1. Economic analysis in German competition law enforcement
St. Martin Conference RECENT TRENDS AND DEVELOPMENTS IN COMPETITION LAW AND POLICY
Economic analysis in German competition law enforcement
Brno, 12 November 2010
Dr. Arndt Christiansen
Bundeskartellamt
Economic Issues (G3)

2. Outline Economic analysis in competition law enforcement
The German cement cartel case
The Bundeskartellamt’s “Best practices for expert economic opinions” from October 2010
Summary

3. Economic analysis in competition law enforcement
Economic analysis is integral part of effective and sound competition law enforcement by the Bundeskartellamt.
Economic Issues (G3) as part of the General Policy Division
Two prominent exemplary areas:
Merger control
Market delineation
Collective dominance / oligopoly
(Hard core) cartel investigations
Identifying/measuring anti-competitive (price-)effects of the alleged infringement
relevant in public enforcement (estimation of “additional proceeds”) and private enforcement (damage calculation)

4. Expert economic opinions
Another important “input channel” of economic analysis: expert opinions (mostly) submitted by parties
A total of 36 such opinions in 20 cases since (July) 2007
Steeply rising number in recent years
(figure for the year 2007 only since July)

5. The German cement cartel case – Background
Only some highlights of the long and complex proceedings
Offense: Quota cartel / market sharing + cornering of mavericks
Decisive role of economic analysis in the estimation of the “additional proceeds”
Legal Background: Until 2005 level of fines in Germany linked to “additional proceeds” of the offence
former Section 81 (2) ARC (in effect until 2005) “[…] the administrative offence may be punished […] up to three times the additional proceeds obtained as a result of the violation […]. The amount of the additional proceeds may be estimated.”
Economist appointed as “expert of the court”

6. The German cement cartel case –Procedural milestones
7/2002: dawn raids
Leniency application by one company
2002/2003: administrative fines imposed by the Bundeskartellamt
A total of 660 Mio. € fines; based on estimated overcharge / price effect of 10 €/t.)
Most companies appealed
: interim procedure / preparation of writ of prosecution (incl. further plausibility checks of estimated price effect)

7. The German cement cartel case –Procedural milestones
12/ /2009: main trial before the Higher Regional Court (HRC) in Düsseldorf (36 days of oral hearings)
Appointment of ESMT / Prof. Roeller as “expert of the court” (supported by Bundeskartellamt)
Extensive debate on methodology upfront (based on expert’s proposals)
Adjudication / instruction of expert mandate in 2/2009
Discussion of data and results in court in 4/2009 and in 5/2009
Alternative estimations based on expert’s dataset submitted by the Bundeskartellamt in 5/2009
Judgment: fines 330 Mio. € (HRC amply followed its appointed expert)

8. The market reality to be explained8

9. Choice of methodology for estimating the “additional proceeds”

10. Model specification and results by court-appointed expert

11. One of several controversial issues: Does “price war” matter, and how?
Pre-price war
Post-price war

12. Alternative estimations by the Bundeskartellamt

13. The German cement cartel case: Some conclusions
Analysis by the court-appointed expert (for the most part) in line with standards / best practices, i.a.
Analysis relevant to the issue at hand
Unbiased discussion of methodological issues
Choice of well-established methodology
Transparency of assumptions
Provision of complete data and program codes ( replicability)
Reduction of fines mainly result of interpretation of economic analysis by the HRC
Strong (“powerful”) position of the appointed expert
Strong impact of the in dubio pro reo principle

14. The Bundeskartellamt’s “Best practices for expert economic opinions”
Reflection of
our experience with received expert opinions,
in particular in the cement cartel case, and
international developments
Aims:
statement of minimum quality requirements
procedural fairness and efficiency
Drafted by G3 but decisive role of Decision Divisions
Published on 20 October 2010; available online at Merkblaetter/Bekanntmachung_Standards_Englisch_final.pdf

15. Structure of the “Best practices”
I. Principles
General principals (sec. I.1)
Standards for theoretical/conceptual analyses (sec. I.2)
Standards for empirical analyses (sec. I.3)
II. Procedural steps (sec. II)

16. General principals Relevance to the case in question
Completeness: Opinion must contain all the information necessary to understand and replicate results.
Transparency: i.a. disclosure of assumptions
Consistency: avoidance or at least explanation of inconsistencies in assumptions or results
Language: German as official language but English acceptable after consultation of the Decision Division
Non-technical summary; non-confidential version
Bibliography and reference list
Preference for established theories and methods

17. Standards for theoretical/conceptual and empirical analyses
Standards for theoretical/conceptual analyses
Choice of model
Relationship to the competition issue in question
Robustness
Standards for empirical analyses
Methodology
Selection and processing of data
Presentation of results

18. Procedural steps Procedural steps Contacts before submission
Timing of submission
Completeness
Decisive role of competent Decision Division
Application with respect to the case in question
Further development in the light of future experience

19. Summary
Economic analysis is integral part of effective and sound competition law enforcement by the Bundeskartellamt
The German cartel case until 2009 as a promising example
Economic studies welcome but necessity of (minimum) quality standards / best practices
Publication of Bundeskartellamt’s “Best practices” on 20 October 2010
Guidance not only for economic experts but also for lawyers/ judges to assess probative value of economic arguments and empirical analysis properly

20. Economic analysis in German competition law enforcement
St. Martin Conference RECENT TRENDS AND DEVELOPMENTS IN COMPETITION LAW AND POLICY
Economic analysis in German competition law enforcement
Brno, 12 November 2010
Dr. Arndt Christiansen
Bundeskartellamt
Economic Issues (G3)