Oligopoly 1999 The OECD Competition Committee debated oligopolies in 1999. This document includes an executive summary, an analytical note by Mr. Gary Hewitt for the OECD and submissions from Australia, Canada, the European Commission, Finland, Germany, Italy, Japan, Korea, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom and the United States, as well as an aide-memoire of the discussion. Oligopolies are markets where profit maximising competitors set their strategies by paying close attention to how their rivals are likely to react. In these conditions, firms might differentiate their products, which can benefit some consumers, but at a price. Oligopoly inter-dependence can also foster anti-competitive co- ordination. Competition laws prohibit collusion that raises prices, restricts output or divides markets. But the laws do not prohibit conscious parallelism. Thus firms in an oligopoly might imitate their rivals’ pricing and other competitive behaviour in a process that harms consumer welfare, yet without reaching an explicit agreement. Competition agencies generally prefer to deal with this risk through structural prevention, notably merger control, rather than detailed regulation. Some competition agencies also employ behavioural restraints to reduce the probability of conscious parallelism. Fighting Hard Core Cartels: Harm, Effective Sanctions and Leniency Programmes (2002) Nature and Impact of Hard Core Cartels and Sanctions against Cartels under National Competition Laws (2002) OECD Recommendation of the Council Concerning Effective Action Against Hard Core Cartels (1998) Competition Policy and Procurement Markets (1998) Regulatory Reform, Privatisation and Competition Policy (1992) Unclassified DAFFE/CLP(99)25 Organisation de Coopération et de Développement Economiques OLIS : 19-Oct-1999 Organisation for Economic Co-operation and Development Dist. : 21-Oct-1999 __________________________________________________________________________________________ Or. Eng. DIRECTORATE FOR FINANCIAL, FISCAL AND ENTERPRISE AFFAIRS Unclassified DAFFE/CLP(99)25 COMMITTEE ON COMPETITION LAW AND POLICY OLIGOPOLY Or. Eng. 83102 Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format DAFFE/CLP(99)25 FOREWORD This document comprises proceedings in the original languages of a Roundtable on Oligopoly which was held by the Committee on Competition Law and Policy in May 1999. It is published under the responsibility of the Secretary General of the OECD to bring information on this topic to the attention of a wider audience. This compilation is one of several published in a series entitled "Competition Policy Roundtables". PRÉFACE Ce document rassemble la documentation dans la langue d'origine dans laquelle elle a été soumise, relative à une table ronde sur les oligopoles qui s'est tenue en mai 1999 dans le cadre de la réunion du Comité du droit et de la politique de la concurrence. Il est publié sous la responsabilité du Secrétaire général de l'OCDE afin de porter à la connaissance d'un large public, les éléments d'information qui ont été réunis à cette occasion. Cette compilation fait partie de la série intitulée "Les tables rondes sur la politique de la concurrence". Visit our Internet Site -- Consultez notre site Internet http://www.oecd.org/daf/clp 2 DAFFE/CLP(99)25 OTHER TITLES SERIES ROUNDTABLES ON COMPETITION POLICY 1. Competition Policy and Environment (Roundtable in May 1995, published in 1996) OCDE/GD(96)22 2. Failing Firm Defence (Roundtable in May 1995, published in 1996) OCDE/GD(96)23 3. Competition Policy and Film Distribution (Roundtable in November 1995, published in 1996) OCDE/GD(96)60 4. Competition Policy and Efficiency Claims in Horizontal Agreements (Roundtable in November 1995, published in 1996) OCDE/GD(96)65 5. The Essential Facilities Concept (Roundtable in February 1996, published in 1996) OCDE/GD(96)113 6. Competition in Telecommunications (Roundtable in November 1995, published in 1996) OCDE/GD(96)114 7. The Reform of International Satellite Organisations (Roundtable in November 1995, published in 1996) OCDE/GD(96)123 8. Abuse of Dominance and Monopolisation (Roundtable in February 1996, published in 1996) OCDE/GD(96)131 9. Application of Competition Policy to High Tech Markets (Roundtable in April 1996, published in 1997) OCDE/GD(97)44 10. General Cartel Bans: Criteria for Exemption for Small and Medium-sized Enterprises (Roundtable in April 1996, published in 1997) OCDE/GD(97)53 11. Competition Issues related to Sports (Roundtable in October 1996, published in 1997) OCDE/GD(97)128 12. Application of Competition Policy to the Electricity Sector OCDE/GD(97)132 (Roundtable in October 1996, published in 1997) 13. Judicial Enforcement of Competition Law OCDE/GD(97)200 (Roundtable in October 1996, published in 1997) 14. Resale Price Maintenance (Roundtable in February 1997, published in 1997) OCDE/GD(97)229 3 DAFFE/CLP(99)25 15. Railways: Structure, Regulation and Competition Policy (Roundtable in October 1997, published in 1998) DAFFE/CLP(98)1 16. Competition Policy and International Airport Services DAFFE/CLP(98)3 17. Enhancing the Role of Competition in the Regulation of Banks DAFFE/CLP(98)16 18. Competition Policy and Intellectual Property Rights DAFFE/CLP(98)18 19. Competition and Related Regulation Issues in the Insurance Industry DAFFE/CLP(98)20 20. Competition Policy and Procurement Markets DAFFE/CLP(99)3/FINAL 21. Regulation and Competition Issues in Broadcasting DAFFE/CLP(99)1 in the Light of Convergence 22. Relationship between Regulators and Competition Authorities DAFFE/CLP(99)8 23. Buying Power of Multiproduct Retailers DAFFE/CLP(99)21 24. Promoting Competition in Postal Services DAFFE/CLP(99)22 4 DAFFE/CLP(99)25 TABLE OF CONTENTS EXECUTIVE SUMMARY .......................................................................................................................... 7 SYNTHÈSE................................................................................................................................................ 11 BACKGROUND NOTE ............................................................................................................................ 17 NOTE DE RÉFÉRENCE ........................................................................................................................... 53 SECRETARIAT SUGGESTED ISSUES FOR DELEGATES CONTRIBUTIONS................................. 91 QUESTIONS SUGGÉRÉES POUR LES CONTRIBUTIONS DES DÉLÉGUÉS ................................... 93 NATIONAL CONTRIBUTIONS Australia ...................................................................................................................................... 97 Canada....................................................................................................................................... 123 Finland....................................................................................................................................... 129 Germany.................................................................................................................................... 135 Italy ........................................................................................................................................... 143 Japan.......................................................................................................................................... 151 Korea......................................................................................................................................... 159 New Zealand ............................................................................................................................. 161 Norway...................................................................................................................................... 171 Sweden ...................................................................................................................................... 177 Switzerland................................................................................................................................ 183 United Kingdom........................................................................................................................ 191 United States ............................................................................................................................. 199 European Commission .............................................................................................................. 213 OTHERS United States Department of Justice, Antitrust Division................................................................................. 225 AIDE-MEMOIRE OF THE DISCUSSION ............................................................................................. 253 AIDE-MÉMOIRE DE LA DISCUSSION ............................................................................................... 271 5 DAFFE/CLP(99)25 6 DAFFE/CLP(99)25 EXECUTIVE SUMMARY by the Secretariat Considering the discussion at the roundtable, the delegate submissions, and the background paper, the following key points emerge: • Mutually aware that their actions will produce reactions from rivals, oligopolists have a strong incentive to substitute anti-competitive co-operation for vigorous competition. Such behaviour, referred to in what follows as "co-ordinated interaction", has negative welfare effects. This is especially clear in