According to empirical research, recent times have seen a significant increase in firms' profit margins. Higher profit margins are a reflection of increased pricing power. Prospective mergers are more likely to cause competition concerns the higher firms' pricing power is to begin with. * The views expressed in this paper are those of the authors and do not necessarily reflect the views of DG Competition or the European Commission. 1 Tommaso Valletti is Professor of Economics at Imperial College London. He currently serves as Chief Competition Economist at the European Commission (Directorate-General for Competition).
The Directorate General for Competition at the European Commission enforces competition law in the areas of antitrust, merger control, and state aids. This year’s article provides first a general presentation of the role of the Chief Competition Economist’s team and surveys some of the main achievements of the Directorate General for Competition over 2017/2018. The article then reviews: the Google Search (Shopping) case, the role of price discrimination in state aid cases; and the use of counterfactuals in merger cases where alternative transactions might have occurred absent the merger.
Two widely discussed pricing benchmarks in the literature on payment cards markets are the "tourist test" interchange fee (Rochet and Tirole, 2010), which internalizes usage externalities in payment card markets, and "perfect surcharging" by merchants (Rochet and Tirole, 2002). This paper shows that these benchmarks are allocatively equivalent. Implications for the regulatory treatment of interchange fees and no-surcharge rules are discussed.JEL classi…cation: G21, L31, L42
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