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Assessing the Comparative Performance of Competition

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Assessing the Comparative Performance of Competition Assessing the comparative performance of competition authorities Khemla Prishnee Armoogum Thesis submitted for the degree of Doctor of Philosophy University of East Anglia School of Economics July 2016 This copy of the thesis has been supplied on condition that anyone who consults it is understood to recognise that its copyright rests with the author and that use of any information derived there from must be in accordance with current UK Copyright Law. In addition, any quotation or extract must include full attribution. Abstract Finding an effective way of assessing the performance of a competition authority is an objective that recently has been widely debated by academics and practitioners. Although several methods of evaluation exist, the issue that still remains unsolved is how the assessment could be done systematically. This thesis consists of one descriptive, and four substantive chapters, the substantive chapters (3-6) includes one theoretical and three empirical, all centred on the assessment of competition law and policy enforcement. The first empirical chapter (3) studies the determinants of the reputation of a competition authority (used as a proxy for performance). In the theoretical chapter (4), a model is developed to understand how an age profile of the number of cartels detected by a competition authority can reflect the combined effects of increasing detection efficiency and greater success of deterrence over time. The second empirical chapter (5) builds on the theoretical model and studies the age profile of cartel cases detected across time and between different competition authorities. Finally, the last chapter (6) empirically examines the possible interactions between the different types of competition cases (mergers, cartels, abuse) in the presence of a competition authority which is budget constrained, and therefore must choose how to allocate its resources between these different areas. i Acknowledgement First and foremost, I would like to express my sincere gratitude to Professor Stephen Davies and Dr. Franco Marriuzzo for their continuous support of my PhD study and research as well as their advice in regards to my personal and emotional wellbeing. I would also like to thank Professor Bruce Lyons who provided me guidance in my first chapter. They have been excellent and devoted teachers and provided me great guidance through the daily ups and downs of research. Their joy and enthusiasm they have for research was very contagious and motivational for me. I really appreciate all their contributions of time and ideas to make my Ph.D. experience productive and stimulating. I thank SSF and ECO for my studentship; their generosity allowed me to pursue full-time studies. I am grateful to the Economics Department of University of East Anglia and members of Centre for Competition Policy for giving me useful feedback in seminars. My best wishes go to my office mates and friends Carsten, Richard, Bing, Mike, Xin, Liang and Tony. I am also grateful to the Competition Commission of Mauritius for granting me leave to enable me pursue a full-time PhD at the UEA. Lastly, I would like to thank my family and friends in Mauritius and UK for all their love and encouragement. A special thought to Uncle Dan and Aunty Padma for their encouragement and help all the way. For my parents, Ramesh and Anita who have always guided and supported me in all my pursuits. I am very grateful to my brother Ashvin who helped with Mathematica. Most of all, I would like to say a big “Thank You” to my husband Amben who has provided me love, support and encouragement throughout the journey of this PhD. I thank him for believing in me and convincing me to apply for the PhD. ii Contents Abstract ........................................................................................................................................... i Acknowledgement ......................................................................................................................... ii List of Tables ................................................................................................................................. vi Chapter 1 Introduction .................................................................................................................. 1 Chapter 2 Descriptive Statistics ..................................................................................................... 5 2.1 Data collection ............................................................................................................... 5 2.2 Sample data ................................................................................................................... 5 2.3 Compilation of data ....................................................................................................... 6 2.4 Legal and institutional framework ................................................................................. 9 2.5 Database ...................................................................................................................... 13 2.5.1 GCR ratings .......................................................................................................... 13 2.5.2 Competition authorities output and budget data .............................................. 14 2.5.3 Explaining the data .............................................................................................. 19 2.6. Conclusion .................................................................................................................... 23 Chapter 3 What determines the reputation of a competition authority?* ................................. 24 3.1. Introduction ................................................................................................................. 24 3.2. Assessing the performance of a competition authority .............................................. 25 3.3. Performance and reputation ....................................................................................... 27 3.4. Determinants of reputation (and performance).......................................................... 29 3.5. Sample and data collection .......................................................................................... 33 3.5.1. Descriptive statistics ........................................................................................... 34 3.6. Methodology ................................................................................................................ 37 3.6.1. Random effects ordered probit .......................................................................... 37 3.6.2. Endogeneity of budget ........................................................................................ 38 3.7. Econometric results ..................................................................................................... 41 3.8. Conclusion .................................................................................................................... 46 Appendices ................................................................................................................................... 47 3.A The GCR - Introduction ...................................................................................................... 47 3.B Governance index .............................................................................................................. 49 3.C Civil v/s Common Law ........................................................................................................ 50 a) Legislation as the basis of the civil law ............................................................... 50 b) Judicial decisions as the basis of the common law ............................................. 50 3.D Regression results .............................................................................................................. 52 Chapter 4 Modelling the time path of cartel detection and deterrence** ................................. 55 4.1. Introduction ................................................................................................................. 55 4.2. Literature review .......................................................................................................... 56 iii 4.3. A model of composition deterrence ............................................................................ 58 4.3.1. The model ........................................................................................................... 58 4.3.2. The implications for the number of cartels convicted and age of CA ................. 62 4.3.3. Changes in the CA’s budget over time ................................................................ 62 4.4. Modelling frequency deterrence ................................................................................. 63 4.4.1. Identical cartels ................................................................................................... 63 4.4.2 Heterogeneous cartels ............................................................................................... 64 4.5. Conclusion .................................................................................................................... 69 Appendices ................................................................................................................................... 71 4.A Comparative statics results................................................................................................ 71 4.B Expressing
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