7 - An Economic Evaluation of the EC’s Proposed “New Competition Tool”

Summary

This chapter provides an assessment of the economic merits of the New Competition Tool (NCT), as it was considered by the European Commission as a tool to address structural competition problems in a timely and effective manner. The NCT has strong analogies to the UK’s “markets regime,” which empowers the UK competition regulator, the Competition and Markets Authority (CMA), to initiate market studies and investigations. The authors review the UK’s markets regime and survey some of the competition concerns the regime is intended to address. This includes a selective review of UK market studies and investigations to illustrate some of the ways these concerns have been explored and a description of the remedies imposed or proposed. The authors conclude with a critical evaluation of the UK’s markets regime in light of this evidence and offer seven recommendations regarding the merits and design of market investigations as a New Competition Tool for the EU. In sum, they see a strong case for the introduction of a New Competition Tool to address factors that prevent effective competition in markets, and they see no benefit to limiting it to specific sectors and to dominant firms.