Transcript Folie 1

St. Martin Conference 2010 RECENT TRENDS AND DEVELOPMENTS IN COMPETITION
LAW AND POLICY
Economic analysis in German
competition law enforcement
Brno, 12 November 2010
Dr. Arndt Christiansen
Bundeskartellamt
Economic Issues (G3)
Outline

Economic analysis in competition law enforcement

The German cement cartel case

The Bundeskartellamt’s “Best practices for expert
economic opinions” from October 2010

Summary
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Economic analysis in competition law
enforcement
 Economic analysis is integral part of effective and sound
competition law enforcement by the Bundeskartellamt.
 Economic Issues (G3) as part of the General Policy Division
 Two prominent exemplary areas:

Merger control

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Market delineation
Collective dominance / oligopoly
(Hard core) cartel investigations

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Identifying/measuring anti-competitive (price-)effects of the
alleged infringement
relevant in public enforcement (estimation of “additional
proceeds”) and private enforcement (damage calculation)
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Expert economic opinions
 Another important “input channel” of economic analysis:
Number of opinions
expert opinions (mostly) submitted by parties
 A total of 36 such opinions in 20 cases since (July) 2007
 Steeply rising number in recent years
20
18
16
14
12
10
8
6
4
2
0
2007
2008
2009
2010
Year
(figure for the year 2007 only since July)
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The German cement cartel case –
Background
 Only some highlights of the long and complex proceedings
 Offense: Quota cartel / market sharing + cornering of
mavericks
 Decisive role of economic analysis in the estimation of the
“additional proceeds”
 Legal Background: Until 2005 level of fines in Germany
linked to “additional proceeds” of the offence

former Section 81 (2) ARC (in effect until 2005)
“[…] the administrative offence may be punished […] up to three
times the additional proceeds obtained as a result of the violation
[…]. The amount of the additional proceeds may be estimated.”
 Economist appointed as “expert of the court”
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The German cement cartel case –
Procedural milestones
 7/2002: dawn raids
 Leniency application by one company
 2002/2003: administrative fines imposed by the
Bundeskartellamt
 A total of 660 Mio. € fines; based on estimated overcharge /
price effect of 10 €/t.)
 Most companies appealed
 2004-2008: interim procedure / preparation of writ of
prosecution (incl. further plausibility checks of estimated price
effect)
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The German cement cartel case –
Procedural milestones

12/2008 - 6/2009: main trial before the Higher Regional
Court (HRC) in Düsseldorf (36 days of oral hearings)
 Appointment of ESMT / Prof. Roeller as “expert of the
court” (supported by Bundeskartellamt)
 Extensive debate on methodology upfront (based on
expert’s proposals)
 Adjudication / instruction of expert mandate in 2/2009
 Discussion of data and results in court in 4/2009 and in
5/2009
 Alternative estimations based on expert’s dataset
submitted by the Bundeskartellamt in 5/2009
 Judgment: fines 330 Mio. € (HRC amply followed its
appointed expert)
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The market reality to be explained
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Choice of methodology for estimating the
“additional proceeds”
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Model specification and results by courtappointed expert
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One of several controversial issues: Does
“price war” matter, and how?
Price war
Pre-price war
Post-price war
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Alternative estimations by the
Bundeskartellamt
70
65
60
6
55
4
50
2
45
0
-2
-4
-6
92
94
96
98
Residual
00
02
Actual
04
06
08
Fitted
68
64
60
6
56
4
52
2
48
0
-2
-4
92
94
96
98
Residual
00
Actual
02
04
06
08
Fitted
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The German cement cartel case:
Some conclusions
 Analysis by the court-appointed expert (for the most part) in
line with standards / best practices, i.a.
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Analysis relevant to the issue at hand
Unbiased discussion of methodological issues
Choice of well-established methodology
Transparency of assumptions
Provision of complete data and program codes ( replicability)
 Reduction of fines mainly result of interpretation of
economic analysis by the HRC
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Strong (“powerful”) position of the appointed expert
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Strong impact of the in dubio pro reo principle
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The Bundeskartellamt’s “Best practices
for expert economic opinions”
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Reflection of
 our experience with received expert opinions,
 in particular in the cement cartel case, and
 international developments
Aims:
 statement of minimum quality requirements
 procedural fairness and efficiency
Drafted by G3 but decisive role of Decision Divisions
Published on 20 October 2010; available online at
http://www.bundeskartellamt.de/wEnglisch/download/pdf/
Merkblaetter/Bekanntmachung_Standards_Englisch_final.pdf
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Structure of the “Best practices”
I. Principles
1. General principals (sec. I.1)
2. Standards for theoretical/conceptual analyses (sec. I.2)
3. Standards for empirical analyses (sec. I.3)
II. Procedural steps (sec. II)
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General principals
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Relevance to the case in question
Completeness: Opinion must contain all the information
necessary to understand and replicate results.
Transparency: i.a. disclosure of assumptions
Consistency: avoidance or at least explanation of
inconsistencies in assumptions or results
Language: German as official language but English
acceptable after consultation of the Decision Division

Non-technical summary; non-confidential version

Bibliography and reference list

Preference for established theories and methods
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Standards for theoretical/conceptual and
empirical analyses
 Standards for theoretical/conceptual analyses
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Choice of model
Relationship to the competition issue in question
Robustness
 Standards for empirical analyses
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Methodology
Selection and processing of data
Presentation of results
Robustness
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Procedural steps
 Procedural steps
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Contacts before submission
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Timing of submission
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Completeness
 Decisive role of competent Decision Division
 Application with respect to the case in question
 Further development in the light of future experience
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Summary
 Economic analysis is integral part of effective and sound
competition law enforcement by the Bundeskartellamt
 The German cartel case until 2009 as a promising example
 Economic studies welcome but necessity of (minimum)
quality standards / best practices
 Publication of Bundeskartellamt’s “Best practices” on 20
October 2010
 Guidance not only for economic experts but also for lawyers/
judges to assess probative value of economic arguments and
empirical analysis properly
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St. Martin Conference 2010 RECENT TRENDS AND DEVELOPMENTS IN COMPETITION
LAW AND POLICY
Economic analysis in German
competition law enforcement
Brno, 12 November 2010
Dr. Arndt Christiansen
Bundeskartellamt
Economic Issues (G3)