Tacit Collusion in Oligopolies and Regulated Industries That Underlie This Thesis

Total Page:16

File Type:pdf, Size:1020Kb

Tacit Collusion in Oligopolies and Regulated Industries That Underlie This Thesis TACIT COLLUSION IN OLIGOPOLIES AND REGULATED INDUSTRIES Zur Erlangung des akademischen Grades eines Doktors der Wirtschaftswissenschaften (Dr. rer. pol.) von der Fakultät für Wirtschaftswissenschaften am Karlsruher Institut für Technologie (KIT) genehmigte DISSERTATION von Niklas Horstmann B. Sc. Tag der mündlichen Prüfung: 20. Mai 2016 Referent: Prof. Dr. Jan Krämer Korreferent: Prof. Dr. Karl-Martin Ehrhart Karlsruhe, 2016 Acknowledgements I am deeply grateful to my advisor Prof. Dr. Jan Krämer who always knew when to encourage and when to challenge me. He has not only been my mentor but also has become a dear friend. I am also indebted to Prof. Dr. Christof Weinhardt for the opportunity to pursue my scientific ambitions. My sincere thanks go to my co-advisor Prof. Dr. Karl-Martin Ehrhart for inspiring comments as well as to Prof. Dr. Kay Mitusch and Prof. Dr. Martin Ruckes for serving on the board of examiners. My sincere appreciation goes to all my colleagues. In particular, I thank Marc Adam for satirical references, Christoph Flath for informative exchanges on politics, Felix Fritz for working weekend chats, Johannes Gärttner for entertaining conversations, Anuja Hari- haran for exciting insights into Indian culture, Philip Köhler for his infectious cheerful- ness, Tobias Kranz for passionate debates, Ewa Lux for making my time at the institute even more memorable and for proofreading this thesis, Marius Müller for diverting discussions, Claudia Niemeyer for her joviality, Thomas Setzer for his dry sense of hu- mor, Daniel Schnurr for close and long-term collaboration, Alexander Schuller for his cooperative nature, Philipp Ströhle for brief glimpses into other research areas, Timm Teubner for constructive feedback, and Lukas Wiewiorra for helpful advice. I thank all colleagues with whom I had the pleasure to collaborate in academic self- administration. Moreover, I gratefully acknowledge financial support from Deutsche Forschungsgemeinschaft and Karlsruhe House of Young Scientists. I thank Prof. Dr. Marc Bourreau for fruitful cooperation during my research stay at Télécom ParisTech. Finally, I express my heartfelt gratitude to those who are most important to me: my family and friends. They encourage me in everything I do, help me to reflect myself, and remind me of the multiplicity of life. I owe them more than words can describe. i Abstract Detection and prevention of collusive behavior are primary concerns of regulatory and antitrust authorities. This includes the exposure of explicit collusion, i.e., cartels, as well as the avoidance of tacit collusion in order to create competitive markets. In an effort to acquaint regulators with market structures and firm behavior that facilitate implicit co- ordination among competing firms, this thesis investigates principle characteristics of oligopolistic markets with respect to their propensity to collude tacitly. These main fea- tures are (i) strategic interactions of few competitors, (ii) multimarket contact between those firms, and (iii) vertically related upstream and downstream markets. The market characteristics are investigated theoretically and empirically with a focus on economic laboratory experiments. Considering the lack of field data on tacit col- lusion due to the difficulties in detecting collusive behavior, experimental economics constitute a complementary research method which bridges the gap between theory and field evidence. In particular, economic laboratory experiments are well suited to systematically study the factors that may lead to tacit collusion in spite of the restrictive assumptions of theory or the deficiency of internal validity in real-world data. As groundwork for the investigation of oligopoly characteristics, part one of the thesis reports on analyses of the experimental methodology itself. Its potential with respect to regulatory policy advice in general is assessed in a literature review that results in guidelines for corresponding experimental designs. In particular, the survey spans the spectrum of experiments by classifying them into those aiming for external validity by implementing regularities of a specific industry and those targeting internal validity by considering the most simplistic laboratory environment. A key design element of any experiment is the mode of timing. The vast majority of experiments consider discrete iii time although continuous time may be argued to be a more realistic alternative. There- fore, both modes of timing are evaluated in an oligopoly competition experiment in which tacit collusion is found to be higher under discrete time than under continuous time. This finding emphasizes the implications of an experimenter’s choice of timing. Part two of the thesis is dedicated to theoretical and empirical analyses of the interac- tions of market structures and tacit collusion. First, the effect of the number of firms on tacit collusion is investigated by a meta-analysis of extant oligopoly experiments and by two experiments with symmetric and asymmetric firms. By systematic variation of the number of firms as well as the mode of competition, all analyses show that contrary to prominent belief the competitiveness of an industry does not strictly increase with the number of competitors. In fact, triopolies and quadropolies are found to be equally competitive, which bears important ramifications for merger control and ex ante reg- ulation of oligopolies. Second, a theory of conglomerate firms’ price setting behavior is developed that explains under which circumstances multimarket contact facilitates tacit collusion compared to single market contact. The theory builds on firms’ abil- ity to communicate collusive intentions solely through their price setting behavior and on the conjecture that such price signaling can be conducted more efficiently under multimarket contact. The findings suggest that limiting conglomerate firms’ possibil- ity to engage in price discrimination across geographically segmented markets may effectively reduce tacit collusion. Third, tacit collusion is also investigated in an en- vironment of vertically related markets. In an industry in which wholesale access for a non-integrated reseller is provided by two vertically integrated firms, a laboratory experiment reveals that wholesale competition may facilitate tacit collusion, yielding wholesale and retail prices even above the monopoly level. Whereas regulation pre- venting a margin squeeze fails to decrease prices, a simple price commitment rule at the wholesale level is found to substantially reduce tacit collusion. These results in- dicate that consumers may be worse off under a wholesale duopoly with unregulated competitive wholesale provision relative to the case of a wholesale monopoly. Alto- gether, these findings highlight the vital importance of research on competition policy and of regulation itself in safeguarding competition. iv Contents 1 Introduction1 1.1 Motivation.................................... 4 1.2 Research questions............................... 7 1.3 Structure of this thesis ............................. 10 I Regulation in the Lab 13 2 Experimental Economics for Regulatory Policy Advice 15 2.1 Objectives .................................... 17 2.2 Key variables .................................. 22 2.3 Literature review ................................ 24 2.3.1 Laboratory experiments maximizing external validity . 25 2.3.2 Laboratory experiments maximizing internal validity . 43 2.4 Observations................................... 55 2.5 Discussion.................................... 66 3 Sequences of Decision Making in Experiments and Tacit Collusion 69 3.1 Motivation.................................... 70 3.2 Timing in experiments............................. 72 3.2.1 Classification of discrete and non-discrete time experiments . 73 3.2.2 Review of non-discrete time experiments.............. 75 3.3 Experiment.................................... 79 3.3.1 Oligopoly competition......................... 80 3.3.2 Measuring competitiveness...................... 82 3.3.3 Repeated games in discrete and continuous time.......... 83 3.3.4 Procedures................................ 85 3.4 Results...................................... 87 3.5 Discussion.................................... 92 II Market Structures and Tacit Collusion 97 4 Number of Competitors and Tacit Collusion 99 4.1 Motivation.................................... 100 4.2 Meta-analysis .................................. 102 4.2.1 Experimental designs ......................... 102 4.2.2 Measuring competitiveness...................... 104 v Contents 4.2.3 Results.................................. 107 4.3 Experiment with symmetric firms....................... 113 4.3.1 Oligopoly competition......................... 113 4.3.2 Procedures................................ 114 4.3.3 Hypotheses ............................... 114 4.3.4 Results.................................. 117 4.4 Experiment with asymmetric firms...................... 121 4.4.1 Asymmetric oligopoly competition.................. 122 4.4.2 Procedures................................ 122 4.4.3 Hypotheses ............................... 125 4.4.4 Results.................................. 126 4.5 Discussion.................................... 131 5 Price Discrimination and Tacit Collusion 137 5.1 Motivation.................................... 138 5.2 Experiment.................................... 139 5.2.1 Design.................................. 139 5.2.2 Procedures................................ 140 5.3 Results .....................................
Recommended publications
  • Auctions As Coordination Devices
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Janssen, Maarten C.W. Working Paper Auctions as Coordination Devices Nota di Lavoro, No. 13.2004 Provided in Cooperation with: Fondazione Eni Enrico Mattei (FEEM) Suggested Citation: Janssen, Maarten C.W. (2004) : Auctions as Coordination Devices, Nota di Lavoro, No. 13.2004, Fondazione Eni Enrico Mattei (FEEM), Milano This Version is available at: http://hdl.handle.net/10419/117892 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified
    [Show full text]
  • Journal of Econometrics Bidding Frictions in Ascending Auctions
    Journal of Econometrics xxx (xxxx) xxx Contents lists available at ScienceDirect Journal of Econometrics journal homepage: www.elsevier.com/locate/jeconom Bidding frictions in ascending auctions ∗ Aaron Barkley a, Joachim R. Groeger b, Robert A. Miller b, a Department of Economics, University of Melbourne. Faculty of Business and Economics Building Lvl 4, 3010 VIC, Australia b Tepper School of Business, Carnegie Mellon University. 4765 Forbes Ave, Pittsburgh, PA 15213, USA article info a b s t r a c t Article history: This paper develops an approach for identifying and estimating the distribution of Received 15 February 2018 valuations in ascending auctions where an indeterminate number of bidders have an Received in revised form 31 July 2019 unknown number of bidding opportunities. To finesse the complications for identifi- Accepted 25 November 2019 cation and estimation due to multiple equilibria, our empirical analysis is based on Available online xxxx the fact that bidders play undominated strategies in every equilibrium. We apply the JEL classification: model to a monthly financial market in which local banks compete for deposit securities. C57 This market features frequent jump bidding and winning bids well above the highest D44 losing bid, suggesting standard empirical approaches for ascending auctions may not be G21 suitable. We find that frictions are costly both for revenue and allocative efficiency. Keywords: ' 2020 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY Dynamic games license (http://creativecommons.org/licenses/by/4.0/). Auctions Jump bids Dominance Inference 1. Introduction This paper studies discriminatory ascending auctions where bidders face bidding frictions.
    [Show full text]
  • There Was Additional Activity. Only in Oklahoma Did Wirelessco Face a Withdrawcll Penalty As a Result of the Large Double Jumps
    there was additional activity. Only in Oklahoma did WirelessCo face a withdrawcll penalty as a result of the large double jumps. In two of the markets (Pittsburgh and Des Moines), it paid one bid increment less than the other winner. WirelessCo's double jumps were probably unsuccessful. The message they sent was confusing and led to significant overbidding in Oklahoma. Although jump bids were rare, there were a few instances where markets closed after a jump bid. For example, PrimeCo's final bid in Chicago was a jump $11.7 million above the minimum bid. WirelessCo dropped out in response. It is impossible to know whether PrimeCo left money on the table or whether the jump induced WirelessCo to drop out. Strategic shifts or drops can be used to facilitate collusion. In a strategic shift, a bidder shifts to another license to keep prices in other markets from escalating. Iffirms X and Yare competing in market 1 and firm X is in market 2, then Y switches out of market 1 and into market 2, implicitly telling X to drop 2 to prevent further competition in market 1. In a strategic drop, a bidder drops a license, prompting a reciprocal drop from a competitor. If X and Yare competing in markets 1 and 2, then Y drops market 1, implicitly telling X to drop market 2. Strategic shifts and drops have two difficulties, which limit their use. First, the implicit message is much less clear than with a gift withdrawal or code bidding. Second, strategic shifts and drops are only effective once the competition is down to two bidders.
    [Show full text]
  • Loss Aversion and Sunk Cost Sensitivity in All-Pay Auctions for Charity: Experimental Evidence∗
    Loss Aversion and Sunk Cost Sensitivity in All-pay Auctions for Charity: Experimental Evidence∗ Joshua Fostery Economics Department University of Wisconsin - Oshkosh August 30, 2017 Abstract All-pay auctions have demonstrated an extraordinary ability at raising money for charity. One mechanism in particular is the war of attrition, which frequently generates revenue well beyond what is theoretically predicted with rational bidders. However, what motivates the behavioral response in bidders remains unclear. By imposing charity auction incentives in the laboratory, this paper uses controlled experiments to consider the effects of loss aversion and sunk cost sensitivity on bidders’ willingness to contribute. The results indicate that revenues in incremental bidding mechanisms, such as the war of attrition, rely heavily on bidders who are sunk cost sensitive. It is shown this behavioral response can be easily curbed with a commitment device which drastically lowers contributions below theoretical predictions. A separate behavioral response due to loss aversion is found in the sealed-bid first-price all-pay auction, which reduces bidders’ willingness to contribute. These findings help explain the inconsistencies in revenues from previous all-pay auction studies and indicate a mechanism preference based on the distribution of these behavioral characteristics. Keywords: Auctions, Market Design, Charitable Giving JEL Classification: C92, D03, D44, D64 ∗I would like to thank Cary Deck, Amy Farmer, Jeffrey Carpenter, Salar Jahedi, Li Hao, and seminar participants at the University of Arkansas, ESA World Meetings, ESA North America Meetings, and the SEA Annual Meetings for their helpful comments at various stages of the development of this project. yContact the author at [email protected].
    [Show full text]
  • Competition and Monopoly : Single-Firm Conduct Under Section
    CHAPTER 8 EXCLUSIVE DEALING I. Introduction prohibiting one party from dealing with 5 Exclusive dealing describes an arrangement others, or the exclusive-dealing arrangement whereby one party’s willingness to deal with can take other forms, as when a seller enacts another is contingent upon that other party (1) policies effectively requiring customers to deal dealing with it exclusively or (2) purchasing a exclusively with it. large share of its requirements from it.1 Exclusive dealing is frequently procom- Exclusive dealing is common and can take petitive, as when it enables manufacturers and many forms.2 It often requires a buyer to deal retailers to overcome free-rider issues exclusively with a seller. For example, a misaligning the incentives for these vertically- manufacturer may agree to deal with a related firms to satisfy the demands of distributor only if the distributor agrees not to consumers most efficiently. For example, a carry the products of the manufacturer’s manufacturer may be unwilling to train its competitors.3 And many franchise outlets agree distributors optimally if distributors can take to buy certain products exclusively from a that training and use it to sell products of the franchisor.4 But it also may involve a seller manufacturer’s rivals. Other benefits can occur dealing exclusively with a single buyer. as well, as when an exclusivity arrangement assures a customer of a steady stream of a Exclusive dealing also occurs between necessary input. sellers and consumers, as when a consumer agrees to purchase all its requirements of a But exclusive dealing also can be particular product from a single supplier.
    [Show full text]
  • Robust Market Design: Information and Computation
    ROBUST MARKET DESIGN: INFORMATION AND COMPUTATION A DISSERTATION SUBMITTED TO THE DEPARTMENT OF COMPUTER SCIENCE AND THE COMMITTEE ON GRADUATE STUDIES OF STANFORD UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY Inbal Talgam-Cohen December 2015 Abstract A fundamental problem in economics is how to allocate precious and scarce resources, such as radio spectrum or the attention of online consumers, to the benefit of society. The vibrant research area of market design, recognized by the 2012 Nobel Prize in economics, aims to develop an engineering science of allocation mechanisms based on sound theoretical foundations. Two central assumptions are at the heart of much of the classic theory on resource allocation: the common knowledge and substitutability assumptions. Relaxing these is a prerequisite for many real-life applications, but involves significant informational and computational challenges. The starting point of this dissertation is that the computational paradigm offers an ideal toolbox for overcoming these challenges in order to achieve a robust and applicable theory of market design. We use tools and techniques from combinatorial optimization, randomized algo- rithms and computational complexity to make contributions on both the informa- tional and computational fronts: 1. We design simple mechanisms for maximizing seller revenue that do not rely on common knowledge of buyers' willingness to pay. First we show that across many different markets { including notoriously challenging ones in which the goods are heterogeneous { the optimal revenue benchmark can be surpassed or approximated by adding buyers or limiting supplies, and then applying the standard Vickrey (second-price) mechanism. We also show how, by removing the common knowledge assumption, the classic theory of revenue maximiza- tion expands to encompass the realistic but complex case in which buyers are interdependent in their willingness to pay.
    [Show full text]
  • Collusion and Equilibrium Selection in Auctions∗
    Collusion and equilibrium selection in auctions∗ By Anthony M. Kwasnica† and Katerina Sherstyuk‡ Abstract We study bidder collusion and test the power of payoff dominance as an equi- librium selection principle in experimental multi-object ascending auctions. In these institutions low-price collusive equilibria exist along with competitive payoff-inferior equilibria. Achieving payoff-superior collusive outcomes requires complex strategies that, depending on the environment, may involve signaling, market splitting, and bid rotation. We provide the first systematic evidence of successful bidder collusion in such complex environments without communication. The results demonstrate that in repeated settings bidders are often able to coordinate on payoff superior outcomes, with the choice of collusive strategies varying systematically with the environment. Key words: multi-object auctions; experiments; multiple equilibria; coordination; tacit collusion 1 Introduction Auctions for timber, automobiles, oil drilling rights, and spectrum bandwidth are just a few examples of markets where multiple heterogeneous lots are offered for sale simultane- ously. In multi-object ascending auctions, the applied issue of collusion and the theoretical issue of equilibrium selection are closely linked. In these auctions, bidders can profit by splitting the markets. By acting as local monopsonists for a disjoint subset of the objects, the bidders lower the price they must pay. As opposed to the sealed bid auction, the ascending auction format provides bidders with the
    [Show full text]
  • Auction Theory Can Complement Competition Law: Preventing Collusion in Europe's 3G Spectrum Allocation
    COMMENT AUCTION THEORY CAN COMPLEMENT COMPETITION LAW: PREVENTING COLLUSION IN EUROPE'S 3G SPECTRUM ALLOCATION OWEN M. KENDLER* 1. INTRODUCTION With the advent of wireless technology for personal and indi- vidualized communication,' radio frequencies have become valu- able property.2 European Union ("EU")3 member states will in- * J.D. Candidate 2002, University of Pennsylvania Law School; M.Sc. Eco- nomics 1999, University of Bristol; B.A. 1996, Washington University. The Author thanks Professor David Gerber of Kent College Law School and Alisa Greenstein of Paul, Weiss, Rifkind, Wharton & Garrison for their insightful comments. Ad- ditional thanks go to Professor Paul D. Klemperer of Nuffield College, Oxford University, for his help in locating key international materials. Jessica Miller of the Class of 2002 of the University of Pennsylvania Law School deserves special mention for all of her hard work in refining and improving this Comment 1 Although the popular press claims the current wireless revolution is a per- sonal communication revolution, radio spectrum in fact began its life as a medium for personal communication through ship-to-shore radio. See discussion infra note 18. The current wireless revolution reverts back to this two-way usage: the cur- rent revolution involves the targeting of wireless communications between two points and the ability for mass use of a narrow bandwidth by multiple users and services (e.g., voice, data, fax, and video). 2 Stephen Labaton, Clinton Orders a New Auction of the Airwaves, N.Y. TIMEs, Oct. 14, 2000, at Al. 3 The terminology used by European institutions is troublesome, because of changes in the name of Europe's confederation and the complexity of its founding and major treaties.
    [Show full text]
  • Publishing Government Contracts Addressing Concerns and Easing Implementation
    Publishing Government Contracts Addressing Concerns and Easing Implementation A Report of the Center for Global Development Working Group on Contract Publication Publishing Government Contracts Addressing Concerns and Easing Implementation A Report of the Center for Global Development Working Group on Contract Publication Publishing Government Contracts Addressing Concerns and Easing Implementation A Report of the Center for Global Development Working Group on Contract Publication © Center for Global Development. 2014. Some Rights Reserved. Creative Commons Attribution-NonCommercial 3.0 The Center for Global Development is grateful for contributions from the Omidyar Network and the UK Department for International Development in support of this work. Center for Global Development 2055 L Street NW, Fifth Floor Washington DC 20036 www.cgdev.org Contents Working Group on Contract Publication ................................................................v Preface ........................................................................................................................... vii Acknowledgements .....................................................................................................ix Summary and Recommendations of the Working Group ................................ix Benefits of Publication ........................................................................................................................ ix Addressing Concerns ..........................................................................................................................
    [Show full text]
  • Plus Factors and Agreement in Antitrust Law†
    Kovacic Final Type M.doc 11/17/2011 11:17 AM PLUS FACTORS AND AGREEMENT IN ANTITRUST LAW† William E. Kovacic* Robert C. Marshall** Leslie M. Marx*** Halbert L. White**** Plus factors are economic actions and outcomes, above and beyond paral- lel conduct by oligopolistic firms, that are largely inconsistent with unilateral conduct but largely consistent with explicitly coordinated action. Possible plus factors are typically enumerated without any attempt to dis- tinguish them in terms of a meaningful economic categorization or in terms of their probative strength for inferring collusion. In this Article, we provide a taxonomy for plus factors as well as a methodology for ranking plus factors in terms of their strength for inferring explicit collusion, the strongest of which are referred to as “super plus factors.” Table of Contents Introduction ...................................................................................... 394 I. Definition of Concerted Action in Antitrust Law....... 398 A. Doctrine Governing the Use of Circumstantial Evidence to Prove an Agreement ....................................... 399 B. Plaintiff’s Burden of Proof ................................................ 402 C. Interdependence and the Role of Plus Factors .................. 405 II. Agreements to Suppress Rivalry Assessed through the Reactions of Buyers ..................................................... 409 III. Taxonomy of Cartel Conduct ........................................... 413 † The authors are grateful to Charles Bates, Joe Harrington,
    [Show full text]
  • Reconciling the Harvard and Chicago Schools: a New Antitrust Approach for the 21St Century
    Indiana Law Journal Volume 82 Issue 2 Article 4 Spring 2007 Reconciling the Harvard and Chicago Schools: A New Antitrust Approach for the 21st Century Thomas A. Piraino Jr. Parker-Hannifin Corporation Follow this and additional works at: https://www.repository.law.indiana.edu/ilj Part of the Antitrust and Trade Regulation Commons Recommended Citation Piraino, Thomas A. Jr. (2007) "Reconciling the Harvard and Chicago Schools: A New Antitrust Approach for the 21st Century," Indiana Law Journal: Vol. 82 : Iss. 2 , Article 4. Available at: https://www.repository.law.indiana.edu/ilj/vol82/iss2/4 This Article is brought to you for free and open access by the Law School Journals at Digital Repository @ Maurer Law. It has been accepted for inclusion in Indiana Law Journal by an authorized editor of Digital Repository @ Maurer Law. For more information, please contact [email protected]. Reconciling the Harvard and Chicago Schools: A New Antitrust Approach for the 21st Century THOMAS A. PIRAINO, JR.* INTRODUCTION: A NEW APPROACH TO ANTITRUST ANALYSIS ............................... 346 I. THE BATTLE FOR THE SOUL OF ANTITRUST .................................................. 348 A . The Harvard School ........................................................................... 348 B. The Chicago School ........................................................................... 350 II. THE PRINCIPAL CASES REFLECTING THE HARVARD/CHICAGO SCHOOL C ON FLICT ....................................................................................................
    [Show full text]
  • Recent Development of Indonesian Competition Law and Agency
    The Contribution of Competition Policy to Improving Regulatory Performance Ahmad Junaidi Bureau of Policy 1 Indonesia Competition Law • Competition is regulated by The Law No.5 Year 1999 Concerning Prohibition on Monopolistic Practices and Unfair Business Practices • The Law has been implemented for almost 11 year to enhance fair competition, since Indonesia economic policy and structure changes after crisis 1998. 2 PRINCIPLES AND PURPOSES The Principle (Article 2) Business activities of business actors in Indonesia must be based on economic democracy, with due observance of the equilibrium between the interests of business actors and the interests of the public The Purposes (Article 3) The purpose of enacting this Law shall be as follows: a. to safeguard the interests of the public and to improve national economic efficiency as one of the efforts to improve the people’s welfare; b. to create a conducive business climate through the stipulation of fair business competition in order to ensure the certainty of equal business opportunities for large-, middle- as well as small-scale business actors in Indonesia c. to prevent monopolistic practices and or unfair business competition that may be committed by business actors; and d. the creation of effectiveness and efficiency in business activities. 3 Structure of The Law Prohibited Agreements: Prohibited Dominant (rule of reason’s approach) Activities Position: (rule of reason’s (rule of reason’s Agreement with Foreigner approach) approach) Exclusive Dealing Monopoly Dominant Oligopsony Monopsony Position Trusts Share Ownership Vertical Intregation Market Control Cartel Conspiracy Interlocking Boycott Merger and Oligopoly Acquition Price Fixing 4 The Commission: KPPU • The Commission for the Supervision of Business Competition (KPPU) was established in 2000 with the authority mandated by the Law No.
    [Show full text]