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Interview with Massimo Motta: "Law & Economics: Why bother with economists?"

Concurrences Review

Monday, June 15, 2015 from 8:30 AM to 7:00 PM (CEST)

Interview with Massimo Motta: "Law & Economics: Why...

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New Frontiers of Antitrust 2015


Law & Economics: Why bother with economists?


Interview with Massimo Motta


The New Frontiers of antitrust conference will be held on June 15, 2015 at Ministry of Economics, Paris. Kai-Uwe Kühn Senior Consultant, CRA — has interviewed Massimo Motta — Chief Competition Economist, UE Commission — who will participate in the panel discussion: "Law & Economics: Why bother with economists?". Other panel speakers include: Laurence Idot, Professor, University Paris II, Marc van der Woude, judge, General Court of European Union and Jérôme Philippe, Lawyer, Freshfields Bruckhaus Deringer.


Kai-Uwe Kühn: Since the Intel decision there has been a much more intense debate on the role of economics in antitrust. There seems to be generally a gap between the recommendations of economics and enforcement practice: In internet retailing economic analysis suggests the potential for severe free riding by internet retailers on the display services of brick and mortar stores, but the German Cartel Office has intervened against every conceivable vertical restraint to deal with this problem (e.g. differentiated wholesale pricing, restrictions on internet sales, and RPM). On exclusive dealing economists have suggested likely foreclosure would have to be shown, enforcement practice in member states claims no potential for foreclosure is necessary to find anticompetitive exclusive dealing. Even the European Commission raises concerns about “discrimination” as an abuse of a dominant position where economists would have expected an argument about foreclosure. Has economic analysis de facto become irrelevant for antitrust enforcement?


Massimo MottaWhile I agree that the path towards a more central role of economics in antitrust is not as smooth and certain as I would like it to be, the picture is probably more varied than stated in your question. As for Courts, there have also been judgments like Post Danmark I and Groupement des Cartes Bancaires which are more aligned with an effects-based approach. As for National Competition Authorities, there are certainly differences in their approach to economic and effects-based considerations. For instance, the recent joint position of the French, Italian and Swedish authorities in the hotel online booking case is trying to balance the possible anticompetitive effects of the Most Favoured Nations clauses with the awareness that these clauses may also have efficiency effects, namely preventing rival sites from free-riding investment made by an online platform.  As for "discrimination", there is not necessarily a contradiction between discrimination and foreclosure. It is well known that a dominant firm may resort to discriminatory practices in order to exclude. This is true for exclusive dealing and for rebates, where a dominant firm may want to offer particularly attractive contracts to some key buyers in order to prevent a smaller or new rival from getting the size it needs to be profitable. But it can also be true for vertical foreclosure, for instance when a vertically integrated incumbent degrades access to a downstream rival.

Kai-Uwe KühnCan you give an example of a competition case where you think the decision was very different from what it would have been 20 years ago because of the economic analysis?


Massimo Motta: In the case of mergers, I think it would be difficult to find a case where economic analysis has not made a difference. Indeed, not only the standard used to assess mergers has changed from dominance to significant impediment to effective competition, the latter often requiring a detailed economic assessment of the likely effects of the merger upon prices and consumers; but also economic considerations have become more central at all stages of the merger investigations, from the identification of a possible theory of harm down to the design and the implementation of remedies.

In antitrust, the contribution of economic thinking may appear less obvious to the external observers, but it also contributes to shaping the cases. And, in this respect, there are several cases which do not end with a prohibition or commitment decision precisely because they do not satisfy the conditions requested by economic analysis, notably a clear and solid theory of harm supported by the facts of the case.

A good example where economic theory played an important role is in the payment card cases done at DG Competition. The economic literature of multi-sided markets, developed among others by Jean-Charles Rochet and the Nobel Laureate Jean Tirole, was instrumental in all these cases in two respects.

First, it showed that, contrary to common wisdom, interchange fees are not prices but a simple way of reallocating costs between the parties involved in a card transaction, i.e. issuing and acquiring banks. Accordingly, a multilateral agreement of banks on interchange fees should not be interpreted as a price-setting cartel.

Second, it showed how in these markets interchange fees regulation at banks' costs is not the right benchmark and it replaced this concept with the so-called "merchant indifference test". This test had significant implications in the 101(3) efficiency assessment of all these cases. Instead of measuring the interchange fee that is compatible with issuers' costs, the merchant indifference test suggests that the multilateral interchange fee compatible with 101(3) should be based on the marginal benefit enjoyed by merchants when accepting a card payment (relative to a cash payment).


Kai-Uwe Kühn Economic analysis has been criticized because it greatly increases the burden on merging firms due to extensive data requests that often take many man-hours to comply with. What do you do in practice to ensure that the value of the data for the economic analysis is high enough to justify the costs imposed on the parties?

Massimo Motta
: To carry out quantitative analysis in merger cases we need data (as well as any other relevant information) from the parties, this is clear. We often would not be able to reach informed decision about the likely impact of the merger otherwise (think for example of the analysis that was carried out in the Ryanair cases, and more recently in INEOS/Solvay). When we are at the initial stages of a merger investigation, we reason carefully about the type of analysis which may be useful and what sort of data we may accordingly need. We try to have an initial understanding of the market and of the transaction before asking for data, to make sure that we are collecting meaningful empirical evidence. We do not ask for data just for the sake of having them. Furthermore, we typically send draft data request to the parties and there are interactions with them and their economists about data availability. I would also stress that extensive empirical analysis is more likely to apply to complex Phase II investigations, and therefore applies to only a minority of cases.

This course of action is fully reflected in DG COMP's Best Practices for the Submission of Economic Evidence and Data Collection in Cases Concerning the Application of Article 101 and 102 TFEU and in Merger Cases.


Kai-Uwe Kühn:  “The economist on the case team has no interest in how the business really works!” One can hear complaints like these about agency economists increasingly often from practicing lawyers. Are economists in the agencies focusing too much on pure data analysis and pure theoretical reasoning and look too little at the qualitative evidence (or “the facts”)?


Massimo Motta: I fully agree that the quantitative analysis should complement and integrate the qualitative facts of the case (and vice versa). This is why the members of the Chief Economist Team at the European Commission typically work in very close contact with the case teams, are involved in shaping the investigation of a case, review extensive qualitative evidence (such as internal documents and responses to Commission questionnaires), and take part in meetings with the parties and calls with other market participants (customers and competitors). I therefore would disagree with the idea that increasingly often agency economists are detached from the qualitative aspects of the case, or have no interest in how the business works. The opposite is the case in my view, and in my experience as a Chief Economist.
This principle that qualitative and quantitative evidence should go hand-in-hand has been endorsed by the General Court in its Ryanair judgment where it established that there is no hierarchy between technical and non-technical evidence (this same idea is spelled out in paragraph 25 of the Notice on Market Definition). Both sources of information are complementary and inform the Commission in its decision making.

For the complete agenda of the conference and the list of the keynote speakers, visit:

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When & Where

Ministry of Economics
139 rue de Bercy, Paris | M° Bercy
75012 Paris

Monday, June 15, 2015 from 8:30 AM to 7:00 PM (CEST)

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The Paris “New Frontiers of Antitrust” conference is a unique occasion to network with some of today’s most influential global leaders in competition law. This conference, held each year in Paris since 2009, now ranks first among the European antitrust independent events in terms of venue, press reports and audience. The 2019 Steering Committee, headed by Frédéric Jenny, includes Prof. Laurence Idot, Prof. Nicolas Petit and Nicolas Charbit.

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