‘Moral Hazard, Quantity Competition and Why Consumers Should Care About Firms’ Agency Problems’

This week’s CCP seminar takes place on Friday 1st November with David Deller (CCP), who has recently joined the Centre as a Research Associate, presenting his research on ‘Moral Hazard, Quantity Competition and Why Consumers Should Care About Firms’ Agency Problems‘. An abstract for his seminar can be found below.


In textbook models of competition, firms are treated as ‘black-box’ profit functions. The paper opens up this ‘black-box’ to highlight the conditions when a standard moral hazard problem within firms can have a significant downward impact on the expected outcome of quantity competition. In a parameterised model, it is shown that, as a market grows “large”, the equilibrium expected output of firms suffering from moral hazard problems is significantly lower than the expected output when firms without moral hazard problems collude. Furthermore, it is shown that firms may not undertake a costly investment in monitoring despite it being welfare enhancing. The negative impact of moral hazard on market outcomes gives a justification for consumers, and not just shareholders, to care about how firms resolve their internal agency problems. Also, time permitting, a discussion of the potential for product market collusion to be achieved via collusion in the incentive contracts offered by firms to their workers will be given.

The seminar takes place from 13:00-14:00 in the Thomas Paine Study Centre, Room 1.4.

‘Independent regulators versus the Rogowski-Kayser effect on consumer prices’

The CCP’s Autumn seminar series continues on Friday 25th November with the return of Chris Hanretty (CCP and PSI) who will be presenting his research on ‘Independent regulators versus the Rogowski-Kayser effect on consumer prices‘. An abstract for his seminar can be found below.


Work by Ronald Rogowski and Mark Kayser has suggested that consumer prices will be higher in systems of proportional representation, compared to systems with more majoritarian electoral systems, and that this is due to the differing marginal contributions of citizen-consumers’ votes and producers’ votes and campaign contributions in such systems, which in turn affect the chosen level of regulation in a Stigler-Peltzman model of regulation. However, the increasing delegation of regulatory competence to independent sectoral authorities suggests that this Kayser-Rogowski effect should be undermined by independent regulators as politicians are simply cut out of the picture.

I test this hypothesis using information on the ratio of residential to industrial prices for electricity in 33 IEA member countries for all years following market liberalization. I find that (a) the main Kayser-Rogowski effect is born out; that (b) there is no countervailing effect of independent regulators per se when using the full-sample; but that (c) there is a countervailing effect of independent regulators in a sample restricted to Western Europe for which we have information about the de facto independence of regulators.

Further reading: Ronald Rogowski and Mark Andreas Kayser, ‘Majoritarian Electoral Systems and Consumer Power: Price-Level Evidence from the OECD Countries‘ (2002) 46(3) American Journal of Political Science 526-539.

‘Reconsidering the role of the public interest in UK merger control’

The CCP’s Autumn Seminar Series continues on Friday 11th October with David Reader (CCP and UEA Law School) presenting his research on ‘Reconsidering the role of the public interest in UK merger control‘. An abstract for his seminar can be found below.


The United Kingdom’s merger control regime can be considered one of the most robust in existence. Under the Enterprise Act 2002, mergers shall be assessed by at least one of two independent competition authorities who each apply the same competition-based criteria to every transaction. There remains, however, a power for political intervention by the Secretary of State in mergers raising certain specified public interest concerns. In these cases, the Secretary of State may permit an anticompetitive merger or block a pro-competitive one where they consider that it is in the public interest to do so. Moreover, the Secretary of State retains a residual power to add to the list of specified public interest criteria, subject to Parliamentary approval.

In light of several controversial transactions – including Lloyds/HBOS, Cadbury/Kraft and NewsCorp/BSkyB – this presentation seeks to reconsider the way in which the public interest provisions under the Enterprise Act may be used to complement the UK’s merger policy. In particular, it will consider the legitimacy of Lord Heseltine’s calls for the Government to ‘show a readiness’ to use the public interest provisions to protect vital national interests and to deter unwanted foreign investment. The presentation will also seek to examine the potential for the public interest exceptions to be added to in the future and whether a decision-making role for the new Competition and Markets Authority could be on the agenda.

Related reading: Bruce Lyons, ‘Beware of Siren Advice for Political Control of Foreign Mergers‘ (2012) Competition Policy Blog.

Policy Briefing: Period of limitations in follow-on competition cases: the elephant in the room?


A series of private competition law cases in the UK has demonstrated that there are significant procedural issues that need to be resolved before private enforcement can take off in the way that the European Commission and the UK Government are currently encouraging.

One of these issues is the period of limitations in a follow-on case where there are multiple infringers, some of whom appeal the infringement decision of the competition authority and some of whom do not.

Where the infringement decision is taken by the Commission and the follow-on action has to be decided by a national court, the applicable period of limitations presents a complicated mix of European and national law that must be overcome before finding the correct solution to the case. This is an on-going problem in the UK in the context of follow-on actions before the Competition Appeal Tribunal and is currently awaiting resolution by the Supreme Court in Deutsche Bahn.

The issue has not been picked up as a problem by the Commission or the UK Government, both of whom are currently in the process of reforming private actions.

The issue is not a UK-specific one and is applicable to all Member State jurisdictions.


The author discusses the case law relating to the period of limitations and its calculation in follow-on cases before the Competition Appeal Tribunal.

This case law is analysed with a view to establishing what the correct approach is in the presence of multiple infringers, some of whom appeal the infringement decision and some of whom do not.

The author proposes ways in which the legally correct approach should be improved to make it fairer.


The author finds that the seemingly simple question of period of limitations is in fact loaded with serious implications going well beyond a procedural, timing issue.

Although the issue is pertinent to all types of infringements of competition law with multiple infringers, it has particular implications for leniency recipients in cartel cases and therefore for the overall relationship between private and public enforcement of competition law. These implications demonstrate how far from desirable the current legal situation is.

The leniency recipients are the least likely addressees to appeal the Commission decision. Exposing these leniency recipients to undue damages actions will automatically discourage leniency applicants from coming forward in the first place and thereby weaken the public enforcement of competition law.


The article demonstrates what the overall preferable solution is regarding the treatment of period of limitations in follow-on cases based on Commission infringement decisions in the presence of multiple infringers from a UK and EU law point of view.

An improvement requires EU-level legislation specific to follow-on actions that renders certain established EU law principles inapplicable, as well as domestic legislation to clarify the existing and envisaged rules.


The full working paper (13-8) and more information about CCP and its research is available from our website: www.competitionpolicy.ac.uk


Pinar Akman was Professor of Law at the UEA Law School and is now an Associate Member of CCP.