More than ever competition authorities are relying on economic analysis in their investigations and decision making.
Working alongside companies and legal counsels we develop sophisticated economic analysis to explain how competition works in different markets.
Our focus is on helping clients establish their case with the competition authorities in a clear, constructive, evidence-rich and decisive way.
Innovative and compelling economic evidence can make the difference between a merger or joint venture being approved, remedied or blocked. Our specialists have acted on landmark merger cases in the HK and China.
We help to:
- assess, at an early stage, the likely competition risks and efficiencies stemming from a merger. This informs the transaction strategy e.g. what commitments may need to be offered as remedies to secure approval
- undertake detailed market definition, including using sophisticated econometric and survey techniques to identify the full set of substitutable products and geographies
- demonstrate the impact of the transaction on competition e.g. by modelling upward pressure on prices or undertaking merger simulations
- quantify the efficiencies from the merger to build a benefits case to counterbalance any competition concerns
- prepare economic evidence for, and give oral evidence in front of, competition authorities; and
- strengthen the case through insight from PwC’s wide range of industry specialists.
When a market is under the microscope, we use robust economics to break through the market noise in order to get to the key structures and dynamics of competition to inform the authorities’ view. We have advised on many of the highest-profile market studies and market investigations by the Hong Kong regulatory authorities.
We help to:
- plan strategically for the lengthy and invasive market investigation process. We work with you to understand what matters to you within the scope of the investigation and to manage the risks
- gather the right data, conduct thorough analysis, and present the best arguments in the most constructive way
- provide robust economic evidence to explain in simple terms how markets really work. We use economic theory and empirical techniques such as econometrics to determine market definition, competitive constraints, barriers to entry, firms’ incentives and customers’ behaviour
- assess a company’s economic profitability (rather than accounting profits), a key factor in determining outcomes of a number of recent investigations. Our specialists have extensive experience in analysing profits and valuing assets
- maximise engagement with the authority. Market investigations typically include formal hearings or meetings. We have extensive experience of appearing as expert economists at these hearings
- shape strategies to input into, or respond to, remedies set out by the competition authorities; and
- appeal decisions to the CAT on the grounds of the economic evidence used or the disproportionate impact of the proposed remedies.
Abuse of dominance
Economic analysis is becoming increasingly important to the assessment of abuse of dominance cases.
A variety of practices such as loyalty rebates and discounts, bundling, or refusal to supply might be dictated by efficiency reasons and not necessarily result in harm to consumers. This has driven the requirement for sophisticated quantitative techniques to distinguish between pro-competitive and anti-competitive behaviour, and to establish the likely effect, if any, on final consumers.
We help to:
- define the relevant markets, calculate market shares, and consider all relevant additional arguments and analysis to determine whether a company could be found to have market power and, thereby, hold a dominant position
- explain the pricing structure in cases such as excess, predatory or discriminatory pricing. This can include showing that prices are objectively justified as cost-reflective through detailed cost modelling
- determine the (actual or expected) effects of specific conduct on competition in potential foreclosure cases; and
- provide expert testimony on the effects of the alleged anticompetitive conduct.
Vertical agreements between suppliers and distributors may take many forms, such as exclusive agreements or setting prices at which retailers can resell a product. Many of these agreements lead to efficiencies for the companies involved, ultimately resulting in better outcomes for consumers. However, in some cases, vertical agreements can give rise to anti-competitive effects, e.g. when they foreclose competitors.
We assist companies to design contractual conditions with trading parties that are competition law compliant, and to explain the effects of an agreement in the course of competition authorities’ investigations.
Our economists have advised on the following vertical issues:
- the use of minimum price guarantees by an online market platform
- the effects of restrictions imposed by an airline on meta-search engines
- the use of minimum resale price maintenance by a major manufacturer of contact lenses with online distributors the conditions that could be imposed by a broadcaster on the use of its content on video on demand platforms.
Cartels and information exchange
Cartels are being pursued aggressively across the world. We use economic analysis to assess whether there is any evidence of cartel effects, to quantify the impact of any anti-competitive practices as part of a mitigation strategy for fines, and/or for use as evidence in any subsequent damages litigation.
Our competition specialists use financial, statistical and econometric techniques to assess the impact on prices and market outcomes of the alleged coordination as compared to the relevant counterfactual.
Our competition specialists can be supported by forensic technology specialists who can quickly interrogate vast email and voice correspondence archives to determine whether existing evidence can corroborate a suspicion that a breach of competition law has taken place.
- We are assisting an international oil company in preparing its response against allegations of coordination of retail prices of motor fuels.
- We supported two motor manufacturers assess the damages each could claim from the car glass cartel investigated by the European Commission.
- We assisted a large international financial institution in responding to the LIBOR fixing investigations in Europe and the US.
- We supported an international building materials manufacturer in its response to allegations of collusion in its UK market.
- We have also advised on the collective selling of horseracing data (before the CAT) and football rights (before the High Court).
- Some other EU level cartels our economists have advised on include Carbonless Paper, Car glass, Cement, Bathroom fixtures and fittings, Copper Tubes, Copper Fittings, and Cosmetics.
Competition and litigation damages
Our economists have helped several clients in private actions and follow on damages claims. We have provided robust expert testimony on the effects of the anticompetitive conduct, the relevant counterfactual absent the anticompetitive action, the quantification of any harm, and the extent to which claimants have passed on the harm (e.g. by means of higher prices) down the supply chain.
Where damages are being determined, accuracy, pace and agility are critical to success. Our economists can rely on the support of industry experts who can help construct relevant counterfactuals through their deep understanding of industry practice and behaviours, access data quickly, and assist in determining levels of pass-on of any damages.
Our economists can also assist in taking matters to the CAT.
- One of our senior economists is acting as expert witness in assisting a major international airline in damages litigation deriving from abuse of dominance.
- We helped one of the three leading financial institutions respond to OFT ligation in the UK High Court about the level of unauthorised overdraft charges.
- We provided expert testimony on behalf of the British Horseracing Board in defending the stand alone action brought by Attheraces through the UK High Court alleging excessive and discriminatory pricing and refusal to supply.