Kein Folientitel

1
UK Agricultural Tractor Registration Exchange- A
cartel at work? Presented by Robin Hertz and
Sebastian Weber 13.01.2005
2
1. Facts and Figures 1.1 The case
1.2 The market structure
2. The mechanism of the exchange
3. The commissions position 3.1 The
Commissions arguments 3.2
Critique of the arguments
4. The parties argument
5. Concluding remarks
3
1. Facts and Figures
2. The mechanism of the exchange
3. The commissions position
4. The parties arguments
5. Concluding remarks
4
1.1 Facts and Figures - The case
5
1.1 Facts and Figures - The case
6
1.1 Facts and Figures - The case
7
1.2 Facts and Figures - The market structure
The UK market for tractors
20 000 new tractor units per year sold Germany,
Italy, France and Belgium imports from EU
member states amount to about 50 of total
market 4 suppliers (Ford, Case, Massey-Ferguson
and John Deere) hold together about 77 of the
market (since take-over of Ford by Fiat share
rose to roughly 80) Each supplier holds between
15-25, whereas other competitors range around
2-3. The group of eight holds together about
87 of the market
The volume
The origin
The main suppliers
The shares
8
1.2 Facts and Figures - The market structure
Three key structural features of the UK market
9
1. Facts and Figures
2. The mechanism of the exchange
3. The commissions position
4. The parties arguments
5. Concluding remarks
10
2. The mechanism of the Exchange
11
2. The mechanism of the Exchange
Basic understanding of the group concerning the
Exchange Information is regarded by the members
as sensitive and confidential, to the extent
that it identifies the exact retail sales of each
member and is therefore exchanged only on a
mutual and reciprocal basis
Exact volume of UK sales and market shares of
each member at various levels up to the postcode
sector level
Exact market shares of every specific model sold
by each member
The retail sales and the market shares of
specific horsepower groups for each member
Daily, monthly, quarterly and yearly retail sales
and market shares at United Kingdom level for
each member
Aggregate data on non-members retail sales and
market shares is also available and can be used
in combination with member data for further
analysis
12
2. The mechanism of the Exchange
All information also available to the dealers of
the exchange members
The different dealer analysis provided
Export analysisThe number of tractors exported
by a given dealer into other dealer territories
and compares these exports with the dealer's home
sales within his own dealer territory
Trend analysisComparison of own companys sales
at all geographic levels, with product breakdowns
Import analysis The number of tractors imported
by other dealers into a given dealer territory
and compares these imports with the sales made by
the home dealer within his own dealer territory
Selling analysis The relative sales of
individual dealers within a postcode sector
selling dealer analysis
13
1. Facts and Figures
2. The mechanism of the exchange
3. The commissions position
4. The parties arguments
5. Concluding remarks
14
3. The commissions position
Prevention of hidden competition in a highly
concentrated market
Increase of barriers to entry for non-members
15
3.1 The commissions position The Arguments
Commission argues that information not directed
towards consumers and that as high degree of
concentration information exchange facilitates
collusion.
Information exchange provides the only
information that is not easily obtainable exact
amount of sales. Commission argues that market
becomes transparent and no uncertainty remains as
promotional efforts are immediately visible.
Firms can react immediately to actions of other
firms who in turn do not gain from price
reductions or other promotional effects. This
stabilizes the market positions of the
oligopolists.
Commissions argument rests on market
characteristics High market concentration, no
external competitive pressures, demand very
dispersed, demand stable.
16
3.1 The commissions position The Arguments
Commission argues that through exchange of past
and current data, future data can be calculated.
This leads to an increase in coordination.
Facilitation of coordination
Commission argues that information exchange of
past and present data allows perfect monitoring
of firms actions and thus immediate punishment of
deviators.
Monitoring of terms of agreement
No deviations as ?c ?Vc ?d ?Vd. Only if ?
nearly zero will ?c ?Vc deviation is possible.
Easier to punish deviator as firms know exactly
where to punish deviator due to transparency.
Easier to punish deviator
17
3.1 The commissions position The Arguments
18
3.1 The commissions position The Arguments
19
3.1 The commissions position The Arguments
20
3.1 The commissions position The Arguments
Commission argues that in tractor market within
the UK, barriers to entry already very high and
that the Exchange increases these barriers even
further.
Entrant has a disadvantage if he enters the
Exchange and if he doesn't enter the Exchange.
21
3.2 The commissions position Critique of the
arguments
Commission argues that market becomes
transparent. Is this the case? Only past and
current data exchanged. Forecasts can be made
from these but only with an element of
uncertainty.
Commission assumes that disadvantages outweigh
the possible benefits of transparency through the
information exchange but provides no proof
(Output adjustment effects).
Commission uses decrease/stagnation of demand to
argue that the Parties of the Exchange can
calculate forecasts of competitors future
actions but ignores the fact that when demand is
decreasing collusion is less likely to be
sustained As demand is falling the present
discounted value of future profits will be low.
This means that current profits and profits when
deviating become more important more difficult
to sustain collusion ?c ?Vc ?d ?Vd
22
3.2 The commissions position Critique of the
arguments

• Discovery mechanism (with knowledge of demand no
  trial and error process)
• Investment decisions and organisational learning
  (Less uncertainty about investment decisions)
• Output adjustment effect
• Lowering search costs (Price transparency)

Benefits of transparency (information exchange)

• Facilitates collusion if
• Facilitates coordination between firms.
• Helps monitor whether terms are followed.
• Improves ability to punish deviator.

Problems of transparency (information exchange)
23
3.2 The commissions position Critique of the
arguments
If firm does not know what demand is, it will
produce Q independently of actual demand. The
more information the firm has of actual demand
the smaller is the gap between what the firm
produces Q and the actual demand.
P
Gain to consumer
Loss to consumer
aH
Gain to consumers Loss to consumers
a
aL
Q
Q
QL
QH
24
1. Facts and Figures
2. The mechanism of the exchange
3. The commissions position
4. The parties arguments
5. Concluding remarks
25
4. The parties arguments
Arguments
Commissions evaluation
1.) Parties have themselves described information
as sensitive and confidential 2.) Such detailed
information is normally considered to be a trade
secret 3.) Abuse of the data to organize their
dealer territories such that sales can be
compared (postcode) 4.) Fact that data is
submitted by UK department does not legalize the
use, but may lead to a broadening of the
investigation w.r.t the authorities practice
Data has been submitted by the UK Department of
Transport and does not constitute trade secrets
In a market where demand is stable or declining
forecasts of competitors' future actions can be
made on the basis of the past the use of
one-year-old sales figures of competitors would
not be anti-competitive
Information relates to past transactions
Therefore information has no impact on
competition
26
4. The parties arguments
Arguments
Commissions evaluation
1.) High financial risk associated with the
investment. Hence, the price still plays the
vital role. 2.) Exchange lessens the intensity of
competition between the members by avoiding price
fights which would erode margins, by increasing
the transparency in a highly concentrated market
The heterogeneous nature of the products
concerned creates strong non-price competition
(quality competition) in the tractor market
1.) Art 85 (1) has to be interpreted for the
potential effects. The fact that an agreement can
create an anti-competitive structure is
sufficient. 2.) It can be said with sufficient
certainty that the market shares of the members
would have been different in the absence of the
Exchange - NO PROOF GIVEN BY THE COMMISSION
Past performance of companies on the UK market
does not confirm any anti-competitive effects of
the Exchange
27
4. The parties arguments
For an exemption under Art 85.3 EEC (now 81.3
ECT) there is a need for either a) an
improvement of the production or distribution of
goods b) promoting technical or economic
progress, while allowing consumers a fair share
of the resulting benefit.
Burden of proof lies on parties side
The party has not given a proof, where consumers
benefit from a possible production or
distribution improvement
28
1. Facts and Figures
2. The mechanism of the exchange
3. The commissions position
4. The parties arguments
5. Concluding remarks
29
5. Concluding remarks
30
5. Concluding remarks
How high is the risk of a type 1 error
Should there have been an exemption according to
Art 81.3 ECT
Would there be more competition without the
Exchange?
31
5. Concluding remarks
A look beyond the single UK case
32
Thank you for your attention Comments...... ..
...Questions?