
Of Submissions
Scrutiny
Integration with case teams
• Economic evidence (theory or quantitative) should be in line
with internal documents, customer views and other
qualitative evidence
• Economists should be tightly integrated into the rest of the
investigation (CET members are effectively seconded to
case team), with a two-way flow of information (case-teams
to help economists understand salient features of the case)
• Attend key internal and external (i.e. State of Play)
meetings
• Involved in qualitative evidence-gathering (drafting of
questionnaires to market participants, calls with market
participants, identification and review of key internal
documents)
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Econometrics is resource-intensive
• For econometrics, one needs: people with
background and experience; reliable data; time to
'clean' data, choose appropriate model and do
sensitivity test
• Example: CET did a demand-estimation model in a
mobile merger case: "cleaning" data occupied two
(experienced) team members during several
months; model not fully reliable, not used in the
final decision
• Start gathering complex data more than 2 months
before notification; add 1 month Phase 1, and 1.5
months of work in Phase 2 (plus refinements after
Parties' reply to S.O.): easily 6 months of work!
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Economic analysis in state aid
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When is a measure state aid
• Various instruments used for giving aid, e.g.
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Grants
Tax exemptions
Soft loans
State guarantees
Repayable advances
Capital injections
Hybrid instruments
• Central assessment concept: MEIP (Market
Economy Investor Principle)
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When is a measure state aid?
Example 1
• Funding amount - Private involvement?
• Assessment of expected returns of investment
(IRR – Internal Rate of Return): based on
business plans
• Enough for a private investor?  comparison with
the cost of capital
Example 2
• Loan (rate and maturity)
• Benchmark rate = base rate + risk margin + fee
Compatibility assessment of state aid
• Striking a (good) balance between
• Benefits of state aid (objective/effectiveness)
• Costs of state aid (distortions)
• Bear in mind: enforcement and compliance
costs
• Architecture of state aid rules: block exemptions
vs. more substantive analysis of individual cases
(rules based)
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"Common principles"
In order to be compatible, state aid must satisfy the
following criteria:
1.
2.
3.
4.
5.
6.
7.
Contribution to a well-defined objective of common interest
Need for state intervention
Appropriateness of the aid measure
Incentive effect
Proportionality of the aid
Avoidance of undue negative effects
Transparency of aid
(If applicable: ex post evaluation for certain larger aid schemes)
Ex post evaluation of aid schemes
• Methodological Guidance Paper - to provide
guidance to Member States as to how to evaluate
the impact of their subsidy programmes
• Commission Staff Working Document (28.05.2014)
• Care to be devoted to the design of the aid scheme
to make sure that one is able to identify effects
afterwards
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Counterfactual analysis…
What would have happened without economics in
DG COMP?
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