Collusive Practices Inside a Business Network: The Case of Information Exchange
Business networks are systems of business cooperation integrating several firms that have at the same time cooperation and competition relationships, what makes them a relevant phenomenon for Competition Law. This paper analyses whether some agreements between network members may infringe Art. 101.1 TFEU, taking as an example one of the most important features of business networks – the information exchanges inside them. To this aim, it delimits the different kinds information exchanges taking place in horizontal or vertical networks, identifies the most relevant cases for Competition Law, and proposes an adequate assessment methodology that takes into account the existence and features of the network. The paper therefore concludes that competition law rules cannot be automatically applied when the cooperating companies belong to a business network, and that an accurate competitive analysis in these cases has to consider also the existence, aims, interests, and organizational and functional needs of the network
Collusion and Facilitating Practices: A New Perspective in Antitrust Analysis
A systematic revision of the notion of facilitating practices is put forward in this paper, with the purpose of relaxing the long-debated tension between economic and legal perspectives on oligopoly. Whereas the law knows of just one collusive illegal conduct, namely agreements, in economic theory the focus on internal enforcement makes the distinction between agreements and other behaviour resulting in the collusive outcome irrelevant. However, the tension may be relaxed, at least in a number of relevant circumstances, provided the focus of competition law shifts from straightforward co-ordination on market strategies to the firms' concerted efforts in the design and implementation of given organisational arrangements of the oligopolistic industry, to which an anticompetitive object can be attached. The theoretical analysis is extensively supported by examples drawn from some recent decisions of the European Commission and the Italian Competition Authority.
Bank Competition and Financial Stability
Under the traditional “competition-fragility” view, more bank competition erodes market power, decreases profit margins, and results in reduced franchise value that encourages bank risk taking. Under the alternative “competition-stability” view, more market power in the loan market may result in higher bank risk as the higher interest rates charged to loan customers make it harder to repay loans, and exacerbate moral hazard and adverse selection problems. The two strands of the literature need not necessarily yield opposing predictions regarding the effects of competition and market power on stability in banking. Even if market power in the loan market results in riskier loan portfolios, the overall risks of banks need not increase if banks protect their franchise values by increasing their equity capital or engaging in other risk-mitigating techniques. We test these theories by regressing measures of loan risk, bank risk, and bank equity capital on several measures of market power, as well as indicators of the business environment, using data for 8,235 banks in 23 developed nations. Our results suggest that—consistent with the traditional “competition-fragility” view—banks with a higher degree of market power also have less overall risk exposure. The data also provides some support for one element of the “competition-stability” view—that market power increases loan portfolio risk. We show that this risk may be offset in part by higher equity capital ratios.