Competition Studies Marina Bidart Consultant Presentation at the workshop organized by the UNCTAD – COMPETITION BRANCH 19 November 2007

1 Layout of the presentation  A general classification of competition studies: objectives, scope, requirements of information, examples referred to the energy markets  The Guidelines for competition studies prepared by COMPAL (April 2005): objectives, scope, requirements of information, examples  The COMPAL typology of competition reports: a tool for future studies (2006)

2 Three types of competition studies 1. Sectoral competition studies Objectives:  Oversight of strategic economic sectors  Competition advocacy  Competition authority’s general and diffuse concerns  Identification of elements that hinder and empower competition Scope of the studies:  The whole value chain and the related markets / sectors Information requirements:  Public and confidential Examples:  Fuels and electrical sectors in El Salvador, COMPALl studies.

3 Three types of competition studies (cont’d) 2. Mergers & Acquisitions analysis Objective:  Authorize or block an economic concentration Scope:  Markets where merging parties operate  Other possible related markets Information requirements:  confidential Examples  Petrobras/Eg3; Petrobrás / Pecom Energia (Perez Companc)

4 Three types of competition studies (cont’d) 3. Anticompetitive practices: cases Objective:  Assess the existence of a competition law violation; estimate damages, propose sanctions and remedies Scope:  Markets where the unlawful practice takes place and have impact.  Markets that facilitate the unlawful practice Information requirements  Confidential Examples  YPF S.A. in LPG market

5 Structural Analysis First step, common to all kind of competition studies 1. Value chain 2. Regulation / Law aspects 3. Product characteristics 4. Demand analysis 5. Identification of economic agents. Taxonomy of the transactions 6. Relevant markets. Market shares and concentration indicators 7. Barriers to entry

6 Value chain example  Oil importers OilRefiningWholesale market Gas stations Imports Constraint FACTOR Fuel importsWholesale market Gas stations Local refiningOil Imports  Oil producers

7 Behavioural analysis  Sectoral competition studies Prices, margins, Lerner Index, correlation to international prices (if exist) Prices: geographical patterns Identification of elements facilitating illegal agreements and abuse of dominance (example: contracts)  Anticompetitive practices investigation The former, but referred to affected markets Direct and/ or indirect evidence of illegal behaviour Estimation of damages  Mergers / acquisitions proceedings Parties behavioural elements that facilitate post- merger monopolisation / cartelization

8 Guidelines for studies prepared by COMPAL (April 2005)  Objective: focused on identifying anticompetitive practices Advantages: “goes to the point” Disadvantages: neglects other kind of competition concerns (competition advocacy, control M&A, monitoring key sectors)  Scope: one or more key economic sectors, at national level Advantages: comprehensive review of the selected sector, from the competition point of view Disadvantages: difficulties to identify anticompetitive practices, on a solid base

9  Information requirements Confidential or sensitive if in line with the objective Non necessarily confidential if in line with the scope  Methodology Conventional structural analysis Behavioural analysis: in line with the objective and requiring confidential / sensitive information  Advantages: “goes to the point”  Disadvantages: requires high experienced consultants in antitrust investigation and in handling sensitive information Guidelines for studies prepared by COMPAL (April 2005)

10 The proposed COMPAL new typology for competition reports Moving towards better coordination between objectives and scope:  National Report on Competition/Consumer Protection Objective: provide overall economic context, institutional and legal framework, international cooperation, and problems identified Scope: whole economy (methodology ?)  Report on the potential existence of anti-competitive behaviour at national level Objective: clearly identify sectors/markets in which potential anti-competitive practices may exist Scope: selected economic sectors (methodology ?)  Sectoral Study: Objective: identification of possible anti-competitive practices in accordance with the competition law, and measurement of the impact Scope: a particular sector (methodology: structural analysis ?)  Report on a particular market Objective: the study should look at anticompetitive practices in the market Scope: a market (methodology: structural analysis ?)

11 Conclusions / Recommendations  Coordinate COMPAL competition studies with the whole range of needs and functions of competition authorities: Support to carry out competition advocacy (studies to support recommendations on regulations, custom duties, taxes, subsidies, etc.) Support to monitor competition performance in key economic sectors (energy markets, food, pharmaceuticals, etc.) Support to develop a methodology to analyse M&A (e.g.non traditional sectors) Support to identify anticompetitive practices  For each type of competition study: coordinate objectives, scope and methodology

12 Thanks for your attention Marina Bidart