Policy Briefing: Retail Price MFNs: Are they RPM ‘at its worst’?

Policy Briefing of CCP Working Paper 14-5:

Amelia Fletcher and Morten Hviid, ‘Retail Price MFNs: Are they RPM ‘at its worst’?’. (Available to download from our Working Papers pages on the CCP website).

KEYWORDS: Retain Price Most Favoured Nation clauses, Retail Price Maintenance, anti-competitive effects, competition law


  • A number of recent competition cases have involved a hitherto rarely observed form of Most Favoured Nation (MFN) clause in which sellers through an internet retail platform explicitly agree not to sell at a lower price elsewhere, including through other retail platforms. These are sometimes known as platform MFNs or platform parities.

  • The economics literature on this topic is still nascent and the effects of these clauses have not yet been fully explored.

  • Competition authorities in a number of jurisdictions including the EU, Germany, the UK and the US have been willing to take on such cases and push them to successful conclusions, with the parties either agreeing, or being required, to drop Retail Price MFN clauses.

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Policy Briefing: Is the Korean Innovation of Individual Informant Rewards a Viable Cartel Detection Tool?

Policy Briefing of CCP Working Paper 14-3:

Stephan A, ‘Is the Korean Innovation of Individual Informant Rewards a Viable Cartel Detection Tool?’. (Available to download from our Working Papers pages on the CCP website).


  • The defining characteristic of modern cartel enforcement is the use of leniency programmes. This innovation, first employed by the US in the late 1970s, has been emulated by the vast majority of competition law enforcement regimes around the world.

  • The basic principle of these programmes is to offer immunity to the first firm to report a cartel infringement to the competition authority.

  • It is thought leniency programmes have been instrumental in destabilising and uncovering cartel infringements, thereby undermining the trust that exists between cartel members and increasing the rate at which cartels are detected.

  • Despite the offer of leniency and the increasing levels of fines imposed on cartels, competition authorities continue to uncover a high volume of infringements. This might suggest that more could be done to strengthen deterrence in cartel enforcement. It has been suggested that the next logical step in advancing antitrust enforcement may be the use of rewards or bounties to individual whistle-blowers.

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Policy Briefing – ‘Mergers after cartels: How markets react to cartel breakdown’

Policy Briefing of CCP Working Paper 14-1:

Davies S, Ormosi P and Graffenberger M, ‘Mergers after cartels: How markets react to cartel breakdown‘ (Available to download from Working Papers 2014 on the CCP website).


  • Anti-cartel enforcement is widely heralded as the single most important part of antitrust activity. But there have been only a few studies analysing how markets react to the elimination of cartels.


  • The authors approach cartel detection from a dynamic perspective by analysing what happens in markets in the years after a competition authority has detected a cartel. At issue is whether markets revert to competitive behaviour or whether firms find alternative ways of reinstating collusive equilibria (short of cartelisation) in the longer run.

  • Data was collected on mergers, acquisitions and joint ventures between firms involved in those cartels for which the European Commission issued decision documents between 1990 and 2012. The useable sample is 84 cartels that were detected between 1984 and 2009.

  • Three questions are posed:

1. Was there more intense merger activity amongst the former cartelists in the years immediately following breakdown?

2. Were certain types of cartel more likely than others to be followed by merger?

3. Is there evidence that the competition authority intervened in those proposed mergers which were most likely to raise potential anti-competitive concerns, or is there evidence of deterrence of such mergers?

  • The authors employ a novel application of survival analysis.

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Executive Summary: Hospital Procurement with Concentrated Sellers – A Case Study of Hip Prostheses

Executive Summary of CCP Working Paper 13-13:

Davies C and Lorgelly P, ‘Hospital Procurement with Concentrated Sellers: A Case Study of Hip Prostheses’ (PDF, 375KB).


  • Total hip replacement surgery is a routine procedure, carried out throughout the NHS, and accounting for a large share – 2.9% – of the aggregate NHS budget for surgery.
  • The market for hip prostheses is characterised by horizontal product differentiation because no one prosthesis type best meets the needs of all patients.
  • In addition to the needs of the patient, three other players are involved in the choice of hip prosthesis: the surgeon, the hospital and the prosthesis manufacturer.

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Policy Briefing: The Impact of Competition Policy – What are the Known Unknowns?


Evaluations of competition policy are increasingly common and typically establish that the consumer benefits from detected cases easily outweigh the costs of competition authorities.

These assessments are often driven by data availability and only capture a small part of the total impact of competition policy because they sidestep the difficult issue of how to evaluate those cases that go unobserved because they are deterred. Assessments also ignore a second class of unobserved cases, those involving anti-competitive harm but which the competition authority fails to detect.


The authors present a broader conceptual framework for the evaluation of competition policy which takes into account the deterred and undetected cases as well as those which are detected.

The analysis draws on stylised facts from existing academic and policy literatures, alongside what it is reasonable to infer from theory about what is not known, in particular, the nature of the underlying population of potential cases, and how samples are drawn from it, in the form of cases detected by the competition authority.

Numerical simulations are conducted within this framework.


The simulations suggest that, while the benefits of deterrence, especially for merger enforcement, are considerable, it is also likely that considerable harm may remain unremedied due to the non-detection of cartels.

Drawing on insights from economic theory, the authors argue that selection bias is likely to be substantial because the unobserved cases could well be those which are the most harmful. If so, the deterrence of anti-competitive mergers may have a much greater positive impact, but the effects of non-detected cartels may be more serious than is usually supposed.


The full working paper 13-7 and more information about CCP and its research is available from our website: http://www.competitionpolicy.ac.uk


Peter Ormosi is a Lecturer in Norwich Business School and member of the ESRC Centre for Competition Policy

Stephen Davies is Professor of Economics in the School of Economics at UEA and member of the ESRC Centre for Competition Policy.

Policy Brief: Product Quality and Business Contracts – Intermediary Crude Oil Pricing in a Southwest-US


Crude oil plays an important role in the world economy. In the US, domestic oil production has increased, and increased in importance, and this holds the prospect of fundamentally changing the balance of power in the world crude market. This is turn lends importance to the determinants of performance in the US submarket of the world oil market.

There are four modes of transportation for US domestic crude oil: water tanker, pipelines, railways and motor transport. Pipeline is the predominant form but, for nearly two decades, motor transportation has continuously gained in importance.


The authors study upstream and downstream prices, and the profit margin of crude oil, for the period 2007-08 in a Southwest-US regional crude oil intermediary market, where oil is transported by motor vehicle.

The analysis draws on a proprietary dataset from an intermediary firm that buys crude oil from well owners and transports it by motor vehicle to downstream buyers that are mostly oil refineries.

The authors estimate panel hedonic models to analyse (i) the effects of geographic variables, (ii) the characteristics of bilateral business deals between an intermediary and their upstream and downstream trading partners, and (iii) the quality components of the crude oil on prices and margins.


The analyses show that crude oil prices in this market may depend, not only on the market valuation of oil quality, but also on other transaction characteristics such as distance and business contracts.

In line with existing results, the authors find significant effects of quality components, such as basic sediment and water, sulphur content, and specific gravity, on buying and selling prices and on the profit margin, but only the effect of specific gravity is nonlinear.


The full working paper 13-6 and more information about CCP and its research is available from our website: http://www.competitionpolicy.ac.uk


Subhasish M. Chowdhury is a Lecturer in Economics at the Centre for Behavioural and Experimental Social Science, and ESRC Centre for Competition Policy, University of East Anglia

Oindrila De, works in the Economics Area, Indian Institute of Management Indore

Stephan Martin is Professor of Economics at Purdue University,West Lafayette.

Policy Brief: Public and Private Enforcement of Competition Law


Most competition law enforcement systems are based on two enforcement pillars: public enforcement and private enforcement. Public enforcement means that antitrust rules are enforced by state authorities. Private enforcement refers to individually initiated litigation, either as stand-alone or follow-on action, before a court to remedy an infringement of antitrust law. Private enforcement is often treated as something new or at least only marginally important in Europe, but it has been the driving force of US antitrust enforcement since the middle of the 20th century. The European Commission published a Green Paper in 2005 and a White Paper in 2008 to incentivise private damages actions and remove perceived obstacles for victims of anticompetitive conduct.


The authors develop a framework which takes into account the usefulness of each enforcement mode contingent on the type of anticompetitive conduct: horizontal agreements, vertical agreements and abuses of a dominant position. Several central determinants of an optimal enforcement mix are identified and characterised. These determine the value of the public and private modes in enforcing different antitrust laws.


A combination of public and private enforcement is likely to increase the benefits of competition law enforcement compared to the implementation of either a pure public or a pure private enforcement strategy. The costs and benefits for public and private enforcement actions may differ depending on the type of infringement.

With respect to horizontal agreements, public enforcement has to play the leading role due to the difficulties in detection and information gathering by private parties.

With respect to vertical agreements, the information possession and gathering advantages of private parties should lead to a more prominent role for private enforcement.

With respect to abuses of a dominant position, public enforcement should play the leading role as long as the victim does not have direct dealings with the infringer.


It is crucial to the design of an optimal competition law enforcement system to assess the incremental costs and benefits when private enforcement activities are added to an existing public enforcement system. Once the parameters for an optimal enforcement system are determined, policy makers can choose those effective legal mechanisms which will provide the incentives for public and private actors to take on the infringement they are respectively best suited to deal with.


The full working paper 13-5 and more information about and more information about CCP and its research is available from our website: www.competitionpolicy.ac.uk


Kai Hüschelrath is Head, Competition and Regulation Research Group, ZEW Centre for European Economic Research, Coordinator, Mannheim Centre for Competition and Innovation and Assistant Professor, Industrial Organization and Competitive Strategy, WHU Otto Beisheim School of Management

Sebastian Peyer is a Post Doctoral Research Fellow, Centre for Competition Policy (CCP), University of East Anglia.

Policy Brief: Conflict Resolution, Public Goods and Patent Thickets


  • Over the last three decades, the demand for patents has been steadily growing at patent offices around the world.
  • Strong demand for patent rights combined with errors in patent offices’ examination and grant procedures result in increasing numbers of ‘weak’ and overlapping patent rights.
  • As a result, companies are increasingly confronted with serious challenges when trying to develop and commercialise technology in the presence of patent thickets.
  • Litigation and post-grant validity challenges have been considered as a way of eliminating erroneously granted patent rights.


  • The authors look at whether individual patents are opposed post-grant. The aim is to identify which factors increase or decrease the incidence of opposition, so as to establish whether post-grant opposition serves applicants patenting different kinds of technology equally well.
  • The analysis draws on a dataset, which includes all patent applications filed with the European Patent Office between 1980 and 2010, with a focus on the characteristics of the patent, the applicant and the technology area.


  • The authors find that opposition decreases in fields in which many firms would benefit from the revocation of a patent, which creates a public goods problem.
  • In fields with a large number of mutually blocking patents, the incidence of opposition is sharply reduced, particularly among large firms and firms that are caught up directly in patent thickets.


  • Findings are of high relevance to the users of patent systems and for those concerned with the governance of these systems.
  • Findings indicate that post-grant patent review may not constitute an effective correction device for erroneous patent grants in technologies affected by either patent thickets or highly dispersed patent ownership.
  • The analysis suggests that it will have to be smaller applicants who contribute to ensuring that weak patents are kept off the register or removed from it when first asserted.
  • Collectively, their interests in patent opposition working are much stronger than those of
  • larger firms at the heart of thickets, whose cooperative actions through cross-licensing do not remove weak patents from the patent register.


The full working paper 13-4 and more information about CCP and its research is available from our website: www.competitionpolicy.ac.uk


Dr Dietmar Harhoff is Professor of Business Administration and Director of the Institute for Innovation Research, Technology Management and Entrepreneurship at the Ludwig-Maximilians University Munich

Dr Georg von Graevenitz is Senior Lecturer at Norwich Business School and a member of the ESRC Centre for Competition Policy.

Dr Stefan Wagner is Associate Professor at the European School of Management and Technology.

Do Depositors Benefit from Bank Mergers?

We were pleased to hear from former CCP Member John Ashton recently. He has been awarded a prize for his paper “Do Depositors Benefit from Bank Mergers? An Examination of the UK Deposit Market” which was based on a CCP working paper.


John Ashton award announcement

Congratulations to John! You can find his paper on the journal website.

Cartels & Quangos: Two New Working Papers

Two new working papers have been added to our series this week:

CCP Alumni Dr John Ashton and Dr Andrew Pressey have added their paper “Who Manages Cartels? The Role of Sales and Marketing Managers within International Cartels: Evidence from the European Union 1990-2009” to our working paper series. You can download paper 12-11 from our website.

Dr Chris Hanretty, currently on buy-out at the Centre, and Dr Stephen Greasley, who was on buy-out with us last semester, have published “Culling the Quangos: When is Delegation Revoked?”. This is working paper 12-12 and is also available on our website.

Policy briefs for both of these working papers will be available on this blog shortly. CCP’s working papers extend back to pre-2008, for a full list see our website.